ION Platform - Thesis confirmed - Model Update

All,

Please find our updated analysis on ION Platform following Q3 results here.

Note: Beta testers can check the update on the portal here.

Our overall impression is more constructive than following Q2. Disclosure has improved materially, with greater clarity on intercompany transfers, stronger engagement from management and the owner, Andrea Pignataro, joining the investor call. Operating performance also continues to improve, with the synergy programme now fully actioned and a growing proportion of savings translating into cash. While the bonds have rallied 5pts since our initial investment in June, we continue to see further upside, supported by year-end deleveraging, the prospect of further debt repurchases and the potential for asset-sale proceeds to reduce leverage.

Investment Rationale

We initiated a 5% position in ION Platform’s 6.875% September 2032 euro bonds in early June at 78.75 (12% yield). Following Q3 results, the bonds have rallied 5pts to 83.5%. While the move raises the question of taking profits, we are maintaining the position given further upside potential.

Q4 is seasonally stronger for cash generation, and further cost savings should support year-end deleveraging. We expect actual EBITDA/net debt to finish FY26 below 6.5x. Our cost-saving assumptions remain unchanged since June but are increasingly conservative relative to the emerging run-rate.

The bonds continue to trade primarily on yield, with no near-term maturities and the earliest call date in May 2028. We see a further 7pts of upside, taking the yield towards 9%, against potential downside of around 5pts back to June levels. Improving disclosure, the prospect of further bond purchases in Q4 and the possibility of asset-sale proceeds being used to reduce debt support the outlook, although we remain sceptical that a sale will materialise.

Disclosure has improved unevenly through the year: Q1 marked a meaningful step forward, Q2 disappointed, but Q3 provided substantially more detail, including greater clarity on intercompany transfers. Owner Andrea Pignataro also joined the call and answered investor questions. The Company disclosed unsolicited interest in DASH, its US-listed options trading and execution technology business. We remain sceptical that this will result in a transaction, but management confirmed that any proceeds would be used to reduce debt.

Investors still need to place some trust in the Company's adjustments and pro forma assumptions, although this concern is diminishing as the gap between actual and adjusted EBITDA narrows. Our analysis uses unadjusted EBITDA, excluding FX adjustments, and indicates leverage of approximately 6.9x currently, declining to around 6.0x by FY27.