Nexi S.p.A. (OTCPK:NEXPF) Q2 2022 Results Conference Call July 29, 2022 7:00 AM ET
Company Participants
Paolo Bertoluzzo – CEO
Bernardo Mingrone – CFO
Conference Call Participants
Mohammed Moawalla – Goldman Sachs
Alastair Nolan – Morgan Stanley
James Goodman – Barclays
Josh Levin – Autonomous Research
Justin Forsythe – Credit Suisse
Aditya Buddhavarapu – Bank of America
Gianmarco Bonacina – Equita
Alexandre Faure – BNP Paribas Exane
Operator
Good afternoon. This is the Chorus Call conference operator. Welcome, and thank you for joining the Nexi First half 2022 Results Conference Call. [Operator Instructions]
At this time, I would like to turn the conference over to Mr. Paolo Bertoluzzo, CEO of Nexi. Please go ahead, sir.
Paolo Bertoluzzo
Thank you. Good morning. Good morning to everyone, and welcome to our call for the first half ‘22 results. As always, I’m here with Bernardo Mingrone, our CFO; and Stefania Mantegazza, who is leading Investor Relations at Nexi by plus after colleagues that may help us in case of need on specific questions. As usual, I will start with the key messages for today.
I will give you a quick update on volume dynamics and a few business updates on what we see happening in our progress in Merchant Services in particular. I will then end to Bernardo, who will cover more in detail the financial results. And obviously, as usual, we will have the time for your questions.
Let me start on Page 3, summarizing the key messages for today. First message, we continue to see strong volume growth in the second quarter across all our geographies. All our geographies are now growing double-digit both compared to last year and compared to pre-COVID to 2019. That is something that we continue to track with a lot of attention, because at the end of the day is the real — give you the real picture of what is happening.
We’ll give you more details in a moment. Let me just underline here the impressive growth that we’ve seen in the SME segment, which is very much the segment where we apply a lot of focus, probably most of the focus where we in the first half of the year, a 38% growth of volumes compared to last year. Second key message in the quarter and more broadly in the first half, we’ve seen strong financial performance. Let me from EBITDA that did grow in the second quarter of the year by 20% and 19% for the first half with a 4 percentage point margin expansion was supported also by the early delivery of the synergies on the back of the acquisitions we have done in the recent past. This growth of EBITDA, 20% has been well supported by revenue growing about 10% in the quarter and 9% in the first half and this revenue growth has been supported by a very fast growth in Merchant Services, plus 16% in the quarter and 14% in the first half.
Obviously, the strong EBITDA growth at plus 20% has been clearly enabled by a strong cost control. Bernardo will show you our cost growth versus last year about 1% to 2%, so strong cost control there as well.
Third message. We continue to progress on our journey of creating the European PayTech leader. As I’ve anticipated, we are progressing the delivery of our synergies. €100 million is the target for this year, and we confirm that we are moving exactly in line with that target. Second point, we had a particularly active second quarter in terms of M&A, both in — and I think this is something they really want to underline.
We signed the acquisition of the deeper merchant book in Italy. We did sign the acquisition of the merchant book in Croatia. We did close the Alpha Bank joint venture launched actual activities, and we closed the acquisition of order book. But also, we have announced the sale of the capital market business in Italy. We have announced the sale and also close the sale of that is a nice digital invoice business in the Nordics, and we’ve also closed the sale of the clearing business in Italy. And I think this math gives you really the sense of how we see our future progressing with nice — even if small in many cases, both an acquisition in merchant services to strengthen our portfolio, but at the same time, also focusing continuously our portfolio on the core of the business on the core of our future. Let me now move — sorry, in this context, we are confirming our ambition for 2022, that as a reminder, is a revenue growth of 7% to 9% for the year and EBITDA growth of 13% to 16% for the full year. Let me now move to volumes, Page 4.
Here, you see the lines represent in the comparison versus last year. I always feel these lines to be a little bit complex to be understood because they very much depend on what happened last year that was still very much affected by ups and downs with COVID. Nevertheless, you see across all markets, double-digit growth both when compared with last year and when compared with 2019 as well. In the appendix to this document, you find our usual chart giving you the month-by-month dynamic versus 2019, and that’s where probably you can appreciate better the fact that the trend of volume recovery and volume increase is actually continuously also in the second quarter, throughout the quarter in a very positive way across all geographies. There’s something you may be losing when you look at these comparisons versus last year. But said that, Italy, we’re now growing in June 18% versus last year 27% compared to pre-COVID actually was supported not only by the business consumption but also by the high-impact consumption that is now growing at 37%. On the right, you see the usual split in between Italian cards and international cards, and you see that international cards are now above 100% more than — versus last year, but they’re already actually 16% higher I think this is very important because it is the first quarter, actually, in which now we finally see a stable and substantial recovery of international travelers in our geography.
In the Nordics as well, we see throughout the quarter, a 20% to 30% increase versus last year and a nice 18% versus pre-COVID, well supported by a 57% growth in the basic consumption sectors that is the effect of, obviously, our focus in our commercial wins but also a continued shift from cash to digital also in the Nordics. Last but not least, in that we have a double-digit growth compared to last year. You’ve seen depending on the comparison with the specific months from last year, growing 37%, 53%. If you adjust — if you clean up this volume dynamic with — from some discontinuities that we had as we did the risk portfolio, especially in travel with a lower value contracts but we’re presenting actually high volumes.
Actually, the growth versus last year in Germany would be a nice 25%, already up 11% versus pre-COVID. Also in Germany, I want to underline the fact that in the basic sector, we are running more than 50% higher than pre-COVID levels. All in, it’s also important to underline that if you look at the travel sector, which is really focused on airline transportation, hotels, these type of things. So it’s net of restaurants and type of high-impact sectors. Finally, travel is back above 2019 and materially above 2019 level for the group all together.
