Vantiva S.A.

Good evening, ladies and gentlemen, and welcome to Vontiva Q1 2023 Revenue Conference call chaired by Luis Martinez-Amago, CEO, and Lars Elen, CFO. At this time, all participants are in listening mode. Later, we will conduct a question and answer session. If you would like to register a question, please press star 11 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 the Ventiva website with synchronized slideshow. During this conference call, statements could be made that constitute forward-looking statements based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the future results expressed, forecasted or implied by such forward-looking statements. For a more complete list and description of such risks and incentives, refer to Von Sievers' filing with the French Autorité des Marchés Financiers. I would now like to hand over the call to Luis.

Please go ahead. Thank you, Thierry. Good afternoon or good morning to everyone in the call. Welcome and thank you for participating in this call. As said by Thierry, I'm going to report about our revenue performance in quarter one. As you will see, We are simplifying the reporting, aligning ourselves with the normal practice of the market, and we will cover in quarter one and quarter three only the revenues in the first half and full year at the occasion of these quarters. So let me start by saying that we are delivering a quarter one very much in line with our expectations. As you will see, we have growth in the first quarter. in a very challenging economy, as I shared with you in the previous occasion, but we are delivering growth in this first quarter. Connected from activity, you will see a delivery of double-digit growth driven by a very still active broadband market. And in our supply chain solution activity, there is a certain decline year on year, and I will cover a bit more what is the basis for this decline. But overall, the most important one is that we are in track to deliver on our guidance. So if we go to the next slide, you will see here that the overall growth has been from 559 same quarter last year to 573 this quarter. And as you can see per division, we have a 12.1% growth in connected home from 408 to 458. and a certain decline in supply chain solutions division, with a decline from 150 last year to 115 this year. This, as we can see, is some variance, but it's very much in line with our expectation, and some declines have been compensated with some additional growth in some other activities. If we go to the next slide, this is the guidance that we shared with you last time, and we are confirming this guidance. We are acting in line with all our expectations. We are very happy with the support of customers and our teams. They are executing on any event of the market. We have the full support of all our customers, big and small, and we are working together to go through these challenging moments in the global economy, but pretty happy to confirm that we are going to be delivering on our guidance. If we go a bit more in detail, BD by BD, if we're getting connected home, As you can see here, now it's splitting the revenues between the two big categories, broadband and video. As we keep reporting in video, we are very selective in the things we do. The overall market is showing a certain decline as we do, but we are pretty happy on the type of deals that we are getting and how we are running that business. We are replacing all activities by new activities in the targeted areas, as you know, it's a RDK video and Android TV video. But as you can see, we have a very small decline compared to last year, but in the right direction. And as you can see, there is a significant growth in broadband. In a market that is not having this growth, it's showing that we have a significant fraction, a bit in the market, so gaining market share. And this is based on an under-axis. I think Wi-Fi 6 is a very demanding activity. I think operators keep investing in this activity, a lot in North America, but also in other geographies. And due to the deals that we won in the past on this activity, this is paying the way to still some significant growth, as you see. There is also a good fraction in the fiber. As I told you, fiber is one of our key priorities to really keep gaining share, and we are doing that. We are dominating the cable segment, as you know, and in fiber is one of our big ambitions. We are working on that, and it's showing significant gains in this aspect, and we're expecting this to continue. The video, it has been impacted in economies a bit more sensible to global microeconomical situations. I'm referring here, for example, to Latin and India. in which in general service providers tend to be a bit more cautious when the situation of the economy is impacting much more the demand than in other geographies. Something that I'm sure will recover, but for the moment we are very attentive to this type of market because they're a bit more volatile than others. Overall, the situation is still Very volatile, as I was telling you when providing the guidance for the year. All actions are in place to deliver on our promises. I think we were very, very much in line and in partnership with our customers. We are serving them, following the needs that they have. uh there is that is different market by market and type of operator per type of operator in some places we need to adjust to a weaker demand in some others they are coming with a very urgent demand to cover some commercial needs and we have all operations in line to adapt to these fluctuations the chipset supply keeps improving i think we are even if in some specific chips we CSS and difficulties, but overall, I should say that in terms of supply, the situation is coming quickly back to normal. And the other aspect is we see a lot of activity, what we call commercial activity, in helping customers in defining and preparing the future product portfolios. A lot of our customers are preparing new opportunities in fiber, in fixed wireless and mostly to introduce Wi-Fi 7 technology, as said with you in the past. And I'm pretty happy of seeing the level of engagement that our teams have with these customers. I'm very optimistic that we will accompany them in the future to pave the way to the growth that we are planning to have moving forward in the following years. If we move to the other activity, to the division supply chain solution, Here, as you can see, what we have suffered in quarter one is in one of the segments, which is the optical disk, which is the traditional. We have some weakness in quarter one, a bit more than expected. There are a number of reasons that are justifying that. One of them is some of the big titles that were planned to launch in quarter one has been delayed. for later quarters. Some of them will do in quarter two, some of them in quarter three. And this is a significant part of growth and volume. So this is just a delay that we will see coming later. We have some of our big retailers in North America that have some rearrangement of the spaces in their stores. that were pushing out a little bit the new demand just for them to end the re-planning of these activities. So there is a number of small reasons. We are not very much concerned. We see the year will come back to what we were expecting gradually. Okay, but we need to go through the motions. We keep working on our efficiency in this business. In the traditional one, as shared with you, we are working in the productivity improvements. in trying to rationalize the activity, try to make it more efficient, to keep extracting profitability in a lower top line. But we keep investing in all the diversification activities. As you know, we are investing heavily in the vinyl capacity because the demand is there and will be there for the years to come. Our key casters, the key music studios, are counting on us to put as much capacity as we can in place to provide us with this activity. And that will be growing quarter on quarter over the year. And that is part of the plan, but we are considering that that could even compensate a bit if the optical disk business keeps showing some delays or weakness. So we are pretty optimistic in all the actions that we have in the vinyl. and we will keep growing quarter on quarter. On the other diversification activity, which is what we call fulfillment and brokerage of transport, it's showing good dynamics. We keep adding brands on the portfolio and that should be other axis of diversification. As you know, this business is all about Increasing the productivity in the traditional business optical this and keep investing and growing in the diversified business. So this is the major axis. So, and we'll keep reporting on you moving forward. Okay. And with this, I think this gives you a quite wide panorama of our performance in quarter one. Remember it grows. in a complex economy. We are quite happy of this performance in quarter two, and we will keep executing throughout the year and coming back to you with more updates. And with this, Thierry, maybe we should go to the Q&A.

