TXT: results H1 2023

PRESS RELEASE

TXT e-solutions: results for the 1st half of 2023

Revenues € 107.3 million (+71,6%)

Double-digit Organic revenue growth (+14,1%)

EBITDA € 13.9 million (+51,5%)

Net Profit € 6.8 million (+92,6%).

• Revenues € 107.3 million (+71,6%), of which €19.6 million related to the Smart Solutions division, € 14.5 million to the Digital Advisory division, and € 73.2 million to the Software Engineering division.
• EBITDA € 13.9 million (+51.5%) after significant investments in fully expensed research and development (€ 4.5 million, +13.8%) and increasing commercial and manage- ment investments (€ 10.5 million, +83.4%).
• Net profit € 6.8 million (+92.6%) net of depreciation and amortisation (€ 5.0 million), interest and financial charges net of financial income (€ 1.0 million) and tax expenses
  (€3.1 million).
• Adjusted Net Financial Dept of € 23.4 million as of June 30, 2023.

Milano, 3 August 2023 - 17:35

Today, the second meeting of the Board of Directors of TXT e-solutions, chaired by Enrico Magni, approved the operational results as of June 30, 2023.

The main economic and financial results in the first half of 2023 were as follows:

Revenues were €107.3 million, a +71.6% growth, compared to €62.5 million in the first half of 2022. On a like-for-like basis, revenues grew by +14.1% and the acquisitions contributed €35.9 million. Total international revenues were € 21.9 million, representing 20.4% of total revenues of the first half of 2023.

To highlight TXT's new and broader positioning in the digital innovation market, the Group has structured itself into three divisions representative of the type of offering:

TXT e-solutionsS.p.A., Via Milano, 150 - 20093 Cologno Monzese (MI) - Italy, Tel. [phone] Fax. [phone], PEC [e-mail],C.F./P.IVA/Registro delle Imprese di Milano, Monza Brianza e Lodi n. 09768170152, Capitale Sociale € 6.503.125,00 i.v.

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1. Smart Solutions: proprietary software and solutions and related services to accel- erate the digital transformation of customer offerings;

1. Digital Advisory: specialised consultancy services for the digital innovation of large enterprise and public sector processes;

1. Software Engineering: software engineering services for innovation and servitiza- tion of customer products driven by expertise on enabling technologies;

The Smart Solutions division had revenues of € 19.6 million, up +11.5% compared to the first half of 2022, of which € 1.5 million came from organic growth (+8.8%) and € 0.5 million from the consolidation of new acquisitions of the second half of 2022.

The Digital Advisory division had revenues of € 14.5 million up +66.1% compared to the first half of 2022, of which € 3.0 million from organic growth (+34.9%) and € 2.7 million related to 2022 M&A.

The Software Engineering division had revenues of € 73.2 million up +102.1% compared to the first half of 2022, of which € 4.2 million from organic growth (+11.7%) and € 32.7 million from consolidation of new acquisitions of the second half of 2022.

Gross Margin, net of direct costs, increased from € 24.1 million in the first half of 2022 to

• 37.4 million in the first half of 2023, an increase of 55.3%. Gross margin as a percentage of revenue in the first half of 2023 was 34.8%, down 3.7 p.p. compared to 38.5% in the first half of 2022 due to the different revenue/cost mix with a dilution of the Smart Solutions division's business related to proprietary software and solutions against the consolida- tion, starting from Q4-2022, of service companies with significant volumes compared to the Group's consolidated volumes and business model with lower gross margins com- pared to the average of the TXT divisions, but with lower indirect cost incidence.