Let me now move to Page 5 to give you a bit of a deep dive into our merchant services space. It’s a pretty rich page. I understand. And on the right, you also have examples of recent customer wins and very strategic also new partnerships in the software and platform space. But let me focus on a few key messages here, starting with SMEs that represent more than half of the business.
As I said, SMEs include volume 38% in the first half of the year. Let me just underline 2, 3 messages. Number one, we’ve seen strong and accelerated sales performance across all geographies, I would say, especially back in Poland to name 2. Our installed base of did grow more than 150,000 terminals in the first half of this year, clearly signaling also a strong growth in terms of customer base. The second thing I would like to underline is that we launched our soft SoftPOS proposition in Greece as well after Nordic and we are now preparing for the Italian launch.
We believe SoftPOS is a nice add-on proposition at for new car merchants, but also as an additional device for mobility or backup for more traditional merchants already well-developed merchants as well.
Third point that I want to underline, we continue to make progress in partnering with software vendors, both market leaders horizontally that cover the market horizontal across the sectors, but also vertical specialists across all our geographies. Moving to e-commerce. We continue to see a strong performance of our easy collecting PSP proposition in the Nordics, and we are now ramping up that same proposition in Germany. And we started basically this year. The second point that I want to underline is the progress we’re making on the enhancing the capabilities of our proposition in the e-commerce space with 2 examples here.
We’ve implemented the transaction risk analysis capabilities in Italy with very visible results for our merchants in terms of conversion rates improvements. At the same time, in Poland, we launched I think this which is the one-click checkout also for APMs, not just for cards. Last but not least, let me stress something that we did announce this morning. We signed a strategic partnership with Microsoft. These partnerships is actually covering 4 areas.
We will become one of the main payment providers when payment partners for their e-commerce — acquiring e-commerce acceptance. In Europe, we will invest together in a go-to-market for SMEs, in particular, where you know that Microsoft is particularly strong and particularly focused. We will work together in integrating our proposition payments and software across the board. And last but not least, we will also partner to enable an acceleration of our platform — evolution of our platform transformation in the cloud. Let me close with a larger merchant.
In larger merchants, we have seen a growth versus last year about 7% despite the derisking of volumes that I mentioned before. Now here, the underlying 3 things, again, strong progress in Italy, in particular, I would say, on the back of the combination with SIA in integrated collection and business-to-business payments capabilities with a specific focus on public administration, transport and utilities. Second point, let me stress, not the expansion of our capabilities both in the Nordics, we are now integrating also the acceptance of local wallets via and back in Germany, in particular, where we’ve implemented a very innovative digital debit feature that allows merchants to accept a direct debit payments in a much simpler way fully digitalized in their shops. And last but not least, also for larger merchants, we are continuing to develop the integrations with the key enabling platforms, both CRMs, ERPs, property management systems for hospitality, and we have signed here new partnerships such as, for example, with Global Blue in hospitality and retail for digital ascription management. Let me now hand over to Bernardo who will cover the financial results.
Bernardo Mingrone
Thanks, Paolo, and good afternoon to everyone who is connected to this call. Starting on Slide #7, we have a brief summary of revenues and EBITDA. In the quarter, we have double-digit revenue growth at 10.2%. I would like to highlight how margin expansion is as high as it’s been, at least as seen since I’ve been at with 400 basis points of expansion both in the quarter and for the full year with EBITDA, as Paolo mentioned, growing north of 20%. I think it’s just worth calling this quarter, and I think this holds true for most payments players in Europe.
We’ve had an increase in scheme fees, which I think needs to be called out in terms of understanding top line performance. We report revenues like most payment players net of scheme fees. But if we were to normalize and gross up revenues for scheme fees, which have had a strong growth due to the fact that as we mentioned earlier, extra EA travel and general travel has picked up, bringing higher scheme fees than in 2021 when travel was subdued. This normalization would lead our growth in the quarter to jump from 10.2% to 14% in the year to be 12%. Obviously, this has no effect on EBITDA.
It increases costs, just like it increases and EBITDA is, therefore, I think, the truest and best measure to evaluate quality of performance. And that’s, I think we did particularly well with this 20.5% growth, which I think is one of the highest we recorded in the recent past. Moving on to Slide #8, we have performance at the Merchant Services business unit. Again, we have acceleration in the second quarter. Revenues were growing 16% for the quarter.
Strong volume growth. I would like to call fact that we have an installed base, which is growing very handsomely with over 150,000 POS terminals installed in the first half of this year. I think a very positive coming from the growth in SME volumes, which stands at 38%, much higher than the average growth in volumes. And a couple of interesting points that I think are worth noting as well with regards to the fact that we still see stronger growth in the physical channel than e-commerce, and this has been a trend we’ve been observing throughout 2022. And the other one, which is value managed transactions is actually growing faster than the number of transactions, and this is probably due to a couple of facts.
One, a mix effect, travel coming back and that being a higher than average ticket and probably the inflation or the first impact of inflation on customer spend. Going back to the point I made earlier with regards to scheme fees, if we go stop revenues for scheme fees on Merchant Services, the 15.8% growth in the quarter would actually be 22.3% and for the first half, it will be 19.6%. We actually have a table. We’ve included a table for your reference in the appendix so that you can have a look at those numbers, if you please. I mean, we’ll obviously continue to report on a net of scheme fee base.
