Good morning, welcome everyone to the Esprinet Q1 2023 result presentation. Before starting, I remind everyone that the webinar is being recorded. After the call, the podcast will be posted on the Esprinet website in Investor section, together with the presentation. All cameras and microphones are currently disabled. During the Q&A session, we will proceed to reactivate the microphone. Please note again that this presentation contains forward-looking statements. I would like to draw your attention to the regulation note on page 2, which provides all details. I'm Giulia Perfetti, Investor Relations Manager of Esprinet. With me is Alessandro Cattani, CEO of Esprinet. Now, I leave the floor to Alessandro to present and comment with you the Q1 2023 results. Alessandro, over to you. Thank you, Giulia, and thanks everybody for joining us today. Well, Giulia introduced the forward-looking statement. Let's jump straight into our Q1 results. Well, of course, it's been a challenge quarter, but what is worth noting is that we keep on moving in our transition to an added value business model, and the growth of gross profit margins on one side, and the growth of the weight of business sales is a clear indication of this relentless transition to an added value business model. We are living in times of high inflation and high, higher, definitely, interest rates. We had, I think, a remarkable result in transferring, pushing downstream inflation and to a large extent, the interest rates that can be measured in the growth of our gross profit margins, which stood at 5.34%, 29 basis points more than the 5.05% of Q1 2022, and 12 basis points up sequentially against the fiscal year 2022. This increase is even higher if we consider the fact that within our gross profit margins, we factored the cost of the financial cost of factoring, which in Q1 2023 was 23 basis points higher than in Q1 2022, reflecting the higher interest rates that we measured during these last 12 months. In a stable environment from an interest rate standpoint, our gross profit margin improvement would have been 52 basis points, up almost 10%. That's been made mostly because of our focus on high margin business lines. Solution and services, which now stand at 23% of total sales, 17% in Q1 '22, and the business customer segment, now 67% of total sales against 60% in Q1 '22. The second highlight is the pressure on rebuilding a standard level of working capital. We have made good progress in decreasing our inventory levels, which is still a high priority for our group. We went down more than EUR 120 million against the Q1 last year, and sequentially close to EUR 60 million against the end of the year. Still there's room to go, and we're working on a strong net debt reduction with the aim of keeping payments to suppliers almost stable and managing customer terms. We must consider that in our net financial position, we discount the fact that we have reduced the overall level of factoring utilization by more than EUR 120 million, resulting from lower sales in the retail segment, where we typically factor our receivables. We are adjusting terms to customers in the business segment to reflect the new environment with higher interest rates, and that's part of the ongoing work of bringing back the overall working capital to manageable levels. In terms of sales, solutions and services outperformed the market, both in terms of product category in the market. The market was down, but the solution and services were sharply up, and we outperformed the market with a notable 23% growth in this area against 18% of the market. There's an ongoing phase of pressure in the market on screens and certain devices, notably consumer electronics. There's a significant pressure in the market on retailers and retailers. The consumer spending has been under pressure, is still under pressure. As I said before, relentlessly phasing out those product customers combinations that generate low value. We're crossing a long desert of, in a sense of, shedding lower value combinations and increasing the weight of the product lines, customer combinations as well that provide higher value. Managing inflation and managing the pressure on interest rates. To a certain extent, I think we have done a remarkable job, if we consider that our SG&A were up just the 3%. Let's have a look at the profitability evolution. As I said, the world has been impacted year-over-year by high inflation and rising interest rates. We have reacted with very strict cost control. SG&A are up 3% year-on-year. We have been able to pass down most of not only product inflation, we have moved it downstream almost entirely, but we have been able to recover also what has been in the gross profit margin in terms of interest rates and grow margins as well. What has not yet happened is the reduction of the working capital, which is still very high for our standards and is up six days compared to Q4 or 19 days compared to Q1 2022. We'll dig a little bit more later into these details. The net financial position, impacted by EUR 120 million of lower factoring utilization, is up because of this, and therefore also the interest costs are up both for interest rate increase as well as higher utilization. We do believe that all the investments in the higher value lines that we have been doing and we keep on doing should pave the way for an accelerated value creation journey. Let's look at this journey. As you know, since a few quarters, we report our product lines in 5 pillars: screens, devices, solution, services, and