Vantiva S.A.

Good morning, everyone. Thank you for being on this call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If you would like to register a question, please press star 1 on your telephone keypad. Just to remind you all, this conference call is being recorded. We would like to inform you that this event is also available on our website with synchronized slideshow. So during this call, a statement could be made that constitutes 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, forecast, or implied by such forward-looking statements. For a more complete list and description of such risks and uncertainties, refer to Vantiva's filing with the French Autorité des Marchés Financiers. I would like now to hand over the call to Tim. Please go ahead.

Thanks, Thierry. Good morning, everyone, and thank you for joining us today for our H1-25 results presentation. Let's go to slide four. Let me start with the main takeaways from the first half. H1 has been a solid period for Vantiva. The recovery in demand that began in Q1 carried through into Q2, albeit at a slower pace. This was most evident in broadband, where demand remained strong. Video was a more mixed bag of results, but generally trended down. One of the most notable achievements of this half was the reduction in operating costs. The sharp increase in EBITDA reflects the benefits of the operational streamlining achieved through the integration of CommScope's CPE business and more general restructuring within the company. We also generated positive free cash flow even after restructuring charges. This was supported by the EBITDA increase and the positive working capital management. In this context, and based on the progress made in H-1, we are maintaining our full-year guidance, provided there are no significant disruptions in the business environment. We'll go to slide five now. Let's take a look at some of the key numbers on slide five. Revenue grew by 8%, reaching 861 million euros. This, combined with lower operating expenses, resulted in EBITDA of 64 million euros, up 42 million euros from last year. After covering financial, tax, and restructuring expenses, Free cash flow came in at 91 million euros. That's a substantial improvement from the 22 million euros we reported a year ago. On slide six, you'll see that growth in Q2 was slightly softer than Q1, but keep in mind that the year-over-year comparison was more demanding in that quarter. Broadband was the main driver of growth. Revenue from broadband activities rose by 28%. nearly 600 million euros. That surge was led by strong demand recovery for DOCSIS cable products and some wins for fiber and fixed wireless access 5G products. In contrast, video product sales declined, with revenue down nearly 20%, consistent with the ongoing structural decline most customers are seeing in that segment. Our diversification businesses also faced headwinds and fell by nearly 20% over the half, mainly linked to lower demand for retail products. If we go to slide seven, I've already mentioned we're in a good position to confirm our full year guidance, thanks to our H1 performance and continued efficiencies from our transformation. With that, I'll hand it over to Lars, who will walk you through the accounts in more detail. Lars?

Thank you very much, Tim. So let's start with the highlights from the P&L and balance sheet. As Tim mentioned, we had a strong semester. Sales increased by 63 million euros, or 8%. And if we strip out the currency effects, our sales at constant rate would have been 12 million higher than what we have reported here. Our EBITDA jumped from 22 million to 64 million euros. This was driven by cost savings and higher volumes, which more than compensated for the slight change in our margin mix. Depreciation and amortization decreased by 3 million euros, and when you add that to our improved EBITDA, or EBIT-A, increased by 45 million euros, landing at 33 million euros for the semester. Below there, PPA amortization was down 6 million euros, and this is mainly because the amortization from the scientific Atlanta acquisition back in 2015 was finalized last year. Non-recurring items also improved by 11 million euros, thanks to lower restructuring charges. All of this brings our EBIT to a negative €20 million, which is a significant improvement of €62 million compared to last year. I'll also note the negative impact of €214 million in the discontinued group. This is a technical accounting entry related to the sale over supply chain services division in Q1 this year. This is a non-cash item and simply balances historical currency effects, and important to notice, has no impact on our equity. Let's look at how we got from EBITDA to free cash flow. CapEx is 6 million lower than last year, mainly because of lower investments in R&D intangibles. The cash impacts of the restructuring charges improved by 3 million, as the restructuring program is starting to slow down. The variance in working capital for the period is 6 million lower than the variance of the same period last year, by still being a significant positive of 117 million euros. This brings our free cash flow to 112 million euros before financing and tax. After those items, we landed at a very strong 91 million euros, a 69 million improvement over last year. Even if we expect some of these positive working capital movements to be offset in the second half due to timing differences, we are confirming our guidance of a positive free cash flow for the year, as Tim just mentioned. On page 9, we can look closer at the items between EBITDA and EBIT. We covered DNA and PPA on the previous phase, so let's focus on the non-recurring items. Impairments increased by $4 million, which mainly are asset price downs as we clean up or structure following the integration of the CommScope CPE division. Restructuring charges themselves fell from $63 million last year to $39 million this year. We have now booked most of the charges needed to hit our synergy targets. Non-current items was a negative 1 million this year versus a positive 8 million last year. In 2024, we recognized a 6 million bad bill following the purchase of the Comscope CPA business, and we also had a positive impact in Poland following a sale and leaseback agreement of one of our facilities there. Moving to page 10, the key point here is a 6 million reduction in our interest expense. This is a direct result of repaying the 85 million bridge loan last year with slower or debt and interest charges. There is also an increase in tax charges of 8 million this year, driven by positive adjustment in tax last year following the acquisition. On slide 11, we show how we got from last year's 22 million euro in free cash flow to this year's 91 million. We start with last year's 22 million and add the 42 million additional EBITDA and then the $6 million lower capex. Restructuring and pension improved slightly versus last year, and as mentioned earlier, the change in working capital was a negative $6 million for the period. We paid $10 million less in financial charges due to lower debt, and our tax payments improved by $14 million as we received a refund for bid tax in the U.S. that we paid last year. All of this together get us to the $91 million positive free cash flow for the period. Finally, on page 10, Let's look at liquidity and debt. We ended the period with 35 million in cash at hand. Combined with our undrawn credit facilities, our total liquidity stands at 104 million euros, a 10 million improvement since the start of the year. Our net debt has decreased to 435 million euros, mainly due to lower drawings on our Wells Fargo facility. This brings our leverage ratio, the net debt to EBITDA, to 2 times 84 times. I want to emphasize that this is comfortably within our debt covenant of 5.1 times, showing a very healthy financial position. The net debt is down from $477 million at the end of the first semester last year and $478 million from the beginning of the year. This marks the end of my presentation, and I will hand it back to Thierry for the question and answer session.