We believe that’s the right way of doing it. But as a reference, I think it’s useful. Slide #9, I think the messages are similar in Cards & Digital Payments also have strong volume growth, feeding into top line growth of approximately 5% the first half, 6% in the quarter. If we look at Italy, where we have the different business model with co-issuing. We have very strong performance, I would say, with high single digits 7% and the rest of Europe where we’re more of a payment processor on the issuing front, slightly lower. I’d like to also call out how during the first half of this year, we’ve seen strong acceleration of the international debit proposition in anything in particular, which is an initiative, a very important initiative we’ve been highlighting since we went public as a key driver of growth in this market. Moving on to Digital Banking and Corporate Solutions.
The first half results, as we discussed a couple of months ago in May, when we discussed first quarter, were impacted on a year-on-year basis from the fact that we had some project-related revenues last year from the acquisition of bank by Intesa. That project related revenue is no longer present in half of 2022. The comp is therefore rather flat for the year. If we look at — for the first half, if you look at the quarter, we have seen growth, driven primarily from the net side in some project work on the EIB business run in Denmark. picture across the various geographies in terms of revenue growth were mostly double-digit growth with the exception of it, which would be double digit.
Obviously, if we go stop for scheme fees as we’re saying. But I’d say, in general, healthy growth throughout Europe coming from the structural shift of card to cash and the reopening we witnessed in the first half of the year throughout Europe. Slide #12 points to costs. As has been highlighted, I think, through our continued review of our cost base and attention to stopping or trying to cut costs as much as possible where possible, we’ve been able to contain cost growth to just under 2% in the quarter, just over 1% in the first half. This has clearly been helped by the synergies, even if we were to factor in synergies cost growth for the first half would be below 4%, notwithstanding the strong volume growth we’ve witnessed.
Obviously, the other side of the — the flip side of the coin of grossing up revenues for scheme fees is that you would have to gross up costs for scheme fees as well. And that cost base would be growing 8%. So against that 12-plus percent revenue growth in the quarter, gross per scheme fees, we’d have 8% cost growth. Slide #13 takes a look at the CapEx. We have a year-on-year increase in CapEx of approximately €15 million.
This is primarily driven by the gray box on the right of our transformation CapEx, where we continue to invest in both transformation. So the completion of stand-alone projects at Nexi and Nets, including, for instance, completion of our group motorization platform, Uni, the rollout of the core acquiring platform and Nets, but also integration CapEx coming from the integration of SIA and that’s, for instance, we are starting our mainframe in data center consolidation. This will bring us to around 14 data centers from the 40, which we have currently or had at the time of the merger. We also continue to invest in our ordinary CapEx that, as you know, however, is between 8% and 10% of revenues and includes ordinary business development, and we have some examples here, for instance, the evolution of our POS, ecosystems and the developments of data analytics and the likes. But again, CapEx, a slight growth driven by the transformation CapEx.
But as you can see on Slide 14, we’re expecting to reach more or less a peak of this transformation spend in 2022. Overall, we said during the course of our full year presentation and back in February, we had approximately €300 million below — approximately €300 million to be spent between now or between then and 2025 in order to complete the transformation of individual companies and integrations of Nets. That €300 million is now reduced to €200 million continue to further reduce over time until it’s completed by 2025, at which point our spend will be reduced to normal ordinary CapEx level of between 8% to 10% of revenues. Slide 15 updates you on performance or actually the view of achievement of the synergies. As you know, last year, we generated approximately €18 million of synergies during 2021.
This year, we’re targeting just north of €100 million of synergies, both EBITDA or P&L synergies and CapEx synergies. Round about €21 million were delivered in the first half of the year, mostly OpEx cost synergies. We also had €17 million of recurring CapEx synergies. So the total for the for the first half is €37 million. We’d obviously already achieved the target of achieving the €65 million one-off CapEx savings at the beginning of this year, and that was done pretty soon after the Nets deals close because it’s about cost avoidance rather than cutting ongoing spend.
So I would say that we are fully on track to deliver the synergy targets that we expect for the year, and in general, to confirm our ambition, our expectation rather to do better than what we’d originally planned in terms of the €320 million total cash synergies over time. Slide 16 updates you on progress with regards to OpEx transformation integration costs. As you know, last year, we spent more than €500 million on transformation costs, including M&A fees, et cetera. This year, we’re targeting spend less than half that. And you see how if we just limit to integration, transformation costs, we’re at €76.2 million, which is roughly 50% of what it was in the first half of last year and then we have the usual other noncash costs on the right of the table or costs borne by the sponsors as part of the IPO process.
It would take us to €106 million of nonrecurring items for the first half of this year. Slide 17, I think what I would like to call out here is how we are introducing for the first time our EPS, cash EPS. Finally, we have a stable share count, having completed the SIA merger. So we think it makes sense to start commenting on that. And presumably, when we come out when — with our Capital Markets Day at the end of September, we will provide guidance not only on the top line and EBITDA level, but also on the bottom line level.
So you can see that our normalized cash EPS normalized excluding one-off costs on a cash basis is $0.34 per share, and this is a 23% year-on-year increase in the bottom line level. Slide 18 confirms our strong cash conversion capabilities. Again, this is on a normalized basis, so excluding those €300-odd million that we have of CapEx and transformation — P&L transformation spend. So normalized basis, we expect to convert approximately 80% of our EBITDA in terms of operating cash flow.
And on Slide 19, we summarize our indebtedness, which is reduced to below 3x at the end of June, if you include run rate synergies in our EBITDA. I think it’s also interesting to note how we were recently upgraded by Moody’s. S&P confirmed their positive outlook. So our journey towards improving our rating towards investment grade continues.
I think it’s also interesting to note how as part of our ordinary course refinancing or financing activities, for instance, in order to fund the M&A to the extent that we don’t use on balance sheet cash are being carried out at rates which are at the same levels as the ones we were obtaining from banks and from The Street before rates rise. The expectation of rate rises was embedded into the performance of our publicly traded bonds, for instance. So pre rate increase levels, and this is obviously a very strong message in terms of the strong appetite for the Nexi credit. Finally, on Slide #20, before I hand the floor back over to Paolo for concluding remarks. Just a few words on M&A in the first half, which is pretty busy, particularly in the second quarter.
