Neosperience S p A : 2022.01.25 - PMI Capital Research - Neosperience Initial Coverage

Empathy in Artificial Intelligence

Sector: Technology & AI

Niche Market Leader: Neosperience is a leading Italian Tech Company specialized in Artificial Intelligence & Machine Learning applied to Customer Analytics, to assist and improving decision making. Appointed by Gartner among the world top six most innovative software companies, it is the only Italian company "on the rise" in the "Customer Psychographics" sector. Neosperience is a registered innovative SME since December 2017 and is listed on Euronext Growth Milan (ex. AIM Italia) since 20th February 2019.

Core competence in AI: Thanks to an experienced team of approximately 180 people including engineers, psychologists, computer scientists and data scientists, with an investment of time and resources of over 100 years/man and over 20 years of experience in AI technologies, Neosperience support companies in their digital transformation with a proven set of technology solutions and services that are tailored to each client's needs and help to infuse empathy in relationship with customers, business partners distribution networks and thereby increase revenues and improves operations processes and profitability.

Proprietary Customer Data Platform: Over the last decade Neosperience has developed the first AI-based customer data platform that uses Machine Learning and Deep Learning models. Neosperience Cloud is based on several, scalable and ready-to-use proprietary solutions, each of which responds to a specific need in the customers' digital transformation process, using psychographics to improve customer engagement.

The platform is offered to customers with an "as-a-service" licence, providing for an high level of recurring revenues and visibility. (c. Euro 10 m in FY20).

Scalability in vertical solutions: In addition, Neosperience has decided to set up three distinct business units dedicated to Healthcare, Fintech and Industry 4.0 with focused staff. These units will be able to evolve into real autonomous companies if a partner expert in the specific sector is identified (like, i.e., "Neosurance Srl", "BikEvo Srl and WizKey Srl in 2018). Neosperience will be able to bring the technological knowledge and the partner will bring the know-how, the network of commercial contacts and the experience of the sector.

Booming Reference Market: The global customer data platform market is expected to grow from USD 3.5 b in 2021 to USD 15.3 b by 2026, at a CAGR of 34.6% during the forecast period. Proliferation of customer channels are expected to drive the adoption of customer data platform solutions and, in addition to this, services increasing spending on marketing and advertising activities by enterprises are changing landscape of customer intelligence to drive market. The convergence of the physical and digital worlds in Neosperience is driven by new technologies and by visionary management, which are creating the possibility of seizing the extraordinary opportunities offered by the current phase of digital transformation of the economy and society as a whole that we are experiencing.

In terms of future prospects, the overall value of the National Recovery Plan is Euro 222.9 b, c.21% of which (Euro 46.2 b) is dedicated to "Digitalisation, Innovation, Competitiveness and Culture". Under an optimistic assumption of full utilization of the funds allocated annually, the Italian digital market would grow to Euro 95 b in 2024.

International scale and M&A for future growth: The group's development strategy is based on organic growth, continuous investments in R&D and international expansion. The Company intend to grow also through external acquisitions; on this hand, we highlight that the management has a proven M&A track record, with more than 10 acquisitions in the last five years. In particular, the company is currently looking at target with proprietary cutting-edgesoftware solutions able to enrich the group's offer: on 29th November 2021 Neosperience has been strengthened by acquiring control (51%) of Rhei, a company with consolidated experience in the creation of CRM solutions, known in Italy as a reference partner of HubSpot.

2021-2023estimates: We believe that Neosperience can grow revenues at a 20-23 CAGR of +28%, continuing to outperform the market as the Company is well positioned thanks to the high focus on professional expertise and constant investments in R&D, both key growth drivers in this market. EBITDA should grow at a CAGR of 32%. with an increase in EBITDA margin by 510 bps.

Valuation: We set a Euro 11,66 p.s. target price of Neosperience, providing for a +114% upside on current stock price and obtained by weighting equally the DCF and the multiple comparison analysis. At our TP the stock would be trading at EV/EBITDA 2021 and 2022 multiple of 16.3x and 11.7x respectively.

