in partnership with esprinet · employs a workforce of approx. 1,300 people. since 2012 the group...

1 ESPRINET INITIAL COVERAGE

MTA STAR - 3 August 2020 8:30 p.m.

IR TOP RESEARCH Luisa Primi – [email protected] T +39 02 89056957

ESPRINET

A strong technology platform to lead transformation in IT distribution We initiate coverage on Esprinet with a TP of Euro 7.69 p.s. providing for a potential upside of 84%. The Group is currently offering a valuation of 8.2x and 6.9x FY20-21 P/E respectively, vs. peers trading on 15.9x and 13.7xFY 20-21P/E. We value Esprinet on a peer group-based multiples approach and on a DCF model. Market leader in southern Europe. Esprinet, is the leading Group in the IT/Consumer Electronics wholesale distribution and solutions market in Italy and Spain and the fourth player at European level. The Group operates as trading partner for over 650 vendors, including almost all global market leaders, and provides a full range of distribution services and IT advanced solutions to a capillary network of 31,000 reseller clients. Esprinet operates principally in Southern Europe (63% of total sales in Italy and 36% in Spain and Portugal cumulatively) and employs a workforce of approx. 1,300 people. Since 2012 the Group has grown rapidly and above market rates thanks to a mix of healthy organic growth and M&A (2012-2019 CAGR of 11% vs. market +8%). In FY 2019 revenues reached Euro 4 b, placing the Group among the top 50 Italian industrial groups and the top 10 distributors worldwide.

M&A with a perfect strategic fit. In mid-June, the Group announced the signing of a binding agreement for the acquisition of GTI Software y Networking S.A., the No.1 distributor of Cloud solutions and business software for Value-added Resellers (VARs) and System Integrators in Spain. With the acquisition Esprinet will significantly strengthen cloud/and as-a-service distribution models as well as its market position in Spain.

Proprietary and strong operating technology platform for growth. According to ICM Advisors’ evaluation of the technology asset portfolio (Information Systems, e-commerce, business intelligence) Esprinet obtains a Technology Equity Score1 of 3.6 on a 5 scale, implying that the Group operates in the reference market as a strong challenger and potentially fast growth player/technology leader. The technology portfolio quality and potential analysis highlights that Esprinet technology position is above competitive parity.

Positive outlook thanks to strong market position, technological leadership, and financial solidity. 1H20 showed positive results with preliminary sales reaching Euro 1,834 m, +7% vs. 1H19. Management has not yet provided any guidance for FY20 but stated that sales in July continued to grow at double digits, and that 1H20 saw a strong improvement in EBITDA vs. previous year.

Looking forward, we estimate revenues to grow at a 19-21 CAGR of +8% reaching Euro 4.6 b in 2021. We assume a top-line growth in of c. +7% in FY20 and +9% in FY21 as we believe that more favourable market condition and the strong competitive positioning will allow the Group to resume the historical path of organic growth. EBIT and Net Profit are forecasted to post a CAGR of 12% and 15% respectively.

Market/Segment MTA / STAR

Bloomberg PRT:IM

ISIN IT0003850929

N. of Shares 50,934,123

Free Float 52.66%

Main Shareholder Francesco Monti (16.16%)

CEO Alessandro cattani

Eu m 2019A 2020E 2021E

Sales 3,945 4,225 4,601

YoY % +10.5% +7.1% +8.9%

GP 175.3 186.6 207.3

GP% 4.4% 4.4% 4.5%

EBIT 41.1 43.9 51.3

EBIT% 1.0% 1.0% 1.1%

Net Profit 23.6 26.0 31.0

Net Cash (272.3) (295.2) (318.2)

P/E 2020 2021

Esprinet 8.2 6.9

Peers 15.9 13.7

Discount/Premium -48.3% -49.6%

1M 3M 6M

Absolute +11.1% -2.6% +38.1%

Relative (TSE Italia STAR) +7.0% -11.9% +28.9%

52-week High/Low (Eu) 5.65 / 2.69

Sector: Technology Distribution Target Price (Euro) 7.69 Market Price (Euro) 4.19 Market Cap (Euro m) 209 (July 31st, 2020)

Share Data

Performance

In partnership with

Results & Estimates

Peers Comparison



CONTENTS

1. INVESTMENT SUMMARY (KEY FINANCIALS & INVESTMENT CASE) 3

2. REFERENCE MARKET1 5

3. COMPETITIVE POSITIONING1 8

4. BUSINESS MODEL1 11

a. BUSINESS MODEL &VALUE PROPOSITION 11

b. PRODUCT AND SERVICES PORTFOLIO 15

c. TECHNOLOGY ASSETS PORTFOLIO 18

5. GROWTH STRATEGY1 20

6. HISTORY, COMPANY STRUCTURE, OWNERSHIP, GOVERNANCE &

SUSTAINABILITY APPROACH 21

7. HISTORICAL RESULTS OVERVIEW 25

8. 2019-2021 ESTIMATES 30

9. VALUATION 32

The analysis has been made in partnership with ICM Advisors, an international independent advisory and research firm specialized in valuation, valorisation and finance of intangible and IP assets (brand, technologies, patents, know-how, R&D projects, software, business model) and the associated businesses.

ICM Advisors has executed hundreds of technology assets evaluations in different industries and technology domains with the objective of measuring the impact of the technology on the business strategy, model and financial performance.

The technology portfolio evaluation is developed using the Technology Equity Score (TES™) proprietary method that evaluates the strengths, risks and opportunities along five competitive dimensions: technology asset quality, technology positioning and strategy, technology business impact, technology & IP management and technology exploitation potential.



KEY FINANCIALS

Euro m Profit&Loss Stetement 2018A 2019A 2020E 2021E Revenues (VoP) 3,571.2 3,945.4 4,224.9 4,600.9 Gross Profit 162.3 175.3 186.6 207.3 Gross Profit % 4.5% 4.4% 4.4% 4.5% EBITDA 28.6 56.0 58.5 66.0 EBITDA % 0.8% 1.4% 1.4% 1.4% EBIT 23.7 41.1 43.9 51.3 EBIT % 0.7% 1.0% 1.0% 1.1% Financial Income (charges) (4.5) (9.4) (8.2) (8.8) Pre-tax profit (loss) 19.2 31.7 35.7 42.4 Taxes (5.0) (8.1) (9.6) (11.5) Net profit (loss) 14.2 23.6 26.0 31.0

Balance Sheet Net working capital (NWC) (2.2) (122.4) (113.5) (106.4) Net fixed assets 118.5 226.0 220.8 215.5 M/L Funds (14.4) (16.9) (17.5) (17.8) Net Capital Employed 101.9 86.7 89.9 91.3 Net Debt (241.0) (272.3) (295.2) (318.2) Minorities 1.2 2.5 3.0 3.6 Equity 342.9 359.0 385.1 409.5

Cash Flow Net income 14.2 23.6 26.0 31.0 D&A 4.7 14.7 14.5 14.6 Change in Working Capital 109.4 120.2 (8.9) (7.1) Operating Free Cash Flow 128.2 158.4 31.6 38.4 Capex (3.0) (3.1) (10.3) (10.3) Change in other non current a/l 2.3 (116.7) 1.6 1.4 Unleverede Free Cash Flow 127.4 38.7 22.9 29.5 Dividend (7.0) (6.9) 0.0 (6.5) Other (equity) (2.5) (0.5) (0.0) (0.0) Free Cash Flow 118.0 31.2 22.9 23.0

0.0 0.0 0.0 0.0 Per Share Data Current Price 4.19 Total shares out (mn) 52.4 EPS 0.3 0.4 0.5 0.6 FCF 2.3 0.6 0.4 0.4 Pay out ratio 49% 0% 25% 25%

Ratios EBITDA margin 0.8% 1.4% 1.4% 1.4% EBIT margin 0.7% 1.0% 1.0% 1.1% Net Debt/Equity -70.3% -75.8% -76.7% -77.7% Net Debt/EBITDA -8.43 -4.86 -5.04 -4.82 Interest cover EBIT 5.22 4.36 5.34 5.80 ROE 4.1% 6.6% 6.8% 7.6% ROCE 16.1% 31.8% 31.9% 36.5% Capex/Sales Free Cash Flow Yield 53.7% 14.2% 10.4% 10.5%

Growth Rates Revenues (VoP) 11% 10% 7% 9% EBITDA -28% 96% 5% 13% EBIT -31% 73% 7% 17% Net Profit -46% 66% 11% 19%

48%52%

Sales 2019 breakdown by Client

Retailers & e-tailers

IT Resellers

63,1%

35,0%1,0% 0,5%

0,4%

Italy

Spain

Portugal

Other EU countries

Extra EU countries

Sales 2019 breakdown by Geographical area

51%14%

35%

Sales 2019 breakdown by Product

IT Clients Consumer Electronics Advanced Solutions

3.571

3.945 4.225

4.601

24 41 44 53 0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

18,0%

20,0%

-

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

2018 2019 2020 2021

Sales and EBIT evolution - Euro m_________

Net Sales EBIT Growth YoY % on net sales



INVESTMENT THESIS

REFERENCE MARKET

• Esprinet’s reference market (Southern European IT&CE distribution market) is a healthy market with growth driven by increased use by vendors of distributors: from 40% in 2016 to 49.8% in 2019 as Vendors look to increase efficiency

• Market demand driven by IT subscription models (replacing IT asset Capex with Opex) and by new technologies (IoT, Big data, Analytics, Cybersecurity)

• Growing demand of logistic services driven by retailer e-commerce

COMPETITIVE POSITIONING • Market leader in a highly competitive reference market: 25% market share in 2019 • The Group’s Critical mass in terms of size and coverage allows a role of active market

consolidator • Competitive positioning in advanced solutions distribution • Highly efficient logistics processes and systems, scalable with low cost sensitivity to

volume upgrades • Proprietary and distinguished IT operating platform and e-commerce services support

the cost base lowering, the customer service level and the launch of new services

BUSINESS MODEL

• Robust value proposition: very wide service portfolio supporting the position of end-to-end solution provider

• Leverage on strong foundation in the distribution businesses to provide high-margin services and solutions (advanced solutions and subscription/usage services)

• Extensive product range and strong relationship with key vendors (one-stop-shop)

GROWTH STRATEGY

• Focus on customer satisfaction: improve the quality of service provided to customers in order to maximize “customer loyalty”

• Increase presence in Portugal through organic growth and/or M&A • Strengthen the end-to-end portfolio of products, services, and solutions • Pushing for a higher weight of high margin businesses (Advanced Solution, Everything

as a service, outsourcing services) • Development of a state-of-the-art XaaS strategy • Working Capital management: further improvement in ROCE, also through a more

efficient inventory management, with positive effect on cash conversion cycle • Potential M&A in cloud services and niche vertical applications

FINANCIALS

• Overperforming a growing market: 2015-2019 CAGR of 10% vs. market +8%. • Revenue increase in 1H20 by +7% thanks to a COVID-19 resilient market (+6%) and the