We completed signed a number of acquisitions. They are highlighted here on the left. So from BPER, we bought the merchant services book. Transaction is expected to close by the end of the year. We signed and we’re just waiting for BPER to complete the integration of category before we migrate that book.
It will happen at some point in December. We paid approximately 10x EBITDA for this. The transaction with Intesa was also announced during the course of May, if I remember correctly, where we bought the merchant acquiring business in Croatia for Intesa. Again, this is the third deal we do with Intesa. The transaction structure, the 1 we’ve done in the past, again, multiple is around 10.5x EBITDA.
We also agreed with Alpha Bank to increase our stake from the level at which it was at signing of 51% to approximately 19%, and this was done basically in agreement with Alpha at the request, and we were more than happy to do so. We would have bought 100% from the start, we could have. And we increased our stake in order burn to 100% from the 40% we had before.
For the first time, we can now speak also of disposals. We actually completed the disposal of Norwegian business which basically digitize documentation so that was to private equity, and we sold 14x EBITDA. We also signed an agreement with to sells Capital Market business during the course of the second half of the year, we expect closing, again, this was a transaction carried out at approximately 12x enterprise value to EBITDA multiple. clearing is a very small transaction as a close to the first half.
So Paolo, I hand the floor back to you.
Paolo Bertoluzzo
Thank you, Bernardo. Let me jump to Page 22, simply to confirm our ambition for the full year. We are having a strong first half that is pretty much in line with And we will have a second half that is obviously consistent with the full year guidance, which is also influenced by more difficult comparisons with last year. But if you compare with the pre-COVID levels with more normal years, we expect to continue to see underlying growth throughout and acceleration throughout.
Coming, therefore, to our ambition for the year, 7% to net revenue growth with double-digit growth in the merchant services space, 13% to 16% EBITDA growth with a 2 percentage point EBITDA margin expansion. CapEx 8% to 10% ordinary CapEx. Nonrecurring items, a rapid decrease as you’ve just seen with Bernardo and a total of €300 million transformation attritionalCapEx by ‘24, ‘25 that Bernardo has shown you already how we’re progressing on that as well.
And finally, on leverage, continuing organic deleverage with a target of net debt of 2.5x EBITDA, including revenue synergies. We are performing this number 2, 3x EBITDA considering all the recent M&A transactions that we expect to close by the end of the year. Let me just conclude reinforcing and reiterating our key messages for the day on Page 23. Strong volume growth and acceleration across all geographies, very visible, especially if you look at the trends compared with pre-COVID levels and an underlying gain this strong growth in SMEs of 38% for the group. Second key message, a strong financial performance.
And again, here, let me underline the EBITDA growth of 20% for the quarter and 19% for the first half of the year and 4 percentage points EBITDA margin expansions and last but not least, continued progress, both in terms of delivering our synergies and reshaping the parameter or the profile of our company through M&A, as Bernardo has just mentioned. On this basis, as I just said, we confirm our for the full year.
Before opening for Q&A, let me just remind to all of you that we plan to have our Capital Market Day on the 27th of September here in Milan and obviously, that will be a fantastic opportunity to deep dive more in the business and obviously, our plans and our longer-term projections. Let me stop there, and we see already a good number of questions. So I think we can go into it.
Question-and-Answer Session
Operator
[Operator Instructions] The first question comes from Mohammed Moawalla with Goldman Sachs.
Mohammed Moawalla
I just had 2 quick ones from my end, if I may. Firstly, as you look through the sort of second half of the year and into next year, just curious to get your sense. I mean you have mostly a sizable SMB business. What are the sort of things you’re seeing in terms of business resiliency, you talked about strong volume growth. But what are your kind of planning assumptions in terms of potential risks around through SMBs with the macro slowdown potentially impending as well as the deal opportunities for growth that you see within that in a kind of post-pandemic period?
And then the second question is just on the sort of margin evolution. We’ve seen that EBITDA was sort of growing ahead of plan. You also talked about sort of investments back in the business in the second half. So how critical are they versus how discretionary are there? And just curious to understand the margin flexibility you have in the event of kind of revenue slowdown next year.
Paolo Bertoluzzo
Thank you for your questions. I’ll let Bernardo take the second. Let me try to cover the first one. As I’ve anticipated, we see a second half of the year that compared to a normal year, we continue to see acceleration. But in nominal terms compared to last year, we obviously see a deceleration as you understand that, clearly, when you compare our first half of the year with the full year guidance. But again, I really want to underline it if you compare it to a normal year, we would see acceleration throughout the year.
Our planning assumptions, listen, for now, we are not seeing any material signal of change in terms of economic environment and SMBs in particular. You are rightly — focusing on SMB that for us are a very strategic segment and also an important source of both financial performance and growth. For now, we don’t see any disruption or any critical element there. For the second half, I think it’s good to remain a bit cautious because we will see the environment out there. For the moment, we are assuming that more or less the combination of the macro environment and the increase in inflation that, as you know, in the short term, has a positive effect on us will more or less balance on each other.
Again, we have a strong expectation in terms of future growth, and we’ll talk about it much more in September with a dedicated session on SMBs. We really believe that’s an important source of future growth for our company in the future, I would say, across all geographies. Let me now hand over to Bernardo.
