Vantiva S.A.

Ladies and gentlemen, welcome to the Ventiva's Q3 2022 results, chaired by Luis Martinez-Amago, Ventiva CEO, and Lars Ehlen, Ventiva CFO. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. If you would like to register a question, please press 01 on your telephone keypad. Just to remind you all, this conference is being recorded. We would like to inform you that this event is also available live on Ventiva's website with synchronized slideshow. I would now like to hand over the call to the CEO. Sir, please go ahead.

So this is Cirino speaking. Before handing over to Luis, I invite every participant to read the forward-looking statements regarding the forward-looking statements. Thank you. Luis?

Good evening, everyone. I am Luis Martinez Zamago, the CEO of Vantiva. I welcome all of you to this first Vantiva earning call. We are reporting for the first time as Vantiva, a refocused company after the spin-off of the technical or creative studio business. Vantiva is now entirely focused on its business with two divisions, the connected home division and supply chain solutions. Let's go to slide number three. Vantiva is offering an attractive value proposition based on our commercial positions, our technical and operational competence, and an experienced management team. As explained during our Capital Market Day, these businesses have been transformed over the last years. The ambitious objectives defined at the beginning of this transformation have been achieved under very turbulent market conditions. And the results that we are delivering as part of Technicolor until now and as an independent company from now are the consequence of this transformation. Our customers are trusting us. They are providing new business opportunity to our divisions. Our partners are aligned with us to execute together and to deliver products to our customers, finding solutions to the different market challenges. And our teams Invantiva are focused on the task with expertise, dedication, and ambition to execute our strategic agenda. And our main shareholders are supportive and motivated to accompany us in this new phase for the company. Our commitment to them is to translate our plans into sustainable profit and positive free cash flow generation. Q3 figures, as you will see in a minute, show that the company is delivering solid results in line with our guidance despite a still complex supply environment. Thanks to the spin-off, the financial leverage has been significantly reduced. However, the intention of the disposal of the TCS stake is now unlikely in the short term, but this is not impacting operationally Vantiva. As TCS and Vantiva are two separate companies now, we at Vantiva will continue to execute our plans over the next years, delaying the delivering plans we initially had. This new situation will not impact our operational plans since we can service our debt and run our operations as planned. Let's move now to our Q3 results. In slide number five, you see the Q3 results, and they have been good and in line with our expectations, if not a notch better. Revenue reached 765 million compared to 528 for the same period last year. This growth of 45% in the quarter came from the strong performance of Connected Home and a favorable exchange rate. At constant rate, the growth would have been 27%. Connected Home reported an impressive 77% growth in the quarter. On the SCS side, They saw its revenue declining by 8.6%. At cost and exchange rate, the drop would have been 18.2%. This drop is explained by a strong 2021 Q3 comparison basis and a lower demand for DVDs. The group suggested EBITDA increased by 40% and reached 6.5% of the revenues versus 6.8% a year ago. THIS SLIGHT DECREASE IN PERCENTAGE IS EXPLAINED BY THE LOWER SHARE OF SCS IN THE PROFIT PULL, AS MARGIN IN PERCENTAGE FOR SCS IS HIGHER THAN THE ONE FOR CONNECTED HOME. CORPORATE AND OTHERS WAITED FOR 9 MILLION IN THE QUARTER IN LINE WITH LAST YEAR. FREQUENT FLOW BEFORE INTEREST AND TAX WAS POSITIVE AT 10 MILLION, SHOWING A 21 MILLION IMPROVEMENT. MOVING TO SLIDE 6 FOR A VIEW OF THE FIRST MONTH OF THE YEAR. In the slide sheet, you can see the same picture, but for the first nine months of the year, the revenue stood at almost 2 billion euros versus the 1.6 billion last year. This 26.5% increase has been totally driven by Conectejon Division, which achieved a 35% growth rate, while CS Supply Chain Solutions was about flat. At cost and exchange rate, the group growth would have been 11%, with 20% for connected home and negative 9% for supply chain solutions. The group adjusted EBITDA amounted to $123 million for the first nine months of the year, when it was 86 a year ago. This led to a margin of 6.3 versus the 5.4 of last year. And the free cash flow before interest and tax was still slightly negative at minus $26 million, but it's $235 million better than the one for the first nine months of 2021. Moving to slide number seven. In this slide, we are showing our guidance for 2022 that we are confirming based on our current and expected performance in quarter four. This guidance is based on a 1.15 euro-dollar exchange rate, and it will be converted when we communicate