Groups’ ability to adapt to new market conditions • Effective cost control and Gross Margin driven by product mix • Improving trend in cash conversion cycle: 12 days at Q220 - 16 days vs. Q219 and -8

days vs. last quarter of 2019. • Focus on ROCE with continuous improvement following strategic initiatives: 9.8% at

year-end 2019 vs. 9.4% in 2018 7.6 % in 2017. • Continuous dividend policy with an average pay-out ratio of 27% (2012-2018)



2. REFERENCE MARKET

• Esprinet’s reference market (Southern European IT&CE distribution market) is a healthy market with growth driven by increased use by vendors of distributors: from 40% in 2016 to 49.8% in 2019 as Vendors look to increase efficiency

• Market demand driven by IT subscription models (replacing IT asset Capex with Opex) and by new technologies (IoT, Big data, Analytics, Cybersecurity)

• Growing demand of logistic services driven by retailer e-commerce

Esprinet’s core business is the B2B distribution of IT and Consumer electronics in Southern Europe (Italy, Spain and Portugal). As such, the Group’s position in the value chain is between vendors (manufacturers) and resellers and the reference market is defined as the portion of the ICT and CE markets channelled through distributors. With the evolution of technology, the distribution business model has had to adapt over the years, starting off with a business model based on solving the upstream need for inventory and logistics management. The second era of distribution was built upon the overall excellence of the first phase by creating cross-vendor solutions, and increased volume ability by building a value-based business model with technical excellence. In this era distributors accentuated upstream vendors by integrating multi-vendor solutions, including data centre offerings. Channel development and enablement was added to their value propositions. The most recent development focuses on digital. As the world is getting digitalized, the technology needs to support the end users’ transformation will include investments in emerging technologies of AI/machine learning, Cloud Xaas, IoT and Security/Analytics for everything. The core value of distribution solutions of data centre and integration and the global logistics quote-to-cash operational excellence from the previous eras will continue to be core needs, but the business models of Distributors will have to evolve to be able to support recurring and subscription business models (vs. transactional) and AI/ML and Data Analytics system integrations within IoT solutions. IT Supply chain Distribution Value & Growth through the years

Source: Company presentation Source: GTDC Tech Distribution 2025

-1990

1990-2018

2018-2025+

• Inventory management • Logistics • Transactional support • Channel financing • Volume • Operational excellence

• Integration Services • Global Logistics • Channel Development • Channel Enablement • Value • Technical Excellence

• Cloud XaaS Marketplaces • Artificial Intelligence • Machine Learning • Analytics Integration • Emerging Technology Solutions

Components &

Systems Era

Solutions Era

Digital Era

-1990 2025

Reve

nues

VENDORS

IT Clients Advanced Solutions

Consumer Electronics

Individuals

Small Medium Businesses

Resellers • Retailers

Government Large Corp

1st TIER Direct

Channel 2nd TIER



Southern European IT and Consumer Electronics distribution market The total addressable IT and CE market1 in Southern Europe, reached Euro 31.5 m in 2019 and has seen a steady single-digit growth since 2015 (CAGR of 1.6%) driven by strong growth in the Portuguese market at a 2015-2019 CAGR of 6.9%, and a more moderate growth in the Spanish and Italian markets (1.6% and 0.8% respectively). The distri share. i.e. portion of market currently managed by distributors (and not directly by vendors) reached 49.8%, accounting for Euro 15.7 b, +7% vs. 2018 (2015-2019 CAGR of 8%). This growth has mainly been driven by a trend of increased use of distributors by vendors: from 39.5% of total addressable market in 2015 to 49.8% in 2019 and is forecasted to continue to grow in 2020, as Vendors look to increase efficiency.

Source: IR Top elaboration of EITO and Euromonitor data2

Why a distributor Why distributors for Vendors Why distributors for resellers • Market access, Reach, Coverage and

Channel Building • One-stop-shopping opportunity (range

and availability) • Speed to market (Brands and new

products) • One-stop-information gathering point

and technical support • Economic efficiency (lower cost to serve,

Variable cost, vs. fixed or capital investment, minimizing working capital)

• Bulk breaking and no minimum quantities required to be a valued partner

• Need for aggregator of products into complex multi-vendor solutions

• Outsourcing of warehousing and shipping

• Specialized services required by different channels

• Market and business intelligence

• Credit line and credit collection capabilities • Credit provisioning COVID-19 Technology resilience Over the past months, European companies across all industries have seen the effects of the COVID-19 crisis, which has substantially affected also Esprinet’s reference market so far in 2020. According to recent Context data, the ICT distribution market in Southern Europe, showed a very positive first bimester of 2020 with revenues up by +13.3% yoy as smart working and distance

1 Total value of IT and Consumer Electronic product categories where the distribution channel is present (IT Clients + Advance Solutions + Consumer Electronics & Smartphone) at distribution price based on EITO (IT Clients - Advanced Solutions & Smartphones) and Euromontor (other Consumer electronic) data 2 Applying Context data for distributors on total addressable market as defined above

52%40%

8%

Italy Spain Portugal

11,7 11,9 13,3 14,6 15,7

17,9 17,8 16,2 15,7 15,8

39,5% 40,0%45,0%

48,3% 49,8%

-5%

5%

15%

25%

35%

45%

55%

0

5

10

15

20

25

30

35

40

2015A 2016A 2017A 2018A 2019E

Direct sales of ICT products (ex-white goods)

ICT distributor sales

Share in ICT products (ex-white goods)

Breakdown IT&CE addressable market by country 2019

Southern Europe: ICT Spending and share of distributors (ex-white goods)



learning contributed to the sales increase in some product categories (e.g. notebook and smartphone). However, as the necessary containment measures were put in place by governments the market saw a downturn in March and April (-11.1% yoy in Spain, -16.2% yoy in Italy and -0.7% yoy in Portugal). May however, as governments started lifting restrictions, saw a return to growth in the Italian market (+6.6% yoy) which was hit earlier and a slowdown of the declined in the Spanish market -2.5% yoy. June confirmed the recovery trend across all markets with yoy growth of c. +35% in Italy, +19% in Spain, and +17% in Portugal. Overall, at the end of June 2020 the Southern European distri market recorded a yoy growth of +6.0%, with Italian market growing by +7.9% and the Spanish and Portuguese markets by +2.9% and +7.5% respectively. Italy, Spain and Portugal Distribution sales – monthly trends (yoy comparison) ___________________

______________________________________________________________________________________________ Source: Context data

Current estimates on COVID-19 impact on GDP in Italy, Spain and Portugal range from -9 to10% in FY20 as the economic crisis looms over Europe. A recovery is expected in 2H20 although still in an uncertain extent, as dependent not only on the timing to return to normality for businesses but also on the effectiveness of expansion and fiscal policies decided by local authorities. However, the strong fundamentals of the ICT market and a growing distribution centricity in the tech business system should imply favourable mid-term expectations. According to IDC estimates released in mid-May, the European ICT spending (including software, hardware, and ICT services) is expected to decline by 4.7% in 2020 with a recovery already in 2021 and 2022. Key industry trends in the ICT distribution market: • Continuous distribution centricity: the distri share has a particularly strong grip in the desktop,

notebook and printing spaces whereas it is more moderate in the tablet space and limited in the mobility and CE, which leaves space for further penetration. According to a recent survey conducted by GTDC (Tech Distribution 2025) global vendors confirmed that they anticipate growth through distributors through 2025. 61% of participants anticipated a >10% growth.

• Market demand driven by IT subscription models (XaaS): Among SMEs, only one in three (30%)

adopts solutions in the Cloud, but for these the strategic approach to the Cloud (Cloud-First or Cloud-Only) is in line with that of large companies. SMEs hence, represent a great potential for cloud services in Italy, and it is necessary for distributors to pay close attention to their VAR channels and to support them with highly focused marketing/sales and education programs. With the spread of Cloud services, IT investments are no longer measured as capex, an initial cost, but as Opex much easier to measure in real time and correspond to actual needs. ICT

10,0%

-0,7%

9,8%

17,6%

9,2%12,7%

-5,0%

3,6%0,6%

-16,2%

-11,1%

-0,7%

6,6%

-2,5%

5,9%

34,8%

18,9%17,0%

Italy Spain Portugal

Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20



distributors are increasingly acting as aggregators of such contracts from multiple providers and thereby reduce impact of working capital needs and increase the portion of recurring revenues. Typical as a service models include Cloud Computing (IaaS, PaaS and SaaS), Managed printing services and Device-as-a-Service. The European Cloud Computing market has showed a significant growth over the last years posting a 2014-2018 CAGR of 32.2% to reach a total value of Euro 30.5 b. This market is expected to continue to grow through 2023 at a 2018-2023 CAGR of 29.1% to reach Euro 109.1 b.

• Logistics services: the rapidly growing e-commerce industry and mass consumer electronics distribution necessitating a robust support in infrastructure including logistics capabilities. Logistics are quickly emerging as the biggest challenge in e-tailing, while simultaneously being the key differentiator considering the stiff competition between domestic and international players.

• Closing the Gap on IT spending: in terms of IT spending on GDP Italy and Spain are still lagging the western European average, particularly in business usage infrastructure and regulatory environment. Closing this gap should boost IT spending in these markets. The major technological trends expected to drive market growth are the same that have been driving the enterprise and commercial markets over the past decade AI/ML, Big Data/Analytics, Blockchain, IoT, Mobility and Security), and will continue to do so through 2023.

White Goods market opportunity. Esprinet is present in the White goods market with FY19 revenues of Euro 55.7 m (+50% vs. 2018). The total addressable White goods market for the Group is estimated in c. Euro 10 b (Italy: Euro 5.4 b, Spain Euro 3.8 b and Portugal Euro 0.9 b), and is expected to grow at a 2020-2025CAGR of 1.2%.

This market is currently undergoing a major transformation driven by: premiumization trend to purchase high-quality appliances (energy efficient and easy to control), transition to more innovative (digital) through connectivity via smartphone, tablet or computer that will be a standard feature of new domestic appliances from 2022 onward. Home appliances are now becoming high-tech, embedded with smart sensors and the Internet of things (IoT) enabled technology to meet the needs of tech-savvy consumers.

In particular Smart Home market could represent an opportunity for Esprinet, all major vendors (LG, Samsung, Whirlpool, Haier-Candy, Electrolux, Bosch, Miele) are connecting appliances with the mobile apps with a Smart Home offering. Esprinet is well positioned on the technology consumer good channels (mass merchandisers, tech superstores, purchasing groups) and has all the offering portfolio to play a role in Smart Home solutions market driven by smart white goods appliances.