Equity Research

INITIAL COVERAGE

Euronext Growth Milan

Target Price 11,66

Market Cap (€ m) 46.9

EV (€ m) 41.0

As of 24th January, 2021

Share Data

Market	Euronext Growth Milan
Reuters/Bloomberg	NSP.MI/NSP:IM
ISIN	IT0005351496
N. of Shares	8.722.161
Free Float	54.81%
Main Shareholder	Neos S.r.l

Financials

	2020A	2021E	2022E	2023E
Sales	16.4	19.3	29.4	37.3
YoY %	12%	14%	31%	27%
EBITDA	4.8	5.9	8.2	11.1
EBITDA %	25%	26%	28%	30%
EBIT	0.8	1.8	3.9	6.8
EBIT %	4.2%	8%	14%	18%
Net Income	0.4	1.2	2.8	4.6
Net Debt	(5.5)	(3.6)	(0.5)	4.2

Share price graph

Performance

	1M	3M	6M
Absolute %	-3.55	-12.54	-16.31
Relative (FTSE Italia	-2.53-12.61	-18.75
Growth)
52-week High/Low (Eu)	6.90	4.76

E do ardo Fu magalli

e . fu magalli@ irt o p . c o m

Monday, January 24, 2022 6:30 PM

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Equity Research

INITIAL COVERAGE

Euronext Growth Milan

INDEX

1. Neosperience Snapshot………………………………………………………………………………...3
2. Key Financials…………………..………………………………………………………………...............4
3. Group Overview…………………………………………………………………………………………..5
4. Business model: Digital Transformation = Digital Platform + Digitization…………………………7
5. Unique Value (Parte del modello di buisness) ……………………………………………………..14
6. Reference Market: Applying AI in the Digital Workplace…...……………………………………17
7. NRRP Directive……………………………………………………………………………………………18
8. The Competitive Positioning of Neosperience…...………………………………………………..19
9. Industry Business System and Strategies……….…………………………………………………....20
10. Governance….…………………………………………………………………………………………..21
11. Financials and Estimates………………………………………………………………………………..22
12. Valuation…….……………………………………………………………………………………………26
13. Peers Description….……………………………………………………………………………………..29
14. Neosperience on Euronext Growth Milan….……………………………………………………….31

Monday, January 24, 2022 6:30 PM

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					Equity Research
					INITIAL COVERAGE
					Euronext Growth Milan
NEOSPERIENCE SNAPSHOT
Company description					Management
Neosperience is a leading Italian Tech Company		Dario Melpignano - President and CEO
specialized in Artificial Intelligence & Machine			Luigi Linotto - Executive Vice President
Learning applied to Customer Analytics, to assist		Lorenzo Scaravelli - Investor Relations and
and improving decision making. Neosperience is			Corporate Development
a registered innovative SME since December 2017				Key Shareholders
and is listed on Euronext Growth Milan (ex. AIM
Italia) since 20th February 2019.					Neos S.r.l. - 39.01%
					Free Float - 54.81%
Key data charts
Stock price performance	Revenues by geography		Revenues by business segment
	5.0%				5.5%
					13.4%
				48.8%	32.3%
	∼95.0%
	Italy	Export		Cloud Lic. Solution Sales Pro. Services Vertical
Free Cash Flow focus	Revenues and EBITDA margin	FCF and CAPEX on Sales

	2%		6%
		4.4%
-9%
	2.2	1.8	2.0
1.7

-0.6

19A 20A 21E 22E 23E

FCF yield %

				29.8%	35.0%
			27.8%
		26.3%		30.0%
	24.7%
20.4%					25.0%
					20.0%
				34.3	15.0%
			26.4		10.0%
		19.3
13.9	16.4
			5.0%
					0.0%
19A	20A	21E	22E	23E
	Revenues		EBITDA %