our own brands. What is remarkable, I think, is that solution and services now represent 23% of total sales and 60% of total with a stronger combined 3.8 EBITA margin. We have room to go to both improve the EBITA margin of everything else, which of course has been impacted not so much by the gross profit reduction, but rather by the lower volumes that provided lower absorption of fixed costs. Still, we have a clear path marked ahead with a strong commitment to grow solution and services on one side and focus our activities in the screens and devices more and more only on those areas where we can squeeze either higher EBITA margins or better Return on Capital Employed, meaning accepting a lower margin products, but with disproportionately lower absorption of working capital. If we look at the P&L summary, I think most of the comments made before have clearly highlighted what is here. I want to stress that even with an acquisition and in a year of high inflation, we grew our G&A by just 3%. We have very aggressive cost control processes in place. What is worth noting is that variable costs are stable, so we have been able to absorb fully year-on-year the changes in pricing for the variable costs. Fixed costs are under control despite the acquisition of Bludis, which brought roughly EUR 700k of additional cost. The overall cost is up EUR 1.1 million. Really, we were able to manage pretty well our cost structure. We had an opportunity in the foreign exchange gain and losses. We had gains against losses last year. The weight of the combined absorption of higher working capital as well as higher interest rates brought a significant increase in the other financial income and expenses, well, in the interest cost. Income taxes, as a proportion, as a percentage of profit before taxes, so the tax rate is essentially unchanged. If we look at the balance sheet, no real big changes from the end of the year in terms of fixed assets. As usual, we witnessed big swings in our working capital due to seasonality, so it's probably worth looking at what happened in Q1 last year in terms of working capital. You see that, last year we already had absorbed a big hit in terms of inventory growth. End of the year it was slightly down and furtherly down in Q1. We think in a good trajectory. Short term, of course, we will have an impact on trade payables because one way of reducing inventory is not buying, and as long as we're not buying, we are not generating trade payables, or at least we're not generating enough trade payables. It's good to know that the terms that we got from vendors are stable and to a certain extent even improving. Once the inventory will be back to normal levels and we will have restored the usual flow of purchases, trade payables days should stay at a healthy level. We have, as I said, witnessed EUR 120 million of lower factoring utilization against March last year. We are not yet measuring a big impact on customer delinquencies. Of course, it's a worry that we see on well, on all the financial papers, newspapers. It's something that we keep a keen eye on. But so far the situation is still absolutely manageable, and we have not yet had significant credit losses. The group is reducing its exposure to certain customers as well as generally speaking, having a progressively lower exposure to the retail segment, which in this moment is the one witnessing a higher pressure in terms of impact of the downturn of the market. Here the forecast is of progressing with our work of inventory reduction. At a certain moment in time, trade payables will start balancing again. In terms of trade receivables, business customers do have nominal payment terms that are lower, generally speaking, than those of retailers, but we don't typically factor them. We should in time have probably a different balance between factoring and trade receivables. That's for the balance sheet. If we look at the working capital metrics on the Q4 average, of course, you see a first sign of decline in the inventory after having spiked at 59 days. The increase in the average DSOs has been driven by the results of the Q1, just the Q1, which we'll see in a second. More or less stable, a little bit down from the peak of Q3 2022, the payment terms of customers to suppliers, but mostly driven by a technical aspect of lower purchases because we're shedding inventory. The nominal terms are stable, if not slightly improving. You see it better in the following slide where you see not the moving average, but the quarter and the metrics. You see that payment terms are more or less stable at 72-73 days. Inventory at 53 days is down against the 57 days of Q1 2022. Still very, very high. If we go back to pre-pandemic levels, we are trading in line, if not slightly below those levels. We expect to have a better situation moving forward. We had this spike at the end of Q1 because of mostly this lower utilization of the factoring. Moving forward, we're really keen to have a better a better picture during the year in terms of working capital metrics, which of course reflect on our Return on Capital Employed, which is which has been heavily impacted by, not so much by the profitability, but rather by the higher level of capital employed linked entirely to the working capital. We had a tax issue. We are discussing a possible tax issue settlement. I expect a lot of questions here. Let me give a little bit more of color. First of all, it has not yet been closed. We're still in discussion with Italian tax authorities. Of