3. COMPETITIVE POSITIONING

• Market leader in a highly competitive reference market: 25% market share in 2019 • The Group’s Critical mass in terms of size and coverage allows a role of active market

consolidator • Competitive positioning in advanced solutions distribution • Highly efficient logistics processes and systems, scalable with low cost sensitivity to

volume upgrades • Proprietary and distinguished IT operating platform and e-commerce services support

the cost base lowering, the customer service level and the launch of new services

There is a spectrum of (overlapping) services a distributor can provide ranging from fulfilment distribution services to distribution of advanced solutions in IaaS or SaaS mode. What kind of offer is more fitting depends of the vendors presence in the marketplace, the market segment being addressed, the maturity of the product and the nature of the final-tier in the marketplace and distribution system. These services can be mapped by gross margin and volume with fulfilment services representing lower margin/higher volumes. However, on the other hand, these services are

3 GTDC Tech Distribution 2025



characterized by low business risk as volumes are negotiated directly between vendors and the reseller and low sensitivity to volume upgrade as additional sales require very low additional investments in G&As. Also, well managed working capital can be an important competitive advantage reaching very low or even negative levels. Advanced Solutions distribution services show higher margins, but lower volumes and additional sales require additional investments in G&As as know-how and technical skills are key.

Distributors Defined by Business Model

Source: Understanding the Technology Distribution Business (Global Technology Distribution Council) The Southern European IT distribution markets is highly competitive and Esprinet, the only big local broadliner (players offering a very wide range of products and services), operates alongside large global broadliners, smaller local competitors as well as local and global players focusing on the value segment (players with focus on advanced solutions such as datacenter, storage and management, cyber security solutions, etc.). The top five players cover almost 70% of the market, with Esprinet emerging as clear market leader with a 25% total market share in 2019. The market is dominated by local and global broad liners (Esprinet, Tech Data and Ingram Micro) whereas Computer Gross and Arrow ECS operate in the value segment of the market, where margins tend to be higher. Increasing revenues in the value segment represent an attractive opportunity for broadlines to increase margins.

Source: IR TOP Research elaboration and Company Data (Consolidated results) Critical mass as competitive advantage in a market where consolidation is happening. Over the last years, the European distribution market has been undergoing a neat consolidation phase. Resellers are more inclined to deal with distributors that can offer the widest range of products possible, so one of the objectives of distributors that aim to be leaders in this market is to build relationships with the highest number of vendors possible. On the other hand, vendors are rationalizing the channel reducing the number of distributors. Over time, this mechanic is leading to the concentration of contracts onto an always tighter group of distributors, characterized by an

Euro m 2019 Sales in the reference market YoY Market

Share Italy Spain Portugal

Esprinet (IT) 3,945 10.5% 25.1% • • • Tech data (US) 2,763 5.9% 17.6% • • • Ingram Micro (US) 1,890 1.3% 12.0% • • Computer Gross (Sesa) (IT) 1,393 15.0% 8.9% • Arrow ECS (US) 880 11.0% 5.6% • • Aggregated top 5 10,871 69.2% Total Market 15,696 100%

Low Revenue/Volume High

Low

Marginn

High Advanced solutions distribution

Value-added distribution

Fulfilment distribution

Broadline distributor



operational excellence that makes them appealing for vendors, and a critical mass that makes convenient for resellers to choose them as their main supplier. It is hence becoming increasingly difficult for smaller players to survive in the market, leaving the market with a group of large players, alongside some small highly specialized and innovative companies specializing in vertical areas mainly linked to innovative technologies and the search for emerging vendors. Acquisition of GTI – a perfect strategic fit Esprinet has recently announced the signing of a binding agreement for the acquisition of GTI Software y Networking S.A., the No.1 distributor of Cloud solutions and business software for Value-added Resellers (VARS) and System Integrators in in Spain. GTI is further a leading distributor of value-added enterprise equipment such as Automatic Identification and Data Capture, Communication and IoT products for the System Integrators and VAR channel. In terms of revenues, GTI is the sixth ICT distributor in the Spanish market. The acquisition, which is subject only to the approval of the Antitrust authorities expected by the end of September 2020, would seem a perfect fit with the Group’ strategic guidelines which highlights the consolidation of the Group’s leadership in southern Europe (with a particular focus on the advanced solutions segment), while establishing itself as a key player in the SaaS and IaaS segments, gradually shifting towards a pay-per-use technology sales model in place of the traditional transactional method. With GTI Esprinet would significantly strengthen its cloud and as a service business models. In the “As-a-Service” business model, GTI is ahead of the Spanish market, having already transformed itself as a truly IT distributor of Cloud Solution (with cloud revenues being 1/3 of total revenues, growing almost +50% from 2018 to 2019). GTI has a provisioning platform that enables its customers to automate, aggregate and sell their own (and third parties’) cloud and digital services. This know-how in selling cloud solutions and dealing with cloud provisioning platforms is exportable in other markets and enables ISVs to take their offerings to market almost instantly across the entire multi-service provider ecosystem with the company’s cloud commerce and Everything-as-a-Service (XaaS) platform It also opens opportunities in new geographical markets, especially in North Africa. Management has defined the acquisition as a business development deal with synergies ranging from commercial cross-fertilization and optimization of scale to customer satisfaction with the possibility of some cost synergies as well. GTI relies on a client base of over 5,500 customers which cover the entire B2B professional channel market and is a top distributor partner for blue-chip vendors, representing more than 90 world-class suppliers such as Microsoft, Adobe, Red Hat, VMWare and IBM. GTI is headquartered in Madrid (Spain) and has presence in Portugal and North Africa (Morocco) and more than 170 employees. In the six months ended 31 March 2020, the GTI Group reported revenues of Euro 91 m, with an EBITDA of Euro 1.9 m (2.1% EBITDA margin). For the full year ended 30 September 2019, revenues amounted to Euro 179.9 m, with an adjusted EBITDA of Euro 3.4 m (net of personnel restructuring charges of Euro 0.5 m) and a Net Financial Position of Euro 17.6 m (Euro 9.89 m at 31 March 2020). The equity value of the deal is of Euro 33.8 m to be paid in cash at closing. With a total average Net Debt of Euro 9.8 m (L6M as of May 2020), the total value of the deal is of Euro 43.6m.



4. BUSINESS MODEL 4a BUSINESS MODEL & VALUE PROPOSITION

Esprinet’s core business is B2B distribution in Italy, Spain and Portugal across all IT and Technical Consumer Goods categories with a strong portfolio of brands and products. Esprinet owns and leverages on robust platforms (e-commerce, information systems, warehouse management and cloud provisioning), that contribute to profitability and service level to customers. In recent years, the Group has expanded the business model from a provider of fulfilment and value-added distribution services to an end-to-end service provider for the ICT industry. Advanced solutions and as-a-Service-oriented businesses have been added to the traditional transactional models in order in to be able to offer tailored services to channel partners at all levels of the value chain from one single source. The acquisition of GTI represent an important step in this direction. The Group distributes two own brands, Nilox and Celly (production in outsourcing) active in the entertainment sport products and PC accessories and mobile devices accessories, respectively.

Esprinet distributes an extensive range of technology product categories and offers value-added services to different channels that address both consumer and business end markets. The business is split in three lines based on business model (transactional, consumption) and end-market indirectly served (Business, Consumer):

• Transactional Consumer (50% of revenues): fulfilment and value-added services (in-store support and category management) to retailers and e-tailers of Technical Consumer Goods (Consumer Electronics, selected PCs/printers, white goods, gaming, …);

• Transactional Business (49% of revenues): fulfilment and value-added (logistics) services to resellers of IT products and Advanced Solutions (datacentres) to VARs and System Integrators;

• as-a-Service Business (1% of revenues): cloud solutions and outsourcing services.

Transactional Consumer Logistic and financial service (fulfilment) to retailers and e-tailers based on a triangular Vendor-Distributor-Partner activity where Esprinet acts as a logistical & financing partner on a predefined fee. The core of this model is a high-volume, high-efficiency logistics operation, focused on stripping out any redundant cost in order for margins to cover infrastructure and operating costs, thanks also to a robust technology platform which is designed to be flexible and support customized solutions to develop an integration into its own Warehouse Management System. Efficiency and scalability of logistics (processes and systems) and financial capabilities are key, as well as the service level. Esprinet typically bears stocking and credit risks, which however are reduced to a minimum thanks to stock protection/rotation and credit insurance agreements. The Company leverages on its expertise in working capital management to balance demand and supply. Value-added services to retailers are grouped under the name “OK Retail” and based on skilled professionals providing in-store support in outsourced category management activities. These services allow Esprinet to be present in some niche and high-margin consumer electronics segments (e.g. games).

Transactional Business Value Added Services to resellers that address business end market refer in particular to pick-pack & ship activity of a wide range of IT products (PC, printers and Accessories & Other peripherals) to a wide range of resellers serving SMEs, by means of self-serve web-based technology (easy and

• Robust value proposition: very wide service portfolio supporting the position of end-to-end solution provider

• Leverage on strong foundation in the distribution businesses to provide high-margin services and solutions (advanced solutions and subscription/usage services)

• Extensive product range and strong relationship with key vendors (one-stop-shop)



highly automated sales & provisioning platform). Key differentiation elements are product range, self-service sales model and customer satisfaction. Esprinet also offers logistic and financial services (fulfilment) on large deals with special pricing to resellers addressing large enterprise clients and government.

Value Added Services to VARs and System Integrators (with clients in the large enterprises and government segment) include distribution of Advanced Solutions i.e. value-added support by skilled professionals providing pre-sale support on complex technologies including architecture, IT design and Data Centre solutions (Servers, Storage, Networking, Security, Unified Communications, Middleware, Video surveillance, Auto-ID, Professional Services, Cabling, Cloud, IoT, and Videoconference). Customers are offered a high level of consultancy expertise from a team able to project and implement customized technological solutions based on clients’ specific needs and requirements. Key elements are technology skills & know-how, configuration.

as-a-Service Business With the “as-a-Service” distribution model, Esprinet acts as service provider, remunerated with variable payments based on usage (consumption-based model or subscription). Esprinet acts as an aggregator of complex consumption-based solutions providing cloud solutions, workplace as-a-Service (PCs & other) and managed print services to VARs and System Integrators. Currently, revenues from this business are mostly related to sales of Cloud solutions (Esprinet is one of the largest distributors in Italy of Microsoft’s cloud products, and the first distributor in Europe in terms of CSP resellers). The Group is however working on the development of cloud-based services (IaaS, PaaS and SaaS), also in combination with hardware components as in the case of Printing as-a Service and Device-as-a-Service. This represent an important opportunity for clients as they do not have to operate their own infrastructure in order to offer complex usage-oriented services. The development of this business, which will become considerably more important for the ICT industry in the future given the technological development and the steady evolution of the cloud, is a key strategic issue for Esprinet. The drivers for this business line are the multi-cloud solutions know-how and platform. In addition, the Group provides consumption-based value-added services such as logistic, financial (Esprifinance), marketing (e.g. e-webclub), as well as technical services to vendors or resellers/retailers. Key elements for this area are efficiency and scalability of logistic processes and systems as well as service level.