Absolutely. Thank you, Louis. So if you want to ask questions, please press star 11 on your telephone keypad. Thank you. Do we have anyone on the left waiting for a question?

Yes, we have Fiona Williams from Edison.

Okay. Okay, Fiona, go ahead.

Hello. Hello. Can you hear me? Yeah, good. Okay. You talked about gaining market share in connected home. Is this down to any change in the competitive landscape or is it your technical capabilities or is it pricing or is it a combination? That's my first question. And on supply chain solutions, I just wondered if you felt you referenced the de-stocking in the statement and then talked about customers doing a bit of refurbishment. Do you think that it's actually worked its way through now? And also, is the investment program on the vinyl intact, on track? Thank you.

Okay, on the 1st question, which is a very good question, it's a very difficult thing, because it's a combination of many things. And it's not an event of 1 quarter is all everything that we are doing over the past. So is the positioning we have. Not only in the portfolio of customers that we are addressing, but also on the technology that we are present and it's a bit that you do and normally after that. it depends in which geography you are and in which sector you are, that depending on the market events, you can take advantage of some market evolution, but sometimes it could go in the other direction. But I would say our selection of markets, as you know, we are very predominantly North America, and the performance of North America market has been quite robust in the first quarter, and this is helping us. Our presence in the cable, our focus on Fiverr, our position in Android TV, all these fundaments at the end is a combination of things that if you find that this is the places where our customers are investing, are preparing their campaigns, then you go with this way, okay? So, but there are many factors. It's very difficult to mention one of them, but okay, look, this is what I can answer on that question. On the second question, if I understand well, you ask if our plans to execute in the capacity expansion of vinyl is still in place. The answer is yes. And the only thing I can share with you is that in the past quarter four, we were reporting that we were having a bit of difficulties of finding the press, the machines to produce the vinyls. And some of them were arriving with a bit delay. Now what I can report to you is that what we see for this year is that we can even be a bit ahead of the original plans, that we see that some of these machines are arriving a bit in advance. So I'm pretty optimistic that if anything this year, the capacity plans will be a bit ahead of plan that will allow us to even deliver a bit more vinyl than what we had in the plan. It's still to be seen. It's a plan, but if something I would say with you is that I'm optimistic that we could execute a plan or a bit better than planning the capacity expansion.

Okay, thank you.

Can I answer your question?

Yeah, there was one more about whether you felt that destocking in the DVDs in the retail sector had actually worked its way through now.

did you mean the inventories that we are depleting the inventories yeah this is okay first first this is not basically a problem for us because the the inventories we have of this belongs to our customers so our business we produce their the dvds that they ask us to produce they own the dvds we store them and after that we have the business of shipping this to the different stores so having more or less inventory it is not our objective i think it's something that they manage uh but what i would say with you is that yes i think they're they're pulling out of the inventory and it is a mixed bag and we normally control that There is new titles that is normally what is a significant part of the new volume. And then when they go to the long tail catalog, they control what they need to sell or not sell or reproduce. But I don't see any major important KPI to share with you in this. It's a business as usual.

Okay. Thank you very much.

Thank you.

Thank you. We have no more questions for the moment. Ladies and gentlemen, just a reminder, if you wish to ask a question, Please press 1-1 on your telephone keypad. Thank you. Gentlemen, we have no more questions by phone.

Okay. So, thank you very much to all of you to be there. I'm happy to talk to you in July when we will comment the first half results. Thank you very much.

And if you have any further questions, feel free to contact the IR team whenever you want. Have a good evening. Bye-bye.

Thank you, ladies and gentlemen. This concludes the conference call. Thank you all for your participation. You may now disconnect.