8.0%	9.1%	9.1%
		6.7%	6.8%
7.7%		2.1%	1.9%	1.7%

-2.8%

19A	20A	21E	22E	23E
	Free Cash Flow %		Capex %

Source: Consolidated Group data for FY 2019-2020, IR TOP Research estimates for FY 2021-2023. Factset Prices

Investment thesis

• Technology leader in Customer Analytics: Accredited over the years as a "thought leader" in the field of Digital Experience, with a community of over 200,000 users as of 2017, mostly professionals and practitioners, Neosperience was assimilated in April 2018 by Gartner as a major player in the field of Artificial Intelligence applied to Digital Experience alongside IBM, Adobe and Microsoft. (source: Gartner Research, 2018, "Applying AI in the Digital Workplace").
• AI-basedproprietary Customer Data Platform: Thanks to its deep knowledge of software and app developing, the group internally designed Neosperience Cloud, an innovative cutting-hedge Customer Data Platform based on Artificial Intelligence helping businesses to acquire new clients and increase the value of existing ones.
• Know-how& Management: The Group's management has extensive experience in digital and in the creation and marketing of software products; it has already created and developed success stories, including a listed company, lastly sold to third parties (Inferentia DNM). Neosperience boasts a high-profile technical team with approximately 180 professionals of different backgrounds and skills: data scientists, creative designers, experience designers, software architects, psychologists.
• Continuous Investments in R&D: Neosperience's 'empathy in technology' vision perfectly explains
  the peculiarity of the group's offer: by applying machine learning to the results of decades of research in cognitive, social, and behavioural psychology, organisations can provide their clients with a customised and optimised experience based on customer personality.

Monday, January 24, 2022 6:30 PM

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				Equity Research
				INITIAL COVERAGE
			Euronext Growth Milan
KEY FINANCIALS
Profit&Loss Stetement	2019A	2020A	2021E	2022E	2023E
Revenues (VoP)	17.5	19.6	22.4	29.4	37.3
EBITDA	3.6	4.8	5.9	8.2	11.1
EBIT	1.1	0.8	1.8	4.0	6.8
Financial Income (charges)	(0.1)	(0.1)	(0.2)	(0.2)	(0.2)
Pre-tax profit (loss)	1.0	0.9	1.6	3.8	6.6
Taxes	(0.0)	(0.5)	(0.4)	(0.9)	(2.0)
Net profit (loss)	0.9	0.4	1.2	2.8	4.6
Balance Sheet
Net working capital (NWC)	3.4	4.4	4.8	5.7	6.9
Net fixed assets	13.0	19.0	18.0	16.8	15.5
M/L Funds	(0.6)	(1.1)	(1.2)	(1.2)	(1.2)
Net Capital Employed	15.8	22.3	21.7	21.4	21.3
Net Debt	1.3	5.5	3.6	0.5	(4.2)
Minorities	0.3	0.7	1.1	2.1	3.8
Equity	14.2	16.0	16.9	18.8	21.7
Cash Flow
Net Profit	947.8	411.9	1,184.2	2,823.1	4,626.6
Non cash items	588.0	517.0	67.3	0.0	0.0
Change in Working Capital	(3,397.0)	(991.0)	(429.3)	(922.3)	(1,206.5)
Cash Flow from Operations	(1,861.2)	(62.1)	822.2	1,900.7	3,420.1
Capex	(15,465.0)	(9,972.0)	(3,124.0)	(3,000.0)	(3,000.0)
Operating Free Cash Flow	(17,326.2)	(10,034.1)	(2,301.8)	(1,099.3)	420.1
Per Share Data
Current Price	5.44
Total shares out fully diluted (mn)	8.72
EPS	0.1	0.0	0.1	0.3	0.5
FCF	(1,986.5)	(1,150.4)	(263.9)	(126.0)	48.2
Pay out ratio	0%	0%	0%	0%	100%
Ratios
EBITDA margin	20.4%	24.7%	26.3%	27.8%	29.8%
EBIT margin	6.4%	4.2%	8.0%	13.5%	18.3%
Net Debt/Equity	9.3%	34.5%	21.3%	2.7%	-19.4%
Net Debt/(Net Debt + Equity)	8.5%	25.6%	17.6%	2.6%	-24.0%
Net Debt/EBITDA	0.37	1.14	0.61	0.06	-0.38
Interest cover EBIT	10.67	7.85	8.89	19.82	34.05
ROE	6.7%	2.6%	7.0%	15.1%	21.3%
ROCE	7.3%	6.0%	10.0%	23.0%	41.3%
Growth Rates
Revenues (VoP)	-	12%	14%	31%	27%
EBITDA	-	35%	22%	39%	36%
EBIT	-	-27%	118%	123%	72%
Net Profit	-	-57%	187%	138%	64%