Business model overview

Consumers

Business Business

SME Large Enterprise & Government

Enterprise & Government

• Vendors • Retailers • Resellers

Technical Consumer Goods (Consumer Electronics, selected IT clients, white goods, gaming, other)

IT Clients • PCs • Printers • Accessories • Other

Peripherals

IT Clients • PCs • Printers • Servers • Storage

Advanced Solutions

• Cloud Solutions

• Workplace as-a-Service (PCs, other)

• Managed Print Services

Outsourcing of • Logistics • Marketing • Financing • Technical

processes

Retailers & E-tailers Resellers Resellers (on large

deals)

VARs & System Integrators

VARs & System Integrators

• Vendors • Retailers • Resellers

Fulfilment Value Added Value Added Fulfilment Value Added as-a-Service

Transactional

End Market

Main Products

Channels

Distribution Service Model

As a Service



Value proposition to Vendors

Esprinet has a portfolio of more than 650 vendors, and just under 1,000 bands including all global market leaders (HP, Microsoft, IBM, Apple, Lenovo, Samsung) with most of which the Group benefits from long term relationships. The Group’s value proposition to vendors is based on:

• Access to a highly fragmented market such as the Italian and Spanish SMEs which relies on VARs to gain access to and support for new technologies

• Cost effective route to market by providing geographical coverage that represents a key competitive advantage through a reseller network of 31,000 resellers distributed throughout the territory.

• Outsourcing partner of full range of services: The Group provides a comprehensive portfolio of services including fine logistics, outsourced sale and marketing force, channel intelligence, online sales platform, and field accounting. For the vendor, outsourcing these tasks results in a reduction of complexity and easier access to the various channels and regions.

• Logistics management: thanks to world class logistics capabilities Esprinet can efficiently bring technology products to market through one of its three strategically located logistics centres, by direct shipment from vendors to customers, or virtually through the cloud marketplace (Esprinet Cloud).

Value proposition to Customers

Esprinet can rely on a distribution network of over 31,000 resellers ranging in size from small, independent resellers to large multinational retailers. The Governmental/Corporate and SME segments are reached by Professional IT reseller such as professional dealers, VARs and System integrators, which together represent approx. 52% of Esprinet’s revenues. Consumer oriented channels are mainly represented by Retailers (Large scale retail and specialist sectors). Over the years the Group has reached a consolidated position of leadership in the Retailers/e-tailers segment, whereas the IT Resellers segment, represents the area in which the Group aims to focus its efforts and investments in 2020.

Source: Company presentation

Retailers

E-tailers

Resellers

VARs

System Integrators

• Supply most of the IT infrastracture needs of mainly the SMB end-users as well as, for the largest dealers, large accounts and public sector • Hardware/Software sales, integration, support and related services to end users typically make up 100% of their turnover

• Develop, customize or resell software applications combined with hardware and related services to form a complete solution

• At least 50% of revenues comes from complete solutions

• Companies that normally conduct a core consulting activity that will assess the broad needs of a corporate client, and implement hardware and software, including support and maintenance • Revenues are normally 95% from services and 5% from resell

• Include retailers of computer/IT products as well as specialist retail distributors and merchandisers

• On-line specialists such as Amazon

Business oriented

Consumer oriented

Trade Partners



The Group’s value proposition to customers is based on:

• Focus on customer experience continuous investments in the redesign of processes and development of new solutions in order to make Esprinet the best place to do business quickly and without errors.

• Provider of end-to-end solutions to help clients create comprehensive, multi-vendor solutions from the world’s leading technology vendors in order to maximize business outcomes for their end user customers.

• Access to flexile financing programs and inventory management • Logistics management: thanks to robust order and logistics management systems Esprinet

can provide flexible and just-in-time delivery of goods and fulfil customer orders quickly through one of the three logistics centres, by direct shipment from the vendor or virtually through the cloud marketplace.

• Training and technical support: Esprinet provides fully integrated supply chain support to all channels including technical support directly to clients’ customers. The Company provides training and certification services to its reseller customers in order to help them configure, install, finance, and sell products

• Provider of complete customer management solutions including customer acquisition, enablement and revenue-growth services (contract renewals and software license compliance), as well as product configuration/integration services. In addition, the Group also provides access to a number of special promotions and marketing services on behalf of the vendors.

• Assisted or self-serviced sale through a network of 19 Esprivillages (Cash&Carry) spread over the national territory (n. 17), and abroad (n. 2 in Spain – Madrid and Barcelona) and through a web platform designed to represent the best choice for resellers in terms of customer experience and information available while at the same time offering lower transaction costs thanks to a simpler ordering and billing system.


Self Service Assisted

Website APP

C&C

Client specialist

Product & Service

specialist

Purchase methods Esprivillage locations in Italy



Highly efficient infrastructure and logistics. Logistics activities are carried out in four leased logistics centres covering a total of approx. 130,000 sqm. Two of them (90,000 sqm) are located in Italy, in Cambiago (MI) and Cavenago (MB), one (40,000 sqm) in Zaragoza (Spain), strategically positioned in a range of approx. 300 km from Barcelona, Madrid, Bilbao and Valencia which total over 80% of total Spain’s ICT consumption and one in Lisbon to improve the level of service provided to customers in Portugal and to attract new important distribution contracts.


4b PRODUCT&SERVICES PORTFOLIO

Esprinet offers a very wide product and service range covering the whole spectrum of IT and Consumer Electronic products and distribution services. IT products cover 51% of total revenues withing which PCs represent the most important product category (34% of total revenues. Consumer electronics cover c. 35% of total with smartphones covering the bulk (28% of total revenues.

Breakdown products FY19

• Customized delivery • Lab service installations HW and SW • Customized boxes • Boxes, pallet and document customization • Customized logistics services • Cross docking • Possibility of item pickup within 2 hours

More than 144k #SKU Shipped

More than 63.7k #SKU on stock (on average)

40.000 sqm in Spain

90.000 sqm in Italy

130.000 sqm Warehousing

area

5.8 million Shipped boxes

35.3 million Shipped

items

34%

10%6%10%

4%

28%

1% 1%5%

51% IT Clients14% Advanced Solutions

35% Consumer Electronics

PC

Printing

Other IT products

Hardware

Software, Services, Cloud

Smartphones

White goods

Gaming hardware andsoftware



Breakdown services FY19

Source: IR Top estimate on Company data

1. CONSUMERS AND BUSINESS TECHNOLOGY DISTRIBUTION

A very wide products and services catalogue is delivered to retailers and e-tailers to serve consumer end market and to resellers for business segment of the market. Thanks to the optimization of logistic processes that enable low cost sensitivity to volume upgrades, Esprinet is able to create value in this market characterized by thin-margins.

Products Services

IT Clients

• Personal Computer and Notebook

• Display • Storage, peripherals and PC

components • Printers and consumables • Stationery • Furniture • Networking • Video projection and

multimedia whiteboards • Fixed telephony

• Webshop: almost 50% of business is realized via web sales

• Cash & Carry ESPRIVILLAGE: 19 points of sales in 12 Italian regions and Spain (2) with qualified staff and the possibility to have orders shipped with next-day or 24/48 hours delivery time.

• E-web CLUB: web partnership program. Each client can build its own 24/7 e-commerce on this portal, setting its pricing, website design and accessing all available information (product availability, technical sheets, …)

• Advanced Logistics: goods purchased by clients are stored in specific portions of the warehouse and are sent to final user in its name, also using its packaging. The client can check and manage anytime this logistics service.

• Esprifinance: credit for clients and for end users, lowering risks

• Web Services • Esprinet catalogue data download (FTP) for

e-commerce sites and management software

• Real time web access to Esprinet catalogue data (master data, availability, pricing)

Technical Consumer Goods

• Mobile devices • Audio, video, drones and

electronics • Games • Sport and leisure • Toys • Heating, cooling, air

treatment • Electrical equipment and

lighting • White goods

Source: IR TOP ICM elaboration on Company data

48%

1%

51%

Fulfilment

As A Service

Value Added



2. ADVANCED SOLUTIONS Advanced solutions are delivered under the V-Valley brand to VARs and System Integrators to serve enterprise and government segment

Products Services

• Server and storage • Networking • Video surveillance • Software • Wiring and energy

efficiency • Security • PBX, Phone

videoconference & UCC

• Auto identification system

• Education: organization of training courses either in the name of important vendors or through Esprinet Campus. The Campus is education by qualified system engineers (internal or partners) for clients, also offering the possibility to take exams for certifications (Microsoft, Cisco Systems, IBM, Check Point, …)

• Demand generation: a specialized team dedicated to show most innovative solutions according to client needs. With the Demo Truck it’s possible to organize events and education sessions everywhere. The Truck is a state-of-the-art datacentre equipped with a demo room with 25 seats, virtual machines and a business zone for one-to-one meetings

• Pre-sale: a specialized team supporting the client in assembling tailored solutions (storage, virtualization & data management, networking & unified communication, security, video surveillance, automatic identification, …) integrating different technologies. Technical assistance is also available

• Esprifinance: financial team (5 people) to manage different financing solutions for system integrators, Var and resellers, comprising renting, leasing and loans

• Logistics: Labservice is an installation and configuration service (hardware and software components on PCs, servers, printers, …) done before the shipping to the final user. The service is configurable online.

• Datacentres environment building: project and architecture of datacenters (ventilation, safety, wiring, electricity, electricity, …)

• Installation and maintenance: 11 service families (branded Serviceland) operated in client’s name by specialized selected suppliers nearby (maintenance contracts, spare parts, environmental services, voip services, on-site installation, data recovery, transfer and rebuilding, on-site and lab repairs, help desk, consulting services, custom transport documents, calls for tender)

• Integration: integrated platforms (products and solutions) for Unified Communication, Internet of Things and IP video-surveillance


3. SUBSCRIPTION-AND CONSUMPTION BASED SERVICES SOLUTIONS

Esprinet delivers a portfolio of cloud solutions and other subscriptions/consumption services to VARs and System Integrators to serve enterprises as well as process outsourcing for vendors, retailers and resellers.

Products / Services

• Cloud solutions distribution: • Microsoft SaaS (Exchange, One drive, Skype for business, Office 365, Dynamics 365, …) • Microsoft PaaS (Azure) • Remote backup • Data management & security • Office automation

• Managed print services (Esprint): customers don’t have the ownership of printers and pay on the base of the number of printed pages

• Workplace-as-a-Service: Esprinet is finalizing a platform for lease devices and related software on a monthly base fee

• Document Management • Processes outsourcing: logistics, marketing, financing, technical




4c TECHNOLOGY ASSETS PORTFOLIO

Esprinet’s technology asset portfolio includes proprietary software applications & systems, hardware and know-how. Based on ICM Advisors Technology Equity model, Esprinet’s Technology asset portfolio has been analyzed along five competitive dimensions: Technology assets quality, Technology positioning and strategy, Strategic and Financial Impact, Governance and Technology Potential.

1. Technology Asset Quality IT Platform

Esprinet’s information systems and e-commerce platforms enable the Group to act as a full-service provider offering highly automated, transactional IT procurement services and logistics for buyers in the IT, consumer electronics and telecommunication sectors.

Esprinet’s business is largely dependent on internal information and telecommunications systems. Esprinet has made significant investments in Information systems and in end-to-end digitalization of mission critical processes such as demand generation, sales, provisioning, logistics, billing and reporting (order-to-cash, procure-to-pay, and fulfillment/delivery processes).