course, as long as we have provided numbers, we have a certain level of confidence drawn by the discussions with the authority that the settlement could be finalized by the end of this month. If that will eventually happen, we will provide, we will inform the market with ad hoc information. What happened is that as described in the annual financial report 2022, at the end of 2022, the Italian tax authorities gave us four tax assessments for the taxable years 2013, 2016, and one for the taxable year 2017. The point is that according to the Italian law, there are customers that are considered usual or habitual exporters. Customers that typically pay VAT on their purchases, and as long as they are exporting, they are not collecting VAT. They generate a huge credit against the financial authorities. The financial authorities, instead of reimbursing this credit, gave options since many years to these habitual exporters to issue a self-declaration to their suppliers, claiming them to be habitual exporters and allowing them to purchase without VAT. The Italian Tax Authorities, we have sold to some of them. It's a really minor portion of our total sales, probably something like 1% of our total sales during those years. It's a few tens of customers that were audited. After longer investigations, the Italian Tax Authorities claimed that they, not only they do not qualify as habitual exporters, but some of them even took part in tax evasion. We have never been considered part of this mechanism. The Tax Authorities said you should have made the sort of policy trying to understand if they were really habitual exporters. This is really peculiar because this is not written in the law. It's the result of retroactive decisions made many years after we sold. Luckily, we had performed controls. We feel confident that we could win. Unfortunately, the Italian tax authorities challenged EUR 77 million of VAT, which we think we should win. Given the Italian regulations, the penalties and interest amount to a staggering 140, roughly EUR 140 million of additional penalties and interest for a total of more than EUR 220 million. That's the standard numbers. Whenever you see a challenge number on VAT or for what I understand, traditional taxes as well, income taxes as well, penalties and interest very often are two, if not three times the amount challenged. What happened under the Italian regulations is that the tax litigation typically goes through three levels of judgment up to the Supreme Court and normally lasts more than 10 years. The litigation will start this year. Unfortunately, pending the litigation, there's a chance that the authority may claim these EUR 220 million in advance pending the final decision. Our board had to face the dilemma in terms of risking of potentially freeze up to EUR 220 million in the next two, three years probably, or to start a potential settlement. The idea after long and painful internal discussions has been the risk for the company of having to give an advance to the government of up to EUR 220 million and then waiting up to 10 years to get that back after the Supreme Court judgment, which we have plenty of leading law firms' opinions that say that clearly this is illegal for many reasons, was too high, was deemed too high. In order to reduce the risk for the company, we entered the negotiation with the authorities. The authorities, I think the percentage is a clear indication of the level of confidence the authorities themselves have in the possibility of winning, is 14%, a little bit less than 14% of the total claim, which we can pay in up to 5 years. We are talking about EUR 6.2 million of taxes per year for the next five years, roughly 8%-9% higher tax rate. Even if the entire cost will be booked as a non-recurring charge on this year results. Discussions are still open and ongoing, as I said, if the settlement procedure will be finalized by the end of the current month, as we think it's possible, we will inform the market. That's for the tax issues settlement. With this, the risks of further payments for taxes up to 2017 for our group on the Italian operations are closed, fully closed. We have reduced significantly the risk. That's for the tax settlement guidance. Well, the backdrop, we as everybody are facing headwinds. There's a geopolitical tension, there's high inflation, interest rate, but forward-looking indicators suggest disinflation in the second half. But negative short-term momentum is still very strong. First half of the year has been very challenged, even if we start seeing hopefully some signs of improvement. Opportunities. Well, short term, public investments in digitalization are still strong, and midterm, the product refresh on a large installed base of users is a tremendous midterm opportunity. Not to mention, of course, the overall opportunities given by the overall higher level of IT utilization, fueled by innovation on one side, but from the major wave of IT purchases made during the pandemic. What to watch, of course, the economic outlook, risk of recession or GDP recovery. There's a sort of strong separation between what the numbers apparently are telling us and what is the feeling of people feeling in when you talk about what's happening in the market, there's a lot of worry and of uncertainty. On the other side, apparently the numbers speak for a much better picture. Are we shifting from energy risks to credit financial risk? We have put a lot of attention into reducing our exposure to certain customers and set certain segments, especially