the actual results in the current rate. We are also confirming our 2023 guidance as well in the same rate of 1.15, and we will update this guidance to the new exchange rate when we are communicating the results of 2022. Let's move now to the business update by division. In slide nine, we will start by the connected home division. Starting by the right-hand side of the slide, we keep executing the business in line with our strategic priorities. We are prioritizing the broadband business since we believe this is a key strategic priority for our customers and will remain so for the years to come. As you can see, this represents already 70% of our business from 58% last year and less than 40% several years ago. On the video segment, our priority is in the new and growing Android TV and RDK ecosystems, where we maintain a good performance. Our two pillars of value proposition are the technological leadership and our operational agility. On the technological leadership front, we are focused on the fast introduction of new standards. On the technological leadership front, We have always led the introduction of new standards. We led the market with DOCSIS 3 and DOCSIS 3.1, and very soon we are going to do the same with DOCSIS 4. We deployed the first product with Wi-Fi 6 and Wi-Fi 6C, and we have recently shown in the Broadband World Forum the first ever product performing Wi-Fi 7 technology. In addition to that, we have launched new commercial products with key customers, as you can see some few examples in this slide. We are very proud of all these deals, and we expect this to continue. At the bottom left corner of the slides, you can see our corporate social responsibility priorities, and we are working in these priorities already for several years. But the relevant aspect in this space is the company's commitment, but also the measurable results that we are reaching in this space. On the commitment front, we are the only company in our industry that has signed the 2050 net zero standard and also has committed for the climate change science-based initiative. On the results front, we have obtained the EcoBuddies Platinum status, which plays Vantiva It places us on the top 1% of the companies in terms of results achieved. We are really proud of all these achievements. Now moving to slide number 10. Despite the still challenging environment, we have seen the Connected Home Division has enjoyed a strong development in the quarter with revenues up 77% or 54% at cost and rate. And at yesterday's BDO at 33 million, representing 5.7%, of revenue versus 16 million and 4.9% in quarter three 2021. Beyond the exchange rate impact, this is explained by lower constraints on the supply and easing logistic issues that have allowed a better product availability and higher deliveries of our backlog. Concerning margins, it is worth to mention that our customers are leaning forward and helping us to absorb the additional cost of components than this industry is experiencing. This has allowed to protect our EBITDA, but it has a mechanical negative effect on the margins in percentage, as it has increased revenues with no incremental contribution to the margin. Nevertheless, this dilutive effect has been compensated by higher volumes and the highly efficient cost structure, allowing us to increase the EBITDA margins on 78 basis points. For the rest of the year, we expect the supply difficulties to remain and the cost of components to stay high. Moving now to the supply chain solution division in slide number 11. As you can see on the right-hand side of this slide, the DVD volumes were significantly down at 43%, and this is due to a high comparison basis versus quarter through 2021. and unexpected manufacturing order reduction from one of our big customers, which is reducing the high level of inventories they have. The retail market performance remain in line with the expectations with a gradual secular decline, which is taking into account in our plans. The division continues to implement efficiency measures to maintain this activity at the right level of profitability contribution. The vinyl market continues to show significant growth. Vantiva accounts already with two global players in this field among its customers, and we are in conversation with a third one to start business with them as soon as possible. While the group has proven its technical capabilities for pressing records, the current capacity in place remains limited. versus the demand. We are putting in place the additional capacity as quick as we can, and the situation is progressively improving. Fulfillment and transportation, which is another axis of our diversification in this division, is growing at a good pace and is benefiting from lower pressure from the freight pricing. In the next slide, you will see that in this context supply chain solutions revenues were down 8.6% in the quarter, and 18.2% at constant exchange rate. Despite lower volumes and revenues, as well as higher material costs, the EBITDA margin has shown good resilience, and they were down only 90 basis points at 13.7%. And with this, I will pass the floor to Lars Ehlen, our CFO, to walk through our figures.