Bernardo Mingrone
Yes. Actually, just to add to what Paolo was saying, I think also some other players in the sector commented on this and how our exposure to SMEs is probably not to those SMEs, which impacted by the recession. So I think our customer base also benefits from the fact that the ultimate clients have a significant amount of savings, which were built up over the COVID period, which are kind of helping to support consumer spend and its other sectors, which probably being a worst hit by the slowdown and might be worst hit by the slowdown going forward. With regards to margin evolution, I think we’ve demonstrated in the past, if you look back to the first of the year, when we did our best to try and protect and shelter our P&L and our cash flow from the slowdown coming from the closures by moving expenditure from 1 year to the next or slowing it down and basically ultimately delivering a growth in EBITDA in a year in which the economy can track at 8%. And I think we retain that kind of flexibility even now that we are planning to spend in the second half of the year to basically secure longer-term revenue growth.
So that is still the plan. But 2 things — and I think we guided to that back when we gave the first indication of 2022 forecast back in February that we’d be spending part of the synergies to reinvest in our platform to secure future growth. That is still the plan. We started to do that in the first quarter. Most of it will be coming in the second quarter and this half — in the second half. But as you were suggesting, should things look different to what they’re currently looking like then we would retain flexibility to spread that over time and time it such that we could protect our performance.
Operator
The next question is from Alastair Nolan with Morgan Stanley.
Alastair Nolan
Just 2 for me. The first would be around those inflation impacts you mentioned, which I think you flagged as being a kind of a net positive thus far. Can you just remind us exactly what percentage your business is a pure kind of take rate on volumes and kind of where you’re seeing the benefits and potentially headwinds at the same time? And then secondly, it’s on the Microsoft deal, which stands like a really interesting deal. Can you maybe provide a little bit more detail around kind of what the strategy is there, exactly how Microsoft are going to help on the platform transformation?
And then if at all possible to quantify what you think this deal could mean in terms of either revenues or maybe potentially the size of the investment, I think you mentioned the co-investment. So anything you can add to that would be really helpful.
Paolo Bertoluzzo
Alastair, let me just take a crack the first one, and Bernardo, you want to add, but inflation impact. We are exposed and therefore, benefiting from immediate positive inflation impact on about 40% to 50% of our total revenues across the company more in merchant services, as you can imagine. But if you take the top line of the company, that’s the direct simple impact. On the Microsoft deal, let me just try to provide a bit more clarity even if I will not be able to provide you any detail on the financials. And well, as I said, there are basically 4 components, and let me start from the last one, that is the one that you mentioned.
Microsoft will be our key partner, and not the only one, but our key partner in transforming basically our infrastructure, moving more into the public cloud with the in especially starting from the digital front end and the digital services more broadly. Second, we will become one of their key partners for the acquiring and the acceptance of digital payments for their e-commerce activities in Europe. Third, we will work together in — on product development. I think this is a chapter to be written to be very, very clear, but we are really excited about the idea of sitting down with that has such a worldwide visibility and capability.
And last but not least, something that is very practical, as I said before, again, focusing on the small and medium merchant space. As you know, Microsoft is the most expensive or one of the most expensive go-to-market network of partners and we work with them and their partners to embed our payment products into this distribution channel.
Operator
The next question is from James Goodman with Barclays.
James Goodman
I’ve got 2 as well, please. So firstly, just on the volume development and the near-term outlook, pretty favorable development through the quarter. But I think you provided that the usual post-period end volume data that you have in the past. So I just wondered if you could give us a little bit more specific insight into July and how that’s gone? And particularly, just given — I think we’ve discussed it before, but the much tougher comparative base that you have in Q3, given sequential step-up in growth that you saw last year with a pretty favorable summer.
You talked about understandably the nominal impact in H2 on growth. I’m just wondering if that’s more in Q3 than Q4? And the second question is around adjusted net income. The EBITDA was very strong for the quarter, but the adjusted net income missed my expectation quite materially and that was entirely due to the DNA, which was up, I think, 15% sequentially on the second half of last year, 20% year-on-year and up at about 15% of sales. So why is it the D&A has suddenly picked up? And can you comment on the outlook for D&A, given at least this year is continuing to climb?
Paolo Bertoluzzo
Thank you, James. Bernard, do you want to these questions?
Bernardo Mingrone
All of them? So in terms of — so I think the first question was with regards to volumes in their developments post-quarter end. So in July, I think — what I would say is that compared to June volumes and July continue to grow year-on-year and also compared to 2019, there is a slight deceleration, I would say, in — there was a slight deceleration beginning of July, slight improvement on that in the second part of July. But overall, if you look at 2019, which I think is the right reference here to take, we have continued growth throughout the year and expect this to be the case for the full — for the second half or throughout the second half. I think it’s — with regards to — if I benchmark that volume growth that we are referencing through in July compared to our forecast, we are tracking pretty much in line with what we were forecasting when we did our, say, the analysis to confirm our full year numbers. So I would say, as you know, comp worsened during the course of the second half because closures were worse in the first half of 2021. So we had an easier comp in the first 6 months ago in the second 6 months. But if we normalize for this, we just have a steady increase throughout the year when we look at, for instance, 2019.
The second part of the question was, I think, with regards to the some general performance in the second half. And I think volumes we’ve spoken of. It’s worth noting the comments on costs. Throughout the year compared to 2021, the site from the dynamics that we have on cost coming from volumes coming from the fact that last year, we had a comp effect in Nets, which lowered staff loss and that is years worth the same effect we had in Nexi last year based in 2020.
So these are driving, let’s say, costs upwards. We have the benefit of synergies. And then in the second half, as I was mentioning, when Mo asked this question, we will be seeking to or we are seeking to invest part of the savings in growing our competencies in e-commerce and product development and so on and so forth. And this will start to pick up in the third quarter this year. So we’ll see some of that feeding through in the third quarter of this year, which obviously impacts us in terms of the overall outlook.