Sophisticated logistics applications not only enable the order fulfillment for customers but also enable Esprinet to provide warehouse space utilization from third parties (e-tailers).

a) Proprietary and distinguished application software platform

The IT applications portfolio covers all the mission critical operating and decisions support processes: ERP, CRM, Business Intelligence, Sophisticated reporting based on data warehouse technology, e-commerce platform (Webshop) and web analytics.

b) E-commerce

Esprinet is a pioneer in this field and launched its first e-commerce services for resellers already in 1996 and is today considered an industry benchmark. The website based Esprinet e-commerce system has redesigned the supply chain and is unique in the B2B distribution. E-commerce for Esprinet is not just a channel but the foundation of its distribution model which has allowed to reinvent the distributor's trade and become the reference point of retailers in search for detailed information and sales tools.

Customers utilize the electronic ordering and information systems. Through the e-commerce website, customers can gain remote access to Esprinet’s information systems to place orders, or check order status, inventory availability and pricing. Certain larger customers have electronic data interchange ("EDI") services available thanks to which orders, order acknowledgments, invoices, inventory status reports, customized pricing information and other industry standard EDI transactions are generated online, which in order to improve efficiency and timeliness.

Esprinet realizes improved productivity, cost savings, and enhanced customer experience through automation and digitization, and will continue to invest in and improve the digital ordering and information systems.

Esprinet significantly invest in HR education and training and constantly maintain the hiring pipeline for mission critical skills through several Employer branding initiatives. Smart Working has been recently introduced. In particular the Group counts an IT professional staff in: pre-sales function to support and educate the resellers, technology consulting for advanced solutions distribution and application development in the internal IT function.

2. Technology Positioning and Strategy – IT Platform evolution

Esprinet’s strategies include further digital transformation, including process enhancements, focus on omnichannel and increased capabilities for multicloud services distribution that streamline the buying, selling and management of subscription/consumption services by resellers. With the acquisition of GTI, Esprinet would also acquire important skills in managing cloud solutions provisioning platforms, extendable to all relevant markets.



Investment development is also focused on CRM, web analytics e data strategy to profile the customer base, the offering and pricing modelling.

3. Technology Business Impact

The Esprinet operating technology platforms have the flexibility and scalability that impact directly and indirectly on:

• Revenue increase by enabling the launch of new services • Operational costs decrease by continuous new functionalities and streamlining the

supply and provisioning processes • Increase the service level and customer experience that impact on cross-selling and

loyalty

4. Technology and IP Management

The company has in place the Information Systems planning processes and the standard IP policies and trade secret management procedures.

5. Technology Potential

The Esprinet information systems and e-commerce platforms have the potential to enable new business and service delivery models. The know-how development on new technology necessary to provide to the customer new products and advanced solutions has also a fall out on internal applications (e.g. big data, AI, omnichannel, ...)

Technology Evaluation summary According to ICM Advisor’s evaluation of the technology portfolio Esprinet obtains a Technology Equity Score4 of 3.6 on a 5 scale, implying that the Group operates in the reference market as a strong challenger and potentially fast growth player/technology leader. The technology portfolio quality and potential analysis highlights that Esprinet technology position is above competitive parity.

4 The Technology Equity Score (TES™) is an ICM Advisors proprietary method that evaluates the strengths, risks and opportunities along five competitive dimensions: technology asset quality, technology positioning and strategy, technology business impact, technology & IP management and technology exploitation potential.



5. GROWTH STRATEGY

• Focus on customer satisfaction: improve the quality of service provided to customers in order to maximize “customer loyalty”

• Increase presence in Portugal through organic growth and/or M&A • Strengthen the end-to-end portfolio of products, services, and solutions • Pushing for a higher weight of high margin businesses (Advanced Solution, Everything

as a service, outsourcing services) • Development of a state-of-the-art XaaS strategy • Working Capital management: further improvement in ROCE, also through a more

efficient inventory management, with positive effect on cash conversion cycle • Potential M&A in cloud services and niche vertical applications

Esprinet’s strategy is based on two core objectives: being the best distributor in the region for all stakeholders and ride the mid-term evolution of the market. The table below summarizes actions, business implications, technology strategy implications and impact and value creation drivers for each of these objectives.



6. HISTORY, COMPANY STRUCTURE, OWNERSHIP, GOVERNANCE & SUSTAINABILITY APPROACHHISTORY

HISTORY

Esprinet was founded in 2000 form the merger of Celo and Micromax, two Italian IT distributors, in Comprel srl a company founded in 1975 as a semiconductor distributor. The new company immediately became the 2nd largest distributor in the Italian market. In July 2001 Esprinet was listed on the Italian Stock Exchange and started to implement a growth strategy based on a combination of M&A and organic growth.

Source: IR Top Research elaboration on Company presentation

• Mid ‘70s: foundation of Comprel. At the time the company’s core activity was distribution of semiconductors in Italy

• 2000: merger of Celo, Micromax and Comprel, under the brand-new Esprinet (Italian 2nd largest distributor)

• 2001: listing on the Italian Stock Exchange (IPO price: Euro 1.4 per share considering the share split-up)

• 2003: Esprinet becomes the 1st distributor on the Italian market • 2008: restructuring of the Spanish branch, at the end of which (2009) Esprinet Iberica

becomes one of the top three distributors in Spain • 2010: Focus on datacenter with the foundation of V-Valley • 2015: the Group becomes the no. 1 distributor in the Southern Europe region • 2016: Esprinet becomes the first ICT wholesale distributor in Spain and the fourth ICT

distributor in all of Europe. • 2016: Group acquired the business unit "VAD-Value Added Distributor" of Itway Group. The

transaction perimeter consists of ICT distribution activities of Itway in Italy, Spain and Portugal

M&A TRACK RECORD

• 2002: acquisition of Pisani and Assotrade (approx. Euro 300 m of revenues) • 2005: acquisition of Memory Set (Euro 525 m revenues in 2004), 2nd largest IT distributor in

Spain • 2006: acquisition of UMD in Spain (Euro 266 m of revenues in 2005) to create Esprinet Iberica • 2014: sale of 100% of Monclick (e-tailer of technology products created in 2005) and 100%

of Comprel and acquisition of a 60% share capital of Celly (Italian vendor and distributor of mobility’s accessories), brought to 80% in 2015 and increased to 95% in 2019.

2019 2001

1317 140 K sqm

31 K

3.9 b

#1 in Italy & Spain

Employees

Warehouse

Customers

Sales

Growth

364

15 K sqm

16 K

800 m

#2 in Italy



• 2016: acquisition of EDSLan (Euro 72 m of revenues in 2015), an Italian “value added” distributor to reinforce V-Valley business and Vinzeo Technology (approx. Euro 584 m of revenues in 2015), the fourth largest Spanish distributor of IT and mobile telecom devices. Esprinet becomes the first ICT wholesale distributor in Spain and the fourth ICT distributor in all of Europe. In 2016 Esprinet also acquired the “VAD-Value Added Distribution” business unit of Itway Group. The transaction perimeter consists of ICT distribution activities of Itway in Italy, Spain and Portugal (Euro 57 m of revenues).

• 2019: acquisition of a 51% stake of 4side Srl exclusive distributor of Activision Blizzard products for Italy

• 2020: signing of a binding agreement for the acquisition of GTI Software y Networking S.A.. Transaction is subject only to the approval of the Antitrust authorities (expected by September 2020).

GROUP STRUCTURE

After an intense M&A activity and various business combination, the actual Group’s structure can be represented as follow.

Source: Company data *in liquidation Italian Sub-group

Esprinet SpA

Esprinet Portugal Lda

Esprinet Iberica SLU

V-Valley Iberian SLU

Vinzeo Technologies

SAU

V-Valley Srl Celly SpA

Celly Pacific Ltd

Nilox Deutschland

Gmbh*4Side Srl

Italia

n Su

b-G

roup

The holding Company of the Group active in the "B2B" distribution of Information Technology (IT) and Consumer Electronics (CE).

Established in 2010 and is based in Italy. Through the V-Valley division, Esprinet distributes value-added products, services and IT solutions.

Founded in 1998, it is based in Italy and is specializes in the design, production and distribution of mobile phone accessories with named brand.

Based in Dusseldorf, it was established in July 2017 in order to distribute and market named brand products (Nilox) in the German market. Acquired by Esprinet in March 2019, it was founded by the historical management of the Italian branch of Activision Blizzard. 4Side is a distributor in the "gaming entertainment" sector (videogames and merchandising products).

95%

100% 5% 100%

85% 100% 51%

100%

100% 100%



Iberian sub-group:

OWNERSHIP The share capital subscribed and paid is Euro 7,860,651, made up by n. 50,934,123 ordinary shares. Currently the Company owns n. 1,150,000 treasury shares, corresponding to 2.26% of total share. Free float is 52.66% Shareholder n. of shares % Francesco Monti 8,232,070 16.16% Giuseppe Calì 4,736,958 11.26% Axopa S.r.l.1 4,618,905 9.07% Paolo Stefanelli succession 2,656,374 5.22% Stefanelli Tommaso 885,000 1.74% Stefanelli Matteo 834,507 1.64% Market 26,820,309 52.66% Own Shares 1,150,000 2.26% Total 50,934,123 100.00% Source: IR Top Consulting on Company Data 1Hodling company owned by Alessandro Cattni (CEO) and Maurizio Rotta (Chariman)

Axiopa Srl, holding Company of Alessandro Cattani (CEO) and Maurizio Rota (Chairman), recently (July 2020) increased its share in Esprinet Spa to current 9.07% through the acquisition of additional 1,200,000 shares at 4.40 p.s..

GOVERNANCE List vote: 2.5% The Board of directors: 12 members, 6 of which are independent Other: Code of Ethics, Code of Conduct, 231 Organization Model. KEY MANAGES

Maurizio Rota – Chairman After gaining experience as Sales Supervisor for IT companies, he founded Micromax in 1986, serving as the Company Chairman. He contributed to the development and the implementation of the Company’s business strategies up to 1999. After the formation of Esprinet in 2000, as a result of the merger of Celo, Micromax and Comprel, he served as Managing Director, Vice President and CEO of the Company. Mr. Rota is now Chairman of the Esprinet Group. Alessandro Cattani – CEO Born in Milano in 1963, Cattani earned an MBA at the Bocconi University after completing his degree in electronic engineering. The start of his professional career saw him serving as Sole Director of an Italian industrial group with the task of managing the Group’s information technology. From 1990 to 2000 Mr. Cattani worked in a consulting company and has, since November 2000, been serving as CEO of Esprinet Group.

Iber

ian

Sub-

Gro

up Iberica

Portugal

Iberian

Esprinet Iberica stand alone represents the third largest electronics distributor in Spain (first based on consolidated data). It has offices and warehouses in Zaragoza (Spain).

V-Valley Iberian, actives in the Iberian market, offers ICT security solutions, enterprise software, virtualization and open source solutions, training courses and technical assistance pre and post sales.