EBITDA amounted to € 13.9 million, up +51.5% compared to the first half of 2022 (€ 9.2 million), after increasing commercial and management of € 10.5 million in the first half of 2023 (+83.4% compared to the first half of 2022), mainly due to the consolidation of new acquisitions, and for increasing investments in marketing, events, sales and management resources to support accelerated growth, and after significant investments in research and development fully expensed (€ 4.5 million, +13.8% YoY). The margin on revenues was 13.0%, down 1.7 p.p. from 14.7% in the first half of 2022, mainly due to a 3.7 p.p. decrease in gross margin, partially offset by lower indirect costs of consolidated service companies from Q4 2022 and operating efficiencies. General and administrative costs as

TXT e-solutionsS.p.A., Via Milano, 150 - 20093 Cologno Monzese (MI) - Italy, Tel. [phone] Fax. [phone], PEC [e-mail],C.F./P.IVA/Registro delle Imprese di Milano, Monza Brianza e Lodi n. 09768170152, Capitale Sociale € 6.503.125,00 i.v.

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a percentage of revenue decreased from 8.3% in the first half of 2022 to 7.9% in the first half of 2023.

EBIT (Operating Profit) was € 8.9 million, up +36.1% from the first half of 2022 (€ 6.6 million) after the amortisation of intangible assets (€ 1.8 million, of which € 1.3 million related to Purchase Price Allocation) and tangible assets (€ 2.8 million) and impairment losses (€ 0.4 million).

Net Financial (Charges)/Income in the first half of 2023 has positive net balance of € 1.0 million compared to the negative net balance of € 1.4 million in the same period of the previous year. In particular, the difference is mainly due to the positive effect of the fair value adjustment of financial instrument for € 0.6 million at 30 June 2023 (negative for €

1.0 million in the first half of 2022), the positive effect of the lower financial liabilities linked to acquisitions, for which the doubling of the share value was guaranteed (€ 1.9 million), net of bank interest expense.

Net Profit was € 6.8 million, an increase of +92.6% compared to € 3.5 million in the first half of 2022, net of tax charges of € 3.1 million. Net Profit as a percentage of revenue was 6.3% in the first half of 2023, +0.7 p.p. compared to same period of the previous year.

The consolidated Adjusted Net Financial Debt as of 30 June 2023 was € 23.4 million, an increase of 3.4 million compared to € 20.0 million as of 31 December 2022, mainly due to disbursements in the period related to the repurchase of treasury shares (€ 8.0 million), the payment of dividends (€ 2.1 million), and investments in minority interests in Simplex (€ 3.0 million) and LAS LAB Srl (€ 0.3 million), partially offset by cash generation from operations. . The Adjusted Net Financial Debt includes € 9.9 million of debt referred to IFRS 16, up € 2.7 million from € 8.5 million as of 31 December 2022, and € 4.8 million of debt for Earn-out and Put/Call options for the purchase of minority interests, of which € 3.8 million beyond 12 months.

The consolidated Unadjusted Net Financial Position as of June 30, 2023 was € 39.9 million, up € 16.5 million from Adjusted Net Financial Indebtedness due to the reclassification of TXT's investment in Banca del Fucino to fixed assets.

Treasury shares as of June 30, 2023 were 1.216.629 (906.600 as of 31 December 2022), representing 9.35% of the issued shares, at an average carrying value of € 6.56 per share.

TXT e-solutionsS.p.A., Via Milano, 150 - 20093 Cologno Monzese (MI) - Italy, Tel. [phone] Fax. [phone], PEC [e-mail],C.F./P.IVA/Registro delle Imprese di Milano, Monza Brianza e Lodi n. 09768170152, Capitale Sociale € 6.503.125,00 i.v.

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In Q2 2023, revenue was € 55.0 million, up 71.7% compared to Q2 2022 (€ 32.0 million), with acquisition revenue contributing € 17.6 million. EBITDA was € 7.1 million, up +50.8% compared to Q2 2022 (€ 4.7 million). The margin on sales (EBITDA margin) was 12.9%, compared to 14.7% in Q2 2022. Operating Profit (EBIT) was € 4.5 million, up 33.2% compared to Q2 2022 (€ 3.4 million), while Net Profit was € 3.9 million compared to € 1.4 million in Q2 2022.