So we confirm our guidance for EBITDA between 13% and 16% and we closed the first half at 19%. So obviously, in the second half, we’ll have some cost — upward cost pressure coming from this. With regard to your miss on D&A, frankly speaking, I don’t know how you model your D&A assumption. I suggest we take that off-line with Stefan and just compare notes as to what it is that you — what your assumptions are. Clearly, the amortization period of investment depends on the nature of investments and ours is a detailed calculation and yours is probably in approximation outside in. So I think we’re happy to provide you the detail that you need in order to reconcile that.
James Goodman
Do you think it will pick up further in the second half? Or we had to run right now in terms of D&A?
Bernardo Mingrone
I think we will have a slight pickup because we continue to invest and the growth CapEx in the second half is — or the CapEx in the second half is expected to be higher than the first half. So we’ll be having — we’ll have a slight pickup in the second half on D&A.
Operator
The next question is from Sebastian with Kepler
Unidentified Analyst
On retail end market, the growth is a little bit slower at least slower than what I was expecting. Is there any specific reason that explains the slower growth in Italy? And then secondly, on the disposal strategy or Ratepay. What is happening there? Have you progressed in your reflection with the Ratepay within our perimeter? And lastly, on the e-com business, you provide the numbers for H1. I have not seen partly the number for Q2 in terms of organic growth. And if you can provide a little bit the data for the organic growth of the e-commerce business in Q2 globally and excluding Ratepay a little bit, the dynamic there, which would be very helpful.
Paolo Bertoluzzo
Sebastian, this is Paolo. Let me take the first 2 and then I will hand over to Bernardo for the third one. On Italy, I understand the market into the performance and actually, we are pretty happy with the performance on Italy. Again, it really depends on — I mean, as you remember, we said it last time, the comparison with last year is affected by the fact that we had some material project work in the first half of last year and in particular in the first quarter last year. This is not affecting in a material way the second.
So you should adjust for that, but you already know it. I think the 8.8% growth is quite strong. Don’t forget that the comparison in Italy was already in the second quarter, a bit more difficult than what it was for the other markets because reopenings were already happening there. Again, if you compare it with other players and never forget that this scheme fee increases and volume increases are having a particularly strong impact on Italy, if you take the growth gross revenues instead of being 8.8% for the quarter will be more than 14%. So that’s the point on Italy.
When it comes to Ratepay, as you can imagine, this is not an environment where we should proceed or accelerate with a process around Ratepay. As we always said, we’re happy owners of this business, and therefore, the team is really focused on developing the business, growing the pipeline in an environment that from the commercial standpoint in terms of volumes, as you know, is less favorable than last year or buy now, pay later services and e-commerce more broadly. Clearly, as you see from also our numbers, people are going back to shops, I would say, in particular, the smaller ones, which is a nice and positive for us and a bit less shopping online and using buy now, pay later. But again, as I said, no process there focused on growing the business, and then we will consider as the market environment evolves. Bernardo?
Bernardo Mingrone
On e-commerce growth, I think you asked for trying to give you some sum of the parts, let’s say, excluding Ratepay. So if you look at it was growing in the first half close to 30%. Nordics were around 20% and the rest of the business was much lower. And there, we have, I would say, in Germany, 3 negative effects, I would say that our Ratepay, which down due to the overall market for BNPL slowing down. And let’s say, specific issues or specific factors relating to Ratepay and the sanitation from the relationship with its former parent company, Alta Group, which have impacted its top line. But also, as you know, and we’ve discussed this in the past, when looking at volumes in Germany, we built to exit certain areas of business where the risk return profile wasn’t in line with our targets, which has impacted us in the first half. But if you look at Nordics and Italy, which are the biggest markets, they’re growing handsomely at around between 20% and 30%.
Operator
Next question is from Josh Levin with Autonomous Research.
Paolo Bertoluzzo
Josh, I don’t know if you are speaking, but we cannot hear you.
Josh Levin
Can you hear me now?
Paolo Bertoluzzo
Yes. Perfect.
Josh Levin
Okay. Sorry. Two questions. So one, given the macro environment, particularly the drop in everybody’s stock prices, how does the level or intensity of M&A discussions in Europe today compared with a year ago? And then the second question is earlier this week on its call, Worldline said that it’s materially growing its market share in Germany and Italy. How do you see the competitive dynamics evolving in those 2 markets?
Paolo Bertoluzzo
So Josh, first of all, listen, in terms of M&A, it’s difficult to give you a precise answer because honestly, we don’t see a major change there. I think maybe buyers are a bit more cautious than in the past, which I think is completely normal. We don’t see major processes have been put on hold or major changes of plans. So for now, we don’t see a material change in terms of processes and in terms of those dynamics. Clearly, now instead — in terms of multiples in terms of prices, we expect to see some material changes.
In terms of market share, honestly, I don’t know where the market share that this is actually for them to explain. What we are seeing from our side is that the — we are actually winning market share as well in Germany. You’ve seen we’ve been growing our customer base by 150,000 terminals from the beginning of the year, which, by definition, underlines an important growth also probably in terms of share. And that has been, as I said, quite for in Germany, Switzerland, Poland as well. As far as Italy is concerned, we don’t see us losing market share to specifically Worldline.
I would say, for us growing market share in Italy at the same time, it’s quite difficult given our starting position that is very, very, very high. That’s the way I would summarize it. But more broadly, our dynamic is quite clear, depending market share and increasing value on the customers in Italy and in the Nordics and winning market share in Germany, Switzerland and Poland, if I need to focus on the key markets and is exactly what is happening.
Bernardo Mingrone
I think if I can add to that, Paolo, I think where we are coasters and see date on our cards, and this is Italy. Obviously, I don’t see a market share increase by Worldline, but we have 80% of the market, by the way.
Paolo Bertoluzzo
Yes. Yes. But maybe just to add a data point that maybe our volumes in SMEs in Germany are actually up almost 100% year-on-year in Germany. Our revenues are actually half of that.