the consumer one, because we are afraid this pressure might create troubles in that area. What are our key priorities? Well, first and foremost, moving forward again and again on our transformation into a value add distribution model will be relentlessly phase out the lowest value add combination of products and customers. We are accepting some market share losses because we want to improve our gross profit margins and pave the way from an accelerated growth in value creation in the next years. Of course, this will drive pressure on changing our cost structure and some of our people, of course. And we are telling clearly to our people, to our vendors, and to customers as well, that, we, are looking for value also in lower profitability lines, such as telephones or PCs, which we call the, what we call screens, but only when optimal management working capital levels is achievable, and I would add in a structural way. A nd of course, we keep on looking at new growth opportunities also through M&A in the solution and services segment. And, uh, we keep on, uh, looking at opportunities. We are actively working on some opportunities. We'll see if we will be able to translate them into reality. And last but not least, we have already, uh, spoken a lot, at length about that. Another key priority is finishing the hard work of bringing back a networking capital absorption to the standard levels, which were severely impaired by the post-COVID changes in, especially in the supply chains, and therefore returning to higher levels of proxy. All in all, if you look at our guidance, well, digital transformation is driving strong IT spending and will drive strong IT spending. We have a clear and consistent strategy in the high value add product and customer segments of the industry. We have more than doubled our profitability. We have doubled our profitability and more in this last five years. Our guidance is based on our feeling and the almost unanimous feeling of industry analysts that during 2023, we should expect in the group's reference countries a low single digit increase in demand. There's agreement that the strongest growth is expected in software and in infrastructure spending, and that consumer demand will continue to be under pressure, albeit less than what we experience in the first part of the year. In consideration of this challenging backdrop, as well as the results obtained in the Q1, the guidance is of an EBIT Adjusted expected between EUR 85 million and EUR 95 million. It all boils down, we are pretty confident on our cost control capabilities as well as on the gross profit performance. It's mostly a matter of understanding market performance will be as analysts and as we as well believe a good recovery, especially in the second half of the year, or will still be challenges in demand driven by worsening macro scenario. Numbers speak for a better performance of the market. We of course are driving a shift, leaving on the table certain lower value portions of the market. Nevertheless, we expect 85 to 95 at the moment as a reasonable number. Of course, being adjusted the EUR 30 million, roughly EUR 31 million of the tax settlement, if we will find the agreement with the government, will be adjusted in these numbers. The end number will, the as reported number will be EUR 30 million, EUR 31 million less, with the cash disbursement will be spread in five years at EUR 6.2 million plus interests per year, roughly. That's all. Thanks for the interest, and now I give back the floor to Giulia for the Q&A session. Yes. We can start with the Q&A session. I remind you that to ask questions, you should kindly book your speech. The first question comes from Mr. Storer. Mr. Storer, I give you the floor. Please remember to activate your microphone. Can you hear me now? Yes, very well. Yes, we can. Okay, perfect. Thank you. Good morning. Thanks for the presentation. I have maybe a couple of questions. The first one is on your underperformance compared to market in Q1. If you can maybe give us some more color on why such a significant underperformance. You spoke, you spoke about maybe the fact that you keep shedding most unprofitable business, but I'm wondering whether this could alone explain the big gap versus the market. And also was surprised in seeing this gap also in the business segment. The second question is on Cash Conversion Cycle. We are understanding that basically the business segment entails a lower level of factoring versus the commercial, the community, the consumer one. In light of that, and in light of the shift that we are seeing in the mix, should we think of a different target in term of Cash Conversion Cycle and so working capital level at target, let's say, level compared to the past? Thank you. Okay, thank you. Well, on the underperformance against the market, let's say no, we are not really losing opportunities. We have a very firm grip on the market. That's our perception, at least, also speaking with customers and vendors. The point is that especially on PCs and smartphones, and to a lesser extent, certain consumer electronics products, such as TVs, we simply have walked away from really underperforming customers, and vendors and deals, generally speaking. I said this many times in the last 2 years, when we embarked into this journey, I said that it would have happened sooner or later that the pace of growth, in the higher margin, and higher value add business, such as solution and services, would have probably been Outpaced by the reduction that we