Esprinet Portugal is an IT distribution company active in the Portuguese market.

Vinzeo, based in Madrid, is the fourth distributor of IT and telephony in Spain. Since 2009 it distributes Apple products.



SUSTAINABILITY APPROACH Aiming at creating durable value for all stake holders, company carefully takes into consideration social and environmental factors. In addition to the annual reports, the Company releases yearly a sustainability report that gives information about economic, environmental, social and employment topics. The key issues are summarized below.

Source: IR Top Consulting elaboration on Company Data Esprinet pays attention to keeping its environmental footprint as low as possible by:

• Promoting Green Project, which highlights environmentally friendly products by marking them with a green leaf symbol.

• Using only renewable energy in all the Italian and Spanish sites. • Being compliant with environmental performance parameters (the Vimercate HQ has

obtained the LEED Platinum Certification) The Company also promotes social activities through the Esprinet4others project, involving its employees with events organized by local Non-profit entities and sustaining foundations through fund raises. The Group has further implemented a Smart working policy that allows its employees to work remotely granting more flexibility with benefits both for the employees and the Company. During 2019, it has also allocated 27,387 training hours to its staff, demonstrating a constant focus on their education development. A notable feature is that more than 55% of the total workforce is made up by women.

Euro 3.9 b of Revenues

(+10% vs 2018)

#1 distributor in Italy and Spain

Sustainability strategy

Competitiveness and Sustainability

Committee

1,317 employees 90% of employees with permanent

contracts

55% women employees Smart Working 2.0

Green Project for sustainable

products

LEED Platinum Certificate in

Vimercate’s HQ

Integrated Management

System

100% renewable energy

Maria Letizia Verga Committee

“Biblioteca Ambrosiana” FOR-TE Esprinet4others

voluntary work

Cor

pora

te

Ove

rvie

w

Envi

ronm

ent

Perfo

rman

ce

Soci

al

Perfo

rman

ce

Initi

ativ

es in

th

e re

gion



7. HISTORICAL RESULTS OVERVIEW

Healthy organic growth above market rates: Over the last ten years Esprinet has seen a significant growth with revenues that went from Euro 1.9 b in 2015 to 4.0 b in 2019, posting a CAGR of 11% (of which approx. 3% from M&A), overperforming the market (2012-2019 CAGR of 8%). Growth was mainly driven by growth in the smartphone segment (5% of total sale in 2012 vs. 28% of total sales in 2018), thanks both to organic growth and the signing of a distribution agreement with Apple in 2014 and the acquisition of Vinzeo (Apple distribution in Spain, revenues of Euro 580 m) in 2016. Between 2016 and 2018 Esprinet acquired two value-added products (EDSLan and a business unit from Itway) adding total revenues of Euro 130 m.

Source: IR Top elaboration on Company data (Consolidated results)

Focus on FY19 revenues: FY19 revenues in reached Euro 4.0 b +10% vs FY18, thanks to a boost over all geographic markets: Italy +13% reaching Euro 2,495 m, Spain +6% rising to Euro 1,378 m and Portugal +27% with Euro 39 m. The Group hence continued to outperform the market that according to Context grow by +8% in Italy and +6% in Spain.

In terms of Product lines, we highlight a significant increase in the Consumer Electronics segment (Euro 1,393 million, +15%) driven by Smartphones (+11%), but in particular by positive performances in high-margin segments like White Goods (+50%) and Gaming (+47%) the latter also thanks to the acquisition of 4Side in 2019. Growth in the IT Clients segment by +10% to Euro 2,036 m, was mainly driven by positive performance in the PC (+13%) and Printing, (+6% vs. 2018) segments. Advanced Solution product line reached Euro 561 m, represented 14% of total sales and grew +1% vs previous year (+6.5% net of the 2018 positive effect from major public tender win). Sales from the Xaas business line grew by +42% to Euro 20 m.

Breakdown by products FY 2018-2019

Eu m FY 2019A FY 2018A ∆ (%) PC (notebook, tablet, desktop, monitor) 1,372.8 1,212.8 13% Printing devices and suppliers 418.3 393.1 6% Other IT products 244.9 237.9 3% IT Clients 2,036.0 1,843.8 10% Hardware (networking, storage, server and others) 407.4 409.0 0%

• Overperforming a growing market: 2015-2019 CAGR of 10% vs. market +8%. • Revenue increase in 1H20 by +7% thanks to a COVID-19 resilient market (+6%) and the

Groups’ ability to adapt to new market conditions • Effective cost control and Gross Margin driven by product mix • Improving trend in cash conversion cycle: 12 days at Q220 - 16 days vs. Q219 and -8

days vs. last quarter of 2019. • Focus on ROCE with continuous improvement following strategic initiatives: 9.8% at

year-end 2019 vs. 9.4% in 2018 7.6 % in 2017. • Continuous dividend policy with an average pay-out ratio of 27% (2012-2018)

48%52%

Retailers & e-tailers IT Resellers

63,1%

35,0% 1,0% 0,5%

0,4%

Italy Spain PortugalOther EU countries Extra EU countries

51%14%

35%

Sales 2019 breakdown by Client Sales 2019 breakdown by Product Sales 2019 breakdown by geographical area

IT Clients Consumer Electronics Advanced Solutions



Software, Services, Cloud 153.6 146.8 5% Advanced Solutions 561.0 555.7 1% Smartphones 1,103.2 997.4 11% White goods 55.7 37.2 50% Gaming hardware and software 43.4 29.5 47% Other consumer electronics products 191.0 152.5 25% Consumer Electronics 1,393.3 1,216.6 15% Adjustments (44.9) (44.9) 0% Total sales 3,945.4 3,571.2 10% Source: Group consolidated results

Gross Profit driven by product mix: Gross profit is driven principally by product mix and vendors/customers relative strength. Over the 2012-2019 period Gross Profit went from Euro 132 m (6.8%) to Euro 175 m (4.4%), with a Gross Profit Margin ranging from 4.4% to 6.8% following a commercial strategy aiming at increasing market share to achieve critical mass, product mix, and a period of strong margin pressure in PCs, smartphones and printing consumables due to high level of competition at vendor’s level. In FY19 Gross Profit grew by 8.1% yoy, whereas Gros Profit Margin decreased slightly from 4.54% in FY18 to 4.44%.

Rationalization of cost structure. Between 2012 and 2019 SG&As fell by 1.5 pts to 3.4% of sales thanks to cost saving and operational efficiency, allowing profitability at EBIT and Net profit level to maintain a stable level over the period despite the trend in gross margin. Over the 2012-2019 period EBIT grew at a CAGR of +2% and reached Euro 41 m in FY19, +73% vs. FY18 net of non-recurring items (+3% on recurring basis). At the end 2019 Net Profit was Euro 24 m, + 66% vs. FY18.


Focus on working capital management, stock levels and funding by vendors: Management of working capital is a key success factor in the distri business and Management has put a lot of effort in improving the cash conversion cycle which at the end 2019 stood at 24 days, - 4 days vs. FY 2018 and the best results in the last 3 years. Compared to Q4 2018 the trend of all main capital metrics was positive with a decrease in Idays by -2.8 days, an increase in DSO by +3.2 days and an increase

1.932 2.0032.291

2.694

3.0423.217

3.5713.945

-10%

-05%

00%

05%

10%

15%

20%

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

2012 2013 2014 2015 2016 2017 2018 2019

Net Sales Growth YoY

132122

142 157164 168 162

175

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

20

40

60

80

100

120

140

160

180

200

2012 2013 2014 2015 2016 2017 2018 2019

Gross Margin % on net sales

3734

4146

39

34

24

41

0%

0%

0%

1%

1%

1%

1%

1%

2%

2%

2%

0

5

10

15

20

25

30

35

40

45

50

2012 2013 2014 2015 2016 2017 2018 2019

EBIT % on net sales

24 23

27

30

27 26

14

24

5 5 6 8 7 7 7

0%

10%

20%

30%

40%

50%

60%

0

5

10

15

20

25

30

35

2012 2013 2014 2015 2016 2017 2018 2019

Net profit Dividend Pay-out ratio

Net Sales – Euro m Gross Margin – Euro m

EBIT – Euro m Net Profit and dividend – Euro m



in DPO +4.2 days. The overall level of working capital reflects the level of utilization of “without recourse” sales of trade receivables commonly used in the industry. At year-end 2019 Net Working Capital was negative at Euro 121 m (positive of Euro 10 m at year end 2018) and with a total use of without recourse factoring of Euro 434 m, -27% vs. Euro 597 at year-end 2018. Improving ROCE trend: thanks to strategic initiatives put in place over the last 12 months Esprinet’s ROCE has been systematically improving and stood 9.8% at year-end 2019 vs 9.4% in 2018 and sharply up vs. 7.6 % in 2017.

Seasonality: the ICT distribution business’ seasonality in favour of the second half of the year is reflected in Esprinet’s results with an average 47%/53% split between the first and second half of the year, and with a weight of the last quarter of approximately 32%. This is reflected also in working capital with average commercial working capital (considering quarter-end results) in FY 2019 of Euro 244 m (6.2% on sales), vs. Euro 232 m in FY 2018 (6.5% on sales).


Change is asset structure with IFRS16 : Historically, assets have mainly been made up by working capital and Intangible Assets, the latter mainly referring to goodwill from acquisitions made over the years (Euro 91 m at year-end 2019) whereas tangible assets tended to be less relevant. In FY19, this asset structure changed with an increase by Euro 107 m in tangible assets related to the adoption of IRFS16.

Net Debt hand in hand with working capital and M&A as the business does not require important investments. At year end 2019 Net Cash stood at Euro 272 m (vs Euro 241 m in 2018), including the impact of financial liabilities related to the adoption of IFRS 16 for a total of Euro 109 m. Without considering the IFRS 16 Net Cash would have been Euro 381 m (Euro 241 m at year end 2018).

The financial structure includes a 3-year Revolving Credit Facility of up to Euro 152.5 signed with a pool of banks in September 2019, following the total repayment for Euro 72,5 m of the pre-existing term loan facility, other “committed” facilities (Euro 56 m of amortising term loans and Euro 100 m of trade receivables securitization program) and commercial banking facilities. According to

54

143 142

-131

7325

121

-241

247

183 184

-272-400

-300

-200

-100

0

100

200

300

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2017 2018 2019

336 308 296 313 314 324 325 384 422 387 364 471

402 438 459 482 498 429 466 494 509 472 503 497

(407) (392) (397)(690)

(425) (484) (427)(868)

(521) (519) (520)(1.089)

332 355 358 104 387 269 364 10 411 340 347 121

(1.500)

(1.000)

(500)

0

500

1.000

1.500

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2017 2018 2019

Trade receivables Inventories Trade Payables

27 27 2628 28

31 32 3234

30 2927 27 28

2624

0

5

10

15

20

25

30

35

40

0

10

20

30

40

50

60

70

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017 2018 2019

Idays DSO DPO Cash Cycle Days

11%

10%

9%

11%

9%

8%

7%8%

7%7% 7%

9%

8%8% 8%

10%

6%

8%

10%

12%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2016 2017 2018 2019

Cash Conversion Cycle ROCE Evolution

Net Debt Commercial Working Capital



Management the current financial structure is adequate to support future business prospects. The new RCF is unsecured and subject to certain financial covenants.