Operator
The next question is from Justin Forsythe with Credit Suisse.
Justin Forsythe
Two questions from me as well. So the first one is Visa and MasterCard Europe, both seem like they’re reporting an increasing delta between transaction value growth and transaction volume growth. It was nearing about 30%, indicating ticket size increases. Perhaps there are some mix differences between you and them, but it looks like that delta for Nexi merchant is pretty much flat. And so I was wondering if you could help parse through the potential differences there.
And if there’s anything that we should be looking out for because it looks like the transaction growth actually came in about 17% and whatever your transaction growth was above the flat transaction growth for the networks. And then I wanted to hone in on Shopify announced — Shopify POS launching in Italy. Given Nexi is the leader for processing for SMEs in Italy, but has had a limited online presence, perhaps historically, how do you evaluate the threat of Shopify cross-selling into the in-store channel via POS, even though they have historically had less presence there, but there is such a high share of SMEs in the market in Italy?
Paolo Bertoluzzo
I let Bernardo covering your first question. On second one, obviously, it’s very early to say. We don’t see them active at the moment. Our store experience is that SMEs by e-commerce services and in-store payment services very much separately and also because very often the choice of moving into an e-commerce platform like Shopify is not necessarily done by the merchant directly, but it’s more done by the software and developers and advisers and so on and so forth. So let’s see, I very well understand why Shopify is trying to do something like that for the moment. This is not something that we are seeing or we expect having a material impact. On the first one?
Bernardo Mingrone
On the first one, I think if we move back to a slide, I think it was Slide #8, we show how — as you were suggesting, we have an increase of value of managed transaction which is larger than the growth in a number of transactions. So same directions as Visa, Mastercard in absolute terms, you’re saying their increase — their gap was much larger. And I think, unfortunately, I mean, can we can sell the 2, I think we are seeing the same phenomenon. And as I said, I think that points to the average ticket size is, therefore, increasing or stabilizing rather decreasing, which is the historic trend we’ve seen so far.
And I attribute that to 2 factors. One of them I mentioned is probably inflation creeping in. And the second one is a mix factor with bigger tickets coming in as travel resumes. Now Visa, Mastercard probably have a much larger proportion of their business exposed to travel and therefore they would have impact in terms of the average ticket size compared to us.
I add to that, that we are exiting some sectors are saying Germany, which are — in particular, those sectors were exiting have larger than average volumes as well that might impact this as well. So it’s hard to reconcile it, too. But I think trends are the same and the mix of business is different, and I suggest that’s the reason why the gap is different.
Operator
Your next question is from Aditya Buddhavarapu of Bank of America.
Aditya Buddhavarapu
Just one from my side. I mean you spoke about the growth in basic discretionary consumption across Italy. Can you maybe just remind us what the mix is for you guys in terms of high impact basic and discretionary, both in Italy, but also in some of your other markets?
Paolo Bertoluzzo
This is Paolo. Thank you for the question. We may come back to you with more details on a more geographical basis. But to cut a story short term, the basic services sector is normally the most relevant one. If my memory is correct, in Italy, for example, represents almost 40% of the volumes.
I would assume a bit probably less in Germany and the Nordics because of an important presence of the travel to where, however, take rates — merchants are much lower. And therefore, it depends if talk about volume or value. I think wise, the merchants — the basic service sector is clearly the most relevant one across the group. But we’ll come back to you with some details.
Aditya Buddhavarapu
And maybe just 1 follow-up from my side. How are you thinking about the scope for maybe, I don’t know, pruning the portfolio a bit more, is there anything else that sort of stands out for you? And you mentioned you a few contracts or a few areas in Germany. So is there any other areas like that where you might need to look at exiting as well?
Paolo Bertoluzzo
Well, I think it’s a good practice to continue to revisit the portfolio. This is exactly what we have done in the past — in the last several years, and this is what we are doing very actively now, and I think that what we’ve executed over the last quarter in terms of M&A gives you a direct sense of it. The short answer to your question is, yes, we are continuing to revisit and we will over time identify and communicate most importantly, areas of potential exit for the company. This is a good topic for our conversations in the Capital Market Day in September. I think the — what Bernardo was mentioning was not really a little more specific contracts and customer relationships that we felt or not worth the risk, but it’s a different — slightly different story.
Operator
The next question is from Gianmarco Bonacina with Equita.
Gianmarco Bonacina
A couple of questions for me. The first one is on your ambition for this year, considering you mentioned that you expect clearly tailwinds from inflation in the second offset maybe some lower real consumption. How confident you have to reach the midpoint of this ambition, given that we’ve seen that consensus is now at the low end of this range?
Then regarding Nexi, given that clearly, we can’t exclude that there will be a recession. If you can remind us how the company has performed in past recession? We clearly know the performance in 2020, but that was an extreme year. Maybe just looking at the past in more normal mild recession where the GDP was down maybe real GDP single-digit, what kind of performance you think you can post in terms of revenue and also considering probably next year, you could still have some tailwind on inflation?
Paolo Bertoluzzo
First of all, thank you for your 2 questions. Let me try to take it, and then if Bernardo wants to add anything. On the of the guidance, consensus and so and so forth, we are confirming the guidance in its full range. I think that the environment and the outlook remains a bit unclear. And therefore, we really don’t want to guide more than that. At least in consensus, I think today, we are delivering ahead of consensus and better than consensus. Hopefully, we’ll be able to surprise our investors in the market in the same way for the full year, but let’s see. On Nexi, this is really, really too early to talk about it. Clearly, we’ll talk about it in September. But I think your — the way you are looking at it in terms of past dynamics is obviously the right one.