Thank you, Lars. Now it's time for opening the Q&A session. So, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad.

First question is from David Sedron Kepler.

Good morning, gentlemen. I have some questions regarding the current environment. In your press release, you said that roughly there is no visible impact of the macro conditions, but can you clarify how do you expect the second part of the year to relate it to the U.S. tariffs. What about the production? If I'm right, it's mainly in India, Vietnam, et cetera. The production is not in China. But can you update us on the U.S. tariffs and the new euro-dollar parity? So how are you impacted potentially in the second part of the year by that? Thank you.

No problem, David. Thank you for the question. Obviously, we're monitoring the tariff situation very closely. It is a dynamic situation that continues to change day by day. You are right that our two major production geographies, Vietnam and Indonesia, they have established deals with the U.S., It's also important to know, and one of the reasons why we're not calling any impact to our numbers for the year and we're still staying on guidance, the majority of our business into the U.S. is for broadband products. And those broadband products are insulated even from those country-specific tariffs related to some of the semiconductor waivers that are in place that impact various electronic devices, including broadband CPE and smartphones. So we're continuing to monitor any updates. from the regulators regarding that semiconductor waiver that's in place. But right now, we do believe that because of that waiver and for a few other business reasons, the company is reasonably insulated from any material impact from tariffs.

Yeah, hey, David. So on the issue of the weakening dollar, there are two impacts, right? So you have the translation impacts, which is when we are translating the results in dollars to euro to consolidate the numbers. And here, of course, we have no protection, and the numbers will continue to weaken as our results in a huge factor are impacted by our U.S. activities. As I mentioned, there was a 12 million variance on the first half numbers compared to the constant rate last year. and this is why we are guiding in a constant rate. So we have taken the guidance in the parity at 1.05, and we will continue to update our numbers like that during the year as well. On the transaction impacts, which is more important, we have taken out hedges during the year for all of our exposures. So this means that the guidance we have given today is including the hedges we have taken out, and we will not have any surprises on the numbers going forward on that respect. Okay.

Sorry, can you repeat for the euro dollar parity you have? It's 115, you said, or?

No, 105. It's stated on the vote in the press release, and 105.

Ah, okay, okay.

Thank you. You will find that vote in the press release and in this presentation.

Yeah, yeah, thank you. That's it, David?

Broadband is running fast, video is declining. Do you think that this is roughly the trend we could observe for the next year?

Yes, yeah. David, we're seeing across not all operators, but across many of the network service providers, In North America and in some other geographies, we are seeing some sectoral decline in that video business. I'd say that the European region is a bit more resistant to some of the video decline, but we are seeing generally softness across the video market. And most of the analysts that I'm reading and following do not expect that trend to materially change over the course of the next year.

Thank you. And regarding the execution of the synergy plan, is it roughly in line with your plan better? Have you identified some additional sources of savings or something like that?

So we are tracking very well on the 200 million target we put forward back in 2023. So, yes, we are on plan to meet that target. In our business, we always have to look for more ways to be efficient. So we are not going to say any specific target more than 200 million. But, of course, we need to stay agile and find more ways to stay slim and healthy in this business. Nothing more to report on that.

Okay. Thank you very much. We have no more questions registered at this time.

Well, with that, I think we will close the call. I'd like to, as always, thank all of our stakeholders, most especially our customers, all of our employees who all of our partners, and all of our equity holders in the company. It was a great half, and we look forward to speaking again at the end of the next half.