Dividend Policy Esprinet has historically followed a continuous dividend policy and returned an average 27% dividend pay-out to shareholders in the period 2012-2018. In FY20 the shareholder’s renounced of the dividend payment as part of the COVID-19 contingency plan.


10349 77

35102 104

10-121

14

910

18

31 29

22 29

10

1010

12

15 15

13 12

74

7476

76

93 92

91 91

13

13 1113

17 16

14 16

215

155186

153

258 255

151

27

-130

-80

-30

20

70

120

170

220

2012 2013 2014 2015 2016 2017 2018 2019

Commercial NWC Other current assets

Tangible assets Intangible assets

Other fixed assets Total

-61 -142 -130 -186 -105 -123 -241 -272

240 260 273 297 317 337 342 357

2 1 1 1 1 3

2012 2013 2014 2015 2016 2017 2018 2019

Net debt / (Cash) Group Equity Minorities

243 233 276 251 389 313 384 471216 217 253 305

329 482494

497

-356 -400 -452 -522-616

-690-868

-1.089 -6%

-4%

-2%

0%

2%

4%

6%

-1.100

-600

-100

400

900

2012 2013 2014 2015 2016 2017 2018 2019

Trade receivables Inventories

Trade payables NWC on sales (%)

103

49

77

35

102 104

10

-121

2012 2013 2014 2015 2016 2017 2018 2019

Commercial NWC

-61

-142 -130

-186

-105-123

-241

-272

2012 2013 2014 2015 2016 2017 2018 2019

Net debt / (Cash)

86

2

67

-71

24

132

64

-3 -6 -5-24

-3 -3 -3

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

-100

-50

0

50

100

150

2013 2014 2015 2016 2017 2018 2019

FCF Capex

FCF on sales (%) Capex on sales (%)

86

2

67

-71

24

132

48

-3 -6 -5-24

-3 -3 -3

-3%

-1%

1%

3%

5%

-100

-50

0

50

100

150

2013 2014 2015 2016 2017 2018 2019

FCF Capex

FCF on sales (%) Capex on sales (%)

Net Working Capital Evolution – Euro m Commercial Net Working Capital – Euro m

Net Debt / (Cash) – Euro m FCF and Capex Evolution – Euro m – %

Assets Evolution – Euro m Liabilities Evolution – Euro m



Profit&Loss Stetement 2012A 2013A 2014A 2015A 2016A 2017A 2018A 2019A Revenues (VoP) 1.931,9 2.003,0 2.291,1 2.694,1 3.042,3 3.217,2 3.571,2 3.945,4 Gross Profit 131,7 121,7 141,8 156,9 163,9 167,8 162,3 175,3 Gross Proft % 6,8% 6,1% 6,2% 5,8% 5,4% 5,2% 4,5% 4,4% EBITDA 39,8 37,7 45,1 50,6 43,1 39,5 28,6 56,0 EBITDA % 2,1% 1,9% 2,0% 1,9% 1,4% 1,2% 0,8% 1,4% EBIT 36,6 34,3 41,1 46,5 38,6 34,3 23,7 41,1 EBIT % 1,9% 1,7% 1,8% 1,7% 1,3% 1,1% 0,7% 1,0% Financial Income (charges) (2,8) (1,9) (2,0) (4,3) (2,8) (0,7) (4,5) (9,4) Pre-tax profit (loss) 33,8 32,4 39,1 42,2 35,7 33,6 19,2 31,7 Taxes (10,1) (10,8) (13,4) (12,2) (8,9) (7,4) (5,0) (8,1) Net profit (loss) 23,7 23,1 26,8 30,0 26,9 26,3 14,2 23,6

Balance Sheet Net working capital (NWC) 93,2 33,8 58,6 21,9 102,3 107,1 (2,2) (122,4) Net fixed assets 97,2 96,8 98,1 101,1 124,5 122,4 118,5 226,0 M/L Funds (11,7) (12,4) (12,1) (11,3) (14,3) (14,4) (14,4) (16,9) Net Capital Employed 178,8 118,2 144,6 111,7 212,5 215,1 101,9 86,7 Net Debt (61,1) (141,7) (130,3) (185,9) (105,4) (123,1) (241,0) (272,3) Minorities 0,0 0,0 2,2 0,8 1,0 1,0 1,2 2,5 Equity 239,9 259,8 274,9 297,6 318,0 338,2 342,9 359,0

Cash Flow Net income 23,1 26,8 30,0 26,9 26,3 14,2 23,6 D&A 2,7 3,3 3,3 4,0 4,8 4,7 14,7 Change in Working Capital 59,5 (24,8) 36,7 (80,4) (4,8) 109,4 120,2 Operating Free Cash Flow 85,3 5,2 70,1 (49,6) 26,2 128,2 158,4 Capex (2,7) (6,0) (4,8) (23,8) (3,1) (3,0) (3,1) Change in other non-current a/l 1,1 1,1 (2,3) (0,5) 0,5 2,3 (116,7) Unleverede Free Cash Flow 83,7 0,4 62,9 (74,0) 23,7 127,4 38,7 Dividend (4,6) (4,6) (6,4) (7,8) (7,0) (7,0) (6,9) Other (equity) 1,4 (7,2) (0,9) 1,2 0,9 (2,5) (0,5) Free Cash Flow 80,6 (11,4) 55,6 (80,5) 17,6 118,0 31,2

Source: IR TOP elaboration on Company financial statements Q1-Q220 RESULTS AND MANAGEMENT OUTLOOK Q120 presented strong results as not yet affected by the COVID-19 outbreak and were later sustained by full business continuity throughout the lockdown period and a contingency plan put in place at the end of March and based on: i) cost control, ii) optimal management of working capital through the definition of deferred payment schemes with major suppliers and iii) strengthening of the financial structure through the renunciation of the distribution of dividends in 2020 and the interruption of the buy-back program.

Revenues in Q120 rose by +4% driven mainly by a strong momentum in smartphones, smart working, and remote learning-related products (PC, tablets, consumer printers). EBIT grew by +24% to Euro 8.3 m with an EBIT margin of 0.91% (0.77% in Q119). Net Profit was of Euro 3.9 m (+34% vs. Q119)

In spite of a decline in revenues in April (-19%), 2Q showed positive results thanks to a strong performance in May and June and posted revenues of c. Euro 920 m, up by +9%, vs prior year recording the best results in the last three years. Looking at geographies, according to Management the Group increased its market share in all markets with Spain recording an increase by c. +10%, Italy by +7% and Portugal by +68%. Sales by product line showed a significant increase both in the CE segment (+15%) driven principally by Smartphones (+15%), and in the IT clients segment (+5%) thanks to a strong increase in PC sales (+12%).

Overall 1H20 preliminary sales stood at Euro 1,834 m, +7% vs. 1H19. The cash conversion cycle continued to improve in Q220 and closed at approx. 12 days, down -16 days vs. Q219, and -8 vs. Q120. Net Cash at the end of Q220 stood at Euro 110 m, after a significant improvement vs. Q120 (Net Debt of Euro 127m) and 1H19 (Euro 183.1 m) thanks mainly to better management of working capital.

Management has not yet provided any guidance for FY20 but stated that sales in July continued to grow at double digits, and that 1H20 saw a strong improvement in EBITDA vs. previous year.



8. 2020-2021 ESTIMATES In the 2015-2019 period Esprinet was able to increase its revenues at a CAGR of c. +10%, reaching Euro 4.0 b in FY19 and largely over performing it’s reference market (CAGR +8%) thanks to a strategy built on a mix of organic growth and M&A. We believe that the Group can continue to overperform the market as it is well equipped to cope with the current macro-economic scenario thanks to its strong market position, technological leadership, and financial solidity. Looking forward to the mid-term, we believe that more favourable market condition will allow the Group to resume the historical path of organic growth. Given the above, we estimate a 19-21 revenue CAGR of +8%, with total revenues reaching Euro 4.601 m in 2021. More in detail, we assume a top-line growth in FY20 of +7%. In FY21 we expect a recovery in the market and a yoy growth for Esprinet of +9%. EBITDA is expected to post a 2019-2021 CAGR of +9% (Euro 66 m in FY21), with a slight improvement in Gross Profit by c. 0.1% over the period considered, thanks to the fact that the Group should be able to leverage on its critical mass in Italy and Spain when negotiating with vendors and a more favourable sales mix with higher weight of Value Added – and as a Service services. On the cost side we factored in containment measures in FY20 which were offset by one-off costs for approx. Euro 2.0 m related to M&A activity (GPI) and the departure of an operative Board Member. Net Profit is forecasted to post a 15% CAGR and we based our assumptions of a constant 25% dividend pay-out rate. Looking at NWC, we have forecast a small continuous improvement over the period given Management strong focus on the cash conversion cycle. At the end of the period Net Cash is expected to stand at Euro 318 m (Euro 58 m FY21 average considering quarter-end results). We highlight that our forecast does not consider the recent acquisition of GTI still subject to approval of the Antitrust authorities and will hence need to be updated with closing of the transaction. Assuming closing at the end of September, we forecast that GPI can contribute with an additional Euro 45-50 m of revenues in FY20 in the as a Service segment and an additional Gross Profit of c. Euro 4.1-4.5 m for the three months of consolidation. The total value of the deal is of Euro 43.6 m which will be funded through available financial resources. Going forward Management expect to be able to benefit from multiple sources of synergies especially in business development. We have not included a possible write-down on receivables of up to Euro 2.5 m related to the still pending outcome of the arrangement with creditors of a former supplier for the Sport Technology line.