The — historically, I mean — I mean, COVID cannot be considered a recession. COVID has been an event completely different from whatever has happened in the past because shops were closed and people could not walk out of their houses and so on and so forth. So that has been a very unique situation. Historically, if you look at more tradition, we can say, recessions or in any case, ups and downs of GDP and consumptions normally, our business has proven to be quite resilient. Then unfortunately, I think a recession is on dynamics. It’s in history. It depends which measures were put in place and so on and so forth and what direction it takes, but that’s basically what the recent 5, 10 years or the last 5, 10 years, I would suggest that in terms of evolution.
Operator
The next question is from Alexandre Faure with BNP Paribas Exane.
Alexandre Faure
I’ve got a couple of questions. Just going back on this partnership with Microsoft and just focusing a little bit on one aspect of it, which is you helping them as a merchant service provider in a number of countries in Europe. Could you help us understand a little bit what you’re going to be doing for them exactly? Is it a full stack offer that you’re going to provide them with acquiring just getting a sense of where you’ll be helping them as a partner? And whether you’d be their reference partner your support in those countries or perhaps more of a fallback option.
So that’s my first and a little lengthy question I realize. Second one, Bernardo, just a small clarification on the scheme fee situation with inflation you’re calling out. Is it purely a consequence from the mix with a bit more travel and more transactions being routed to Visa and MasterCard? Or is it the case that Visa and Mastercard themselves have been hiking pricing over the course of H1?
Paolo Bertoluzzo
Alexandre, let me take the first 1 and then hand over to Bernardo for the second one. Listen, on Microsoft, the reality is that, as I said, will be one of their key partners on acquiring. I think as most of these very large technology companies normally as some components of the stack managed directly by them. But we will be one of their few partners for acquiring and over time, their Q1 in certain geographies. Bernardo, you want to cover the second question?
Bernardo Mingrone
Yes. So the biggest effect we’ve had in the quarter for — coming from scheme fees, which, as I said, is important to note because it affects top line growth if you include them or exclude them from our is due to the fact that we now have, as you’re suggesting, or as I was saying, an increased level of extra EA travel. This has higher scheme fees than normal or intra EA travel. And therefore, this has increased scheme fees very significantly this year compared to 2021. And therefore, you have a very significant uplift to top line growth if you exclude those scheme fees from revenues and include them in costs.
We normally show net revenues. So I think ultimately, it’s irrelevant from an EBITDA perspective, which I think is the right way to measure the quality performance. But if you want to gross up, you should gross up for scheme fees and take note that this quarter is probably exceptional — this year is probably exceptional due to COVID and due to this effect. There are also minor impacts coming from increases in scheme fees, for instance, domestic, et cetera. Ultimately, I think, the main explanation comes from extra scheme fees coming back this year compared to last year.
Paolo Bertoluzzo
Alexandre, this is Paolo, if I may say, because clearly, this is a bit complex and a bit technical, but the only reason why we are it is because in this quarter, it makes up 4 percentage points or more difference on the total and even — and actually 6, 7 percentage points on revenues for Merchant Services.
So as you do comparisons, I think it’s important that you don’t forget about it. But ultimately, to keep things very, very simple. And to the point, EBITDA is in this phase, the measure to look at because EBITDA cleans up everything. So regardless of your report, EBITDA is EBITDA and EBITDA for the case of Nexi is growing more than 20% in the quarter and more than 19% for the first half. That’s it.
Operator
The next question is from with Alpha Value.
Unidentified Analyst
Could you please help us understanding your progress on the — on your software? I mean, if we look at the Slide 5 of the presentation and the wins you’ve had in terms of merchants, what are they really buying? Is it something from SIA, from Nets or something really fully synergized between Nexi-Nets and SIA, so we can better understand why are they choosing you rather than comps?
And the second question, if I may come back on M&A. There has been rumors of Nexi’s interest for payment business. I assume you would not want to comment on that more specifically. But if you could provide your vision in ambitions of Nexi Group for the Spanish market, which I think is still very much within the hands of banks. Would you say that such opportunities are quite rare so far?
Paolo Bertoluzzo
This is Paolo. On your second question, as you rightly said, I cannot comment on the specific cases. Let me just say that merchant books and for us, in general, an important area of focus because normally, we have proven that we can create a lot of value on top of this type of deals and geographically — that’s a geography that is attractive for many reasons, and there’s also quite a bit of similarities is what Italy is or Italy was a few years ago. So let me stop there. On your first point around clients and what they buy from us and where we win, where we lose, the — I mean, the names that you see on this page are just some examples of names that may be more telling than others. But I would say that more in general, the reason why customers choose us is basically normally a combination of 2 things: the proposition itself, our products and services from the SME known Smartpay or SmartPOS our e-commerce capability with Spain, Italy or with easy more broadly or similarly, I could say the same on — for larger merchants. But that is also these capabilities, product and capabilities are also combined with our ability to be very local.
So we have the scale that is needed to deliver a modern propositions and advanced proposition. But at the same time, we also are very local and very invention in the market, which means a lot in terms of customer support, delivery, entrenchment with the locally relevant platforms entrenchment with the local relevant softwares, which is incredibly important with the merchants and normally we win on the back of the combination of these 2 components.
Operator
Mr. Bertoluzzo, gentlemen, there are no more questions registered at this time.
Paolo Bertoluzzo
Well, I think then we can close the call here. Thank you for attending. I think we are at the end of July. So maybe some of you are already on holiday, and I wish you great fantastic holidays. Some of us, hopefully, will go in the coming days.
So, wish all of you a great holiday as well and actually see as many as possible a few at the end of September at our Capital Market Day. After the Capital Market Day, obviously, we’re going to be, as usual, available for meeting. But I think we will also show very probably in the U.K. and the U.S. at least.
So, enjoy the summer and talk to you soon. Bye, bye.
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