are performing of the lower margin businesses. Sometimes we have been able to balance them in a better way. Sometimes, the acceleration in the, let's say, shedding of unprofitable business has been a bit too fast. That's basically what we're doing. We have progressively, and we will keep on progressively discuss with our customers and our vendors, and if there's not enough value, in terms of margins against the working capital, we will slowly or quickly walk away from them. The underperformance is mostly driven by this, and it's also a force that we are exerting on our people. They have to understand that, we are becoming something different. Whoever is involved in low margin businesses is forced to work hard to change this underperforming business into a better performing one, or they would be moved to other departments or potentially left home. That's for the market. On the Cash Conversion Cycle, well, so far we have not changed our targets. It is true that we are in the middle of a big transition. Anyhow, the impact on DSO on the business segment is normally counterbalanced by the fact that most of the solutions run with lower inventory levels. What might happen probably in the future is that we will have lower levels of inventory and slightly higher levels of DSO. The overall target of running around or below 18 and 19 days of cash cycle is something that we keep in mind as our guiding light. Of course, we are far away from there because we are transitioning from, let's say a steady state situation to a really post-pandemic mess, which we are sorting out, and not only us. It will take some time and unfortunately, the fact that the PC market is so under pressure, -20%, is something that is creating further complexities into the process of reducing the inventory because vendors are truly desperate about the market performance. On top of that, we collectively as distributors are working to reduce the level of inventory. It is taking more time than what we would have expected and loved. It's so far the target is still confirmed. We'll see by the end of the year if when we'll most probably will release a new focus for the next 3 years. We will work on new numbers. So far I don't expect big changes. Okay. Another call, question comes from Mr. Nargi. Mr. Nargi, please remember to activate your microphone. Hello, everyone, and thanks for taking my question. I have three questions. The first one is on the tax litigation you received from the Italian Tax Authority. My question is about these unfair customers. If you are still in touch with this customer, and if they had some contribution to your revenues in the 2018 and 2022 period. The second question is about the rental business. If you may provide some update on this business, or if you can give us some indication for the year. The third question is about your M&A strategy. If your M&A strategy is still ongoing. If you expect to continue acquiring new firms. Thanks. Okay. Well, on the first question, tax litigation, it was a really small amount of our overall sales. It's considered that they challenge EUR 77 million VAT on a period of four years. In that period of time, we made probably EUR 8 billion-9 billion in Italy alone. No, we have not sold anything to those customers. As a matter of fact, we have basically brought to zero sales to all customers in exempt, in exemption, in habitual exporters. As a result of this investigation years ago, we have lost the sales on many other customers since 2017, because it's not yet clear even now from the government which kind of controls are deemed as okay for the tax authorities. The tax authorities challenged us, but they didn't say what we should have made as controls, so that's the point. They didn't say. They simply said that we didn't make enough controls. That's it. We quit selling to these customers. We still have some minor sales to few long-term customers of ours, as some of these customers were as well, frankly speaking. Sales are zero, not only on those customers that were challenged, but on many, many others as well. On the rental business, it's progressing slower than expected. We are close to EUR 6 million of contracts either signed or under discussion in Italy alone as of today. We are kicking off seriously the activities in Spain, so eventually Spain will become a contributor. The project is moving forward slower than expected, frankly speaking, so we have not yet the targets for this year. As I said, we would expect to be in double digit in terms of millions of EUR of the cost of contracts for the full year, and we have a good trajectory here. Let's see if we will succeed. The project is moving forward. In terms of M&A, yes, we keep on exploring opportunities. As I said, we have a double-folded strategy. In Italy, Spain, and Portugal, we are looking at small companies, typically they are small, few tens of millions in revenues and perhaps EUR 1 million, EUR 2 million, or slightly more in terms of EBITDA, as add-ons to especially the solution or services segment. We have some deals that are under discussion. I don't know if as always in this kind of deals, we will close them or not, but yes, we are discussing. We are also looking at opportunities in Western Europe. In this case, we are looking at bigger entities that would act, let's say as a sort of portfolio company on which to provide later on add-ons with further acquisitions once in that country. It's a longer process. We must be more careful here because we don't yet know these markets, so we must be really