Monday, January 24, 2022 6:30 PM

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Equity Research

INITIAL COVERAGE

Euronext Growth Milan

GROUP OVERVIEW

Neosperience is a leading Italian Tech Company specialized in Artificial Intelligence & Machine Learning applied to Customer Analytics, to assist and improving decision making. The Company was founded in Brescia in 2006 by Dario Melpignano and Luigi Linotto, currently holding the positions of Chairman & CEO and Executive Vice President respectively. Over the last decade Neosperience developed the first AI- based customer data platform that uses Machine Learning and Deep Learning models: Neosperience Cloud is based on several, scalable and ready-to-use proprietary solutions, each of which responds to a specific need in the customers' digital transformation process, using psychographics to improve customer engagement.

Key Milestones

• 2006: Incorporated in 2006 in the form of a limited liability company
• 2009: The company focuses on digital innovation, thanks in part to the entry of Dario Melpignano, who acquires 45% of the share capital. Dario Melpignano and the team participated in the first European research projects in mobile services and developed the mobile app engine that would later become Neosperience Cloud.
  In the early years, the company focused mainly on creating its first apps, also in light of the launch of the iPhone 3G in Europe, working alongside major international operators in a still nascent sector. Subsequently, it gradually positioned itself in the digital transformation field, also thanks to the start-up of collaborations with leading companies in their respective businesses.
• 2011: In April 2011, the Company was transformed into a joint-stock company, increasing its capital to Euro 0.42 m and also acquiring the name Neos S.p.A.

In the 2010-2015 five-yearperiod, the Company made significant investments in the development of digital innovation solutions, almost entirely financed by its own funds.

• 2013: Since November 2013, the Company has been undertaking various research projects, such as the PEGASO project, which aims to use digital and mobile technologies to improve services in healthcare. Further projects relate to the development of application solutions in a number of industrial sectors: retail, publishing, local public transport, with a view to consolidating a leading role in the digital transformation process.
• 2014: On 13th March 2014, Neos S.p.A. changed its name to Neosperience S.p.A.
• 2015: Neosperience Lab is set up - with an 80% share - as a non-profit company that obtains accreditation as an Innovative Startup.
• 2016: With the acquisition of control of Neos Consulting, the Group expands its coverage to two
  different business units: on the one hand, Neosperience S.p.A. and Neosperience Lab S.r.l for large enterprises and, on the other hand, O&DS S.r.l. and Neos Consulting for small and medium enterprises.
• 2017: In December, the Company, after meeting the requirements, obtained the status of Innovative SME and, therefore, registered in the special section of the companies' register. In addition, Neosperience obtained the ISO 9001:2015 certification.
• 2018: In August 2018, the Company founded WizKey S.p.A. (and has a 16.36% stake in it), a startup dedicated to the creation of a Blockchain-supported credit marketplace aimed at modernising the sector of securitisation and buying and selling of credits by financial operators.

Monday, January 24, 2022 6:30 PM

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