2426

31

7 8

0%

5%

10%

15%

20%

25%

30%

0

5

10

15

20

25

30

35

2019 2020 2021

Net profit Dividend Pay-out ratio

3.9454.225

4.601

41 44 510%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

500

1.000

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

2019 2020 2021

Net Sales EBIT

Growth YoY % on net sales

Net profit and dividend – Euro m Sales and Ebit evolution – Euro m



Euro m – IAS/IFRS FY 19A FY 20E FY 21E

Revenues 3,945.4 4,224.9 4,600.9 yoy +10.5% +7.1% +8.9%

Gross Profit 175.3 186.6 207.3 margin 4.4% 4.4% 4.5%

EBITDA 56.0 58.5 66.0 margin 1.4% 1.4% 1.4%

EBIT 41.1 43.9 51.3 margin 1.0% 1.0% 1.1%

Pre tax profit 31.7 35.7 42.4 Net Profit 23.6 26.0 31.0 Euro m – IAS/IFRS FY 19A FY 20E FY 21E

Operating Net Working Capital (121.0) (112.0) (104.8) Net Working Capital (NWC) (122.4) (113.5) (106.4) Fixed net assets 226.0 220.8 215.5 Funds (16.9) (17.5) (17.8) Net Capital Employed 86.7 89.9 91.3

Net Cash (272.3) (295.2) (318.2) Group’s Equity 356.5 382.0 405.9 Minority Interest 2.5 3.0 3.6 Sources 86.7 89.9 91.3

471 509 550

497 538 581

-1.089 -1.159 -1.235

-3% -3% -2%

-20%

-18%

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

-1.500

-1.000

-500

0

500

1.000

1.500

2019 2020 2021

Trade receivables Inventories

Trade payables NWC on sales (%)

-272

-295

-318

-330

-320

-310

-300

-290

-280

-270

-260

-250

-2402019 2020 2021

Net debt / (Cash)

Net Working Capital evolution – Euro m Net Debt / (Cash) – Euro m



9. VALUATION We initiate coverage on Esprinet with a TP of Euro 7.69 p.s. providing for a potential upside of 84%. We value Esprinet on a peer group-based multiples approach and on a DCF model. At our target price the stock would be trading at 14.7x and 12.4x P/E 20 and 21 respectively. Valuation Summary Method Weight Price (Euro) Multiple Comparison 50% 8.40 DCF 50% 6.98 Target Price 100% 7.69 DCF model Our DCF model yields a fair value of Euro 6.98 per share and was run using our FCF estimates of for the FY20E-23E explicit period and based on the following assumptions:

WACC calculation Perpetual growth rate 1.0% WACC 8.4% Risk free rate (BTP 10Y 12 months average) 1.3% Beta 0.75 Equity risk premium (Damodaran) 10.0% Ke 10.3% Gearing ratio 25,0%

DCF Valuation Euro’000 Sum of PV 2020-23 FCFs 107.7 27% Discounted terminal value 297.7 73% Enterprise Value 405.4 Net Debt (average Q219-Q120) 55.4 Minorities 2.5 Equity Value 347.5 N. of outstanding shares (m) 49.8 Fair Value p.s. 6.98

DCF Sensitivity analysis

Euro m WACC 7.4% 7.9% 8.4% 8.9% 9.4%

g 0.5% 384.2 354.6 328.8 306.1 285.9 1.0% 410.0 376.5 347.5 322.3 300.0 1.5% 440.2 401.8 369.0 340.6 315.9



Multiples Comparison Our relative valuation provides a fair value of Euro 8.40 per share. We selected a peer group of International players active in Esprinet’s core business (B2B tech distribution) and focused on 20-21 P/E multiples to remove distortions related to seasonality in Net Debt.

Companies Country Market Cap Price

Sales Sales EBITDA % EBIT % NI %

2020E YoY 20/19 2020E 2020E 2020E ALSO Holding AG Switzerland 2,843 221 11,757 10% 1.9% 1.5% 1.0% Arrow Electronics, Inc. USA 4,702 61 22,662 -13% 3.6% 3.1% 1.9% ScanSource, Inc. USA 492 19 2,630 n.a. 3.3% 2.7% 1.3% Sesa ITA 993 64 1,963 11% 5.4% 3.8% 2.2% SYNNEX Corporation USA 5,432 105 19,065 -11% 4.7% 3.8% 2.4% Average 2,892 94 11,615 -1% 3.8% 3.0% 1.8% Esprinet ITA 213 4 4,225 7% 1.4% 1.0% 0.6%

Source: FactSet data as of July 31st, 2020 IR Top estimates for Esprinet Esprinet currently trades at a significant discount vs. peers (48.3% and 49.6% P/E 20-21 respectively) which given the Group’s position of leadership in its reference market and higher than average yoy growth, is in our view only partially justified by a somewhat lower than average profitability.

Companies P/E

20E 21E ALSO Holding AG 23.8 20.7 Arrow Electronics, Inc. 11.4 9.2 ScanSource, Inc. 11.1 10.4 Sesa SpA 21.3 18.7 SYNNEX Corporation 11.7 9.4 Average 15.9 13.7 Esprinet 8.2 6.9 Premium/Discount to Peers -48.3% -49.6%

Source: FactSet data as of July 31st, 2020 and IR Top estimates for Esprinet



ESPRINET ON MTA STAR SEGMENT IPO Trading Market: MTA – STAR Segment – Borsa Italiana SpA Date: July 16th, 2001 Price: Eu 14.00 (Eu 1.4 per share considering the share split-up) Capital raised: Eu 15.3 m Capitalisation: Eu 66.9 m SHARES (as of July 31st, 2020) Bloomberg: PRT IM Reuters: PRT.MI ISIN ordinary shares: IT0003850929 Shares: 50,934,123 Price: 4.19 Eu Performance from IPO: +199% (considering the share split-up) Capitalisation: Euro 209 m Free Float: 52.66% Specialist: Banca IMI



DISCLAIMER UPDATES: This Research is the first coverage made by IR Top Consulting S.r.l. (IR Top) on Esprinet Spa (the “Company”). Update frequency might depend on circumstances considered to be important (corporate events and changes of recommendation, etc.) or on further advisory commitment. Opinions and estimates of this Research are as the date of this material and are subject to change. Information and opinions have been obtained from sources public and believed to be reliable, but no warranty is made as to their accuracy or correctness. Past performances of the Company are not guarantee of future results. VALUATION METHODOLOGY (HORIZON: 12M): IR Top obtained a fair value using different valuation methodologies including Discounted Cash Flow method and Multiple-based models. Detailed information about the valuation or methodology and the underlying assumptions and information about the proprietary model used is accessible at IR Top premises. RESEARCH TEAM: Luisa Primi, (Senior Analyst, AIAF Associated) Chiara Cardelli, (Researcher) No other people or companies participated or anyhow contributed to the Research. Neither the members of the research team, nor any person closely associated with them have any relationships or are involved in circumstances that may reasonably be expected to impair the objectivity of the Research, including interests or conflicts of interest, on their part or on the part of any natural or legal person working for them, who was involved in producing the Research. INTERESTS INVOLVED AND CONFLICTS: This document has been prepared by IR Top, Partner Equity Markets of Italian Stock Exchange, part of LSE Group, on behalf of the Company according to a contract, under which IR Top undertook to prepare this report expressing only independent, fair and balanced views on the Company. The fees agreed for this Research do not depend on the results of the Research. 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These widely-attended conferences/events may include some investor presentations by clients of investor relations services. - Analysts are also permitted to attend and speak at conference calls or meetings between analysts and bankers, investors or customers in which are discussed Research reports already published or general view on specific sectors. In such cases, at the start of that meeting, bankers, investors or customers need to be clarified that the discussion cannot involve the communication of privileged information to the analyst as the analyst would be prohibited from producing new research report on the companies whose privileged information has been disclosed. Members of the Research Team do not receive salaries, commissions, bonuses or any other form of compensation based upon specific investment banking transactions or securities’ performances. IR Top and the members of the Research Team do not have any further interest or conflict of interest directly or indirectly related with the Research, the Company or the securities, that may reasonably be expected to impair the objectivity of the Research. There are no other interests or conflicts of interest of any person belonging to the same group of IR Top that are: (a) known, or reasonably expected to be known, to the persons involved in the production of the recommendation; or (b) known to persons who, although not involved in the production of the recommendation, have or could reasonably be expected to have, access to the reccomendation prior to its completion. In any case, as a general Policy, nobody of the Research Team nor IR Top is allowed to have a financial interest in the securities of the client company or serve as an officer, director or advisory board member of the client company. Analysts must not undertake personal transactions on financial instruments that are object of the investment research or that relate to the same industry. Exceptions may be made with the prior approval of IR Top’s CEO in special circumstances such as for disposal of (a) positions already held before the employment or before the implementation of the company policy, or when initiating coverage and (b) positions obtained as a result of the issuer extraordinary activities. By the way, when analysts hold instruments to which Equity Research relates, they are required to disclose their interests in Research reports. Any trades that analysts make must be in line with their recommendation(s), contained in the last published Research. An analyst is prohibited from producing a Research on an issuer if the analyst carries out activities for which he receives compensation from the issuer. If an analyst's household member / relative / relative in-law (within the second degree) serves in such a high capacity for the issuer (i.e. manager or director), the analyst has to inform IR Top’s CEO and the analyst will cease covering the issuer. POLICY: IR Top has in place a “Joint conflict management policy” in order to effectively manage any conflicts of interest, and an “Equity Research Policy”, in order to rule research services in compliance with Parliament Regulation (EU) no.596/2014 and Commission Delegated Regulation (EU) no. 958/2016 on Market Abuse. IR Top has adopted the “Joint conflict management policy” in accordance with best practice regarding “information barriers” to restrict the flow of information to prevent the misuse of information and/or prevent any conflicts of interest arising from other activities of IR Top. A copy of these policies is available to the recipient of this Research upon making a request to IR Top by e-mail. DISCLAIMER: This report has been prepared solely for information purpose and is not intended as an offer or solicitation with respect to the purchase or sale of any financial products. It should not be regarded as a substitute for the exercise of the recipient’s own judgment. IR Top does not accept any liability for any direct, consequential or indirect loss arising from any use of material contained in this report. This document may only be reproduced or published together with the name of IR Top. Opinions and estimates in this Research are as at the date of release and are subject to change without notice to the recipient. Information and opinions have been obtained from sources believed to be reliable, but no representation or warranty is made as to their accuracy or correctness. Past performance is not a guarantee of future results. The investments and strategies discussed in this Research may not be suitable for all investors. In any case, you should consult your investment advisor. This document is intended for distribution only to E.U. “qualified investors” and to “qualified counterparties” resident in Italy, within the meaning of article 2(1)(e) of the prospectus directive (directive 2003/71/EC) and Consob Reg. 16190, as subsequently amended and supplemented; its distribution in USA, Canada, Australia, Japan is not allowed. In Italy, this document is being distributed only to, and is directed at qualified investors within the meaning of article 100 of legislative decree no. 58 of 24 February 1998, as amended, and article 34-ter, paragraph 1, letter b), of Consob regulation on issuers no. 11971 of May 14, 1999, provided that such qualified investors will act in their capacity and not as depositaries or nominees for other shareholders, such as persons authorized and regulated to operate in financial markets, both Italian and foreign. DISTRIBUTION: In the United Kingdom, this document is not for distribution to persons that would be defined as private customers under rules of the FSA; it is for distribution only to persons who: (i) have professional experience in matters relating to investments falling within article 19(5) of the financial services and markets act 2000 (financial promotion) order 2005 (as amended, the “financial promotion order”), (ii) are persons falling within article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc.”) of the financial promotion order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the FINANCIAL SERVICES AND MARKETS ACT 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This document is not addressed to any member of the general public and under no circumstances should this document circulate among, or be distributed to (i) a member of the general public, (ii) individuals or entities falling outside the definition of “qualified investors” as specified above or (iii) distribution channels through which information is or is likely to become available to a large number of persons. IR TOP CONSULTING SPECIFIC DISCLOSURES: We disclose that IR Top acts as Investor Relations and Financial Communication advisor for the Company.

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