careful in selecting the targets. We are discussing with multiple M&A firms that are providing targets, and we are looking at the targets in this moment. It will take some time probably. Here we need, as I said, to be really spot on in terms of choice of the target. Yes, we are working on this. The M&A trajectory that we designed is of paramount importance for our development, yes, we keep on running it. Okay. Okay, another question come from Mr. Berti please remember to activate your microphone. Hi, good morning, everyone. Thank You for the presentation. I was wondering what is the visibility you have on the guidance you provided? My understanding is that it incorporates the assumption of mild recovery in consumer demand in the second half of the year. Is that correct? What is the visibility on that? Second question, if you can provide a comment on the timing you expect for the restocking and therefore the return to a more normalized level of financial position. Yeah. In terms of the visibility on the guidance, well, gross profit margins, are growing, notwithstanding the, the increased interest rate costs, bear the, within the gross profit by the financial costs of the factoring. So, in our guidance, we have incorporated higher gross profit margins, very strict cost control. We do expect some growth, in the overall SG&A, although we are exerting tremendous pressure on, our organization to keep a lead on cost. W e are forcing, holidays, on, our people. We are reducing significantly, the, turnover, so the substitution of people that leave, autonomously the company. W e are renegotiating furthermore contracts, with everybody. We have, reduced, we have sub-rented the portion of our Italian offices. We are putting a lead on travel, so lots of activity over there. Good news is that the weight on revenues of variable cost is stable, so we have stabilized the inflation in this area as well after very strong and harsh negotiations with suppliers, as well as redesigning of certain processes. It all boils down to the volumes. Far the visibility is that we could have a year of stable, if not slightly higher levels of revenues. That's the math incorporated in the best-case scenario. There's another hypothesis of low single digit decline in revenues that is incorporated in the lower level of the guidance. We'll see what will happen in the next months. April has been a challenged month. May looks much better. The overall sentiment of business customers is fairly good. Consumer retailers are struggling. again, the point is more on the perception rather than truly the numbers as seen. There's a bad mood out there, which apparently is not reflected in the hard figures that we get from the government, from statistical entities. especially in the consumer segment, we think that it's not so much an issue of crisis, it's a rebalancing of the share of wallet. After having been mostly devoted to indoor spending during the pandemic, there's a sort of binge spending in outdoor activities. Probably it will bounce back to a more normal situation. Those are the assumptions under the visibility of the guidance. As long as the guidance has been issued yesterday night, it incorporates all the information that we have as of today, therefore, so far, we have a good visibility. All analysts are anonymous in stating that there should be a mild year-over-year recovery in the distribution industry in the second half, especially driven by better performance on PCs. Smartphones are not doing bad. Consumer electronics is very challenged, especially in Italy. Last year we had government subsidies for TVs, it will be a hard time for those that sell TVs this year. Apart from this, we have more uncertainty, so the range is higher than usual. So far we think it should turn out to be a good year. Potentially another record year. We'll see in due time, depending on the overall performance of the market. Also, on the timing of the stocking, which is your second question, the impact on gross profit margin is linked also to the speed of the stocking. We have been able to significantly destock without any impact on our gross profit margins. As a matter of fact, they grew. The timing is also linked here. We are patient, we are helping our customers, our suppliers to find the right timing to reduce the level of the stock, because it's a painful journey for them especially, and to a lesser extent for us. It really depends on the recovery in the, especially in the PC market. If the PC market will provide some signs of recovery before summer or earlier in September, I think by the end of the year we should have probably normalized the situation even earlier, if possible. If not, it will probably be a more muted journey, we'll see. It's really hard to have a strong prediction. We were more positive last year and so we said, probably by the end of the year everything will be fixed, and we were wrong because the market turned, the nasty turned down in Q4. We have to be cautious in providing timing. Most probably by the end of the year the situation should be over anyhow. Thank you very much. You're welcome. Any other questions? Apparently not. Thanks everybody for joining us today. We are on a journey, and here we are. For further questions, as always, feel free to get in touch with us. We have an upcoming series of stock conferences. You can find them in our calendar on our investor relation website. Eager to see you soon at one of these meetings. Hope you're all well, and speak soon. Thanks. Thank you and see you next time.