"The Group's profitable growth in the first half of the year, and in particular the outstanding results in terms of growth on a like-for-like basis, confirm the sustainability of the TXT Group's industrial plan," comments CEO Daniele Misani. "The uncertainties and difficulties resulting from the complex macroeconomic context are mitigated by the geographic diversification and synergies generated by the Group's ecosystem: proprietary solutions, specialised engineering and consulting expertise, and technologies able to innovate processes and products of the major market players. For the second half of the year, we expect organic growth to continue, and we will keep integrating new excellences into our Group's ecosystem. We will maintain our focus on operational efficiency policies and initiatives aimed at maximising Group synergies, in order to further rapidly raise TXT's position in the digital innovation market, with the cohesive goal of creating value for all the Group's stakeholders."

On August 4, 2023, at 11:00 (CEST) a conference call will be held during which the CEO Daniele Misani will present, and comment on the results for the first half of 2023. The registration form for the conference call is available on the Company's website www.txt- group.comunder the page "Financial News & Calendar".

Subsequent events and business outlook

As a continuation of the first half of this year, which saw sustained organic growth in the business and increasing synergy from the integration of the newly acquired companies into the TXT ecosystem, TXT's management expects further growth in 2023, both organically across all operating divisions and through further acquisitions of target companies, some of which have already been identified and are under evaluation and due diligence.

In the Smart Solutions division, after a first half of 2023 that recorded reduced organic growth compared to the Group average due to the seasonality of the business, from the second half of the year, management expects accelerated growth driven by new multi-

TXT e-solutionsS.p.A., Via Milano, 150 - 20093 Cologno Monzese (MI) - Italy, Tel. [phone] Fax. [phone], PEC [e-mail],C.F./P.IVA/Registro delle Imprese di Milano, Monza Brianza e Lodi n. 09768170152, Capitale Sociale € 6.503.125,00 i.v.

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year licensing contracts, which will favour the growth of the Smart Solutions division on a number of markets, with a particular focus on the Aerospace market, where the full recovery of the civil aviation segment and the transition trend towards a green economy are proving to be beneficial factors for the positioning of the portfolio of ESG software solutions already selected by the main players in the sector, whether they are manufacturers or operators (i.e., airlines). In the Defence and Industry segment, new important business opportunities arise from the commercialisation of the WEAVR platform dedicated to the creation of VR/AR/MR content for the technical and procedural training of specialised and non-specialised personnel, with up-selling opportunities on existing customers and new opportunities on large companies and groups currently not covered by the Group's offer. With reference to new partnerships and innovative projects, in the context of innovation in the aviation market there is a new collaboration between the German subsidiary PACE GmbH and a leading US company recognised worldwide as a pioneer and leader in the IT industry. More details will be provided in the following sections.

In the Digital Advisory division, after a first half of 2023 that recorded sustained organic growth of 34.9%, for the remainder of this year and for the following two years TXT's management expects continuity in the division's growth thanks to the numerous important public contracts related to PNRR won by the subsidiary HSPI during the second half of 2022, as well as by leveraging the new public contracts awarded through public tenders during the second half of 2023 for which TXT Group, thanks to its specialised expertise in digital transformation of processes related to public administration, is strategically posi- tioned. In continuity with the first half of the year, the skills integrated synergistically into the Group's Digital Advisory offering following the strategic acquisitions completed in 2022 are favouring the expansion of the offering into new segments such as the healthcare segment, where the integration of the skills of HSPI and PGMD, the latter acquired in Q4 2022 are favouring the acquisition of new contracts in both public and private healthcare, and in the space segment, where the specialised cybersecurity governance skills provided within the framework of the European space programmes are bringing benefits in terms of positioning the Group's Digital Advisory offering and in terms of the division's growth, also favouring its internationalisation.

In the Software Engineering division, which more than doubled revenues in the first half of 2023 compared to the same period of the previous year as a result of the consolidation of the companies acquired during 2022 and thanks to double-digit organic growth, man-

TXT e-solutionsS.p.A., Via Milano, 150 - 20093 Cologno Monzese (MI) - Italy, Tel. [phone] Fax. [phone], PEC [e-mail],C.F./P.IVA/Registro delle Imprese di Milano, Monza Brianza e Lodi n. 09768170152, Capitale Sociale € 6.503.125,00 i.v.

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