Claranova SE

Thank you for attending this presentation of Clara Nova annual results for our fiscal year 2021, which goes from July 20 to June 21. As introduction, we are still getting a lot of questions about who is Clara Nova, what really do we do, and I would like to take a few minutes to give a brief summary about what we do and who we are. Clara Nova is a global technology player that manages a portfolio of majority stake into a digital company with strong growth potential. Maybe the most important point to understand is that we are defining and controlling the company in the sense that we're defining the vision long term, we're defining the strategy, we are selecting the management team, we are building the organization, we are dealing with the partnerships, so we really have a controlling position as a majority shareholders. In this position, we can intervene in various situations. We can actually create the business. We will identify, develop product, service, or business model, which we think are innovative enough and we think we can build value upon. This is what we've done with Planetaert back in 2014 when we created FreePrints and we grew the company pretty much from the ground. We can also work as acquiring undervalued business, distressed business, where again we believe we can build a strong shareholder value. This is what we have done with AvantQuest. we really turn around this critical business, which has been around literally for 30 years, but also we have been acquiring several company to build a real strong SaaS software player, and in parallel, we will constantly develop strategy, commercial, technological, or financial partnership. This is what we've done, for instance, with Semtech, a US analog group, which get into my device capital, but also who are a very strong business player for what we do. So we really have all these options to grow the various businesses. How we finance this portfolio will be through the listed entity, Clara Nova. We can do capital increase as we did back in 2015. We can also use different mechanisms like convertible bonds or debt like we did back this summer. We usually work with a five to ten years horizon when it comes to building the business. Again, because we are in that controlling situation, it does take that amount of time to really grow and build these businesses. And once these assets reach a certain level of maturity, the way we can really externalize the value will be through an IPO or through a session, partial or global, of one of the assets we are working with. And at one point, once we have these liquidity events, we can bring the cash to the shareholders of Claranova. We can buy share back. We can invest in new businesses. Well, this is how we manage our financial model. So even though we are not very satisfied with the evolutions of Claranova shares, especially over the past couple of years, which I think are very disconnected to the reality and the value that we created since 2018, If we bring things back in perspective over the past six years, we multiply the value of the company by more than five. And if you look at the annual performance, we are about the 35% level And if you compare that to the CACOL shares index, which is about 7%, we have been significantly super-performing most of the shares indexes around the world. Again, it doesn't mean that we believe we can be much better, and really the plan continues to significantly grow that value moving forward. So, Claranova owns currently three separated autonomous assets. PlanetArts is a Delaware-incorporated U.S. company managed by Todd and Roger. We are talking about over 500 employees in between mainly U.S. and China. AvantQuest is a French-Canadian company managed by Eric with 200 employees, most of them in Montreal, the rest in France, and my device remains a bit slower with about 20 employees back in Burbank. Again, what is important to understand, each of these three businesses are totally autonomous, they are completely independent, and again, when it comes to externalize the value, they could really be separated to the group, one way or the other, and it will obviously have no impact on the rest of the business. Looking more specifically at what we did on the various business over the past few years, Planet Arts, for instance, we invested less than 20 million back in 2015 when we recapitalized Clara Nova. And with these 20 million over the past six years, we grew from the ground up. a 400 million euro revenue business, which has been generating nearly 40 million in EBITDA since 2015. So I think it was a very small amount for a fairly significant value creation when it comes to Planete Art. And if we put things in perspective and we compare that business to our direct competitions or comparable, so whether we're talking about Moonpeak, Seawee, or Desenio, for instance, three of them listed company, We have been able to reach, we've planned it out, this 400 million euro revenue threshold in pretty much six years. If you compare that to our direct competition, it took them 20 years or more to get to that level of revenue. But maybe more interestingly, Not only have we been able to grow much faster than the rest of our environments, but we are today the only player in our fields being at the same time in the US and in Europe when most of our competitions are usually very local company. Moonpeak, which is a great company, is mainly UK business. Siwi is mainly a German company, and Desenio is mainly a Sweden business. because of our business model, we've been able to really grow very quickly and on a global basis. Obviously, if we look at the EBIT, as you can see on these charts, we are currently still lower than these people. There are a couple of reasons to that. The first one is, again, related to our business model. We have been disrupting this environment, being the first player to come with a fabless model. So we don't produce, we don't own the production tool like pretty much all our competition. And this is again the reasons why we've been able to be more agile, grow faster, grow on the larger scale. But obviously that has a cost. It's about 10 points of margin when it comes to the cogs we are paying, we're giving away to our suppliers, so this is 10 points that we don't get in our EBITDA, but really we were able to grow very strongly because we had that agility and clearly the plan, as we are a very young company with only five years behind us, we will continue to grow and we will continue to improve our profitability. Looking at AvantQuest, so as much as PlanetHeart again was built from the ground, we came with the concept, we grew the company, we structured the business, and at one point we did some acquisition. AvantQuest was really a restructuring activity. We really rebuilt again from the ground that historical business, which I took over back in 2015. We completely reshaped the company, what they were doing, but maybe more importantly, what we did was to acquire a few companies, three Canadian companies, for instance back in 2018, and upon which we have been able to build this SaaS software player we are today, with over $100 million of revenue and over 10% of profitability, And again, it took the past four years to rebuild that organization. We really completed the transition to SaaS, and really we should be able to see the benefit of that transition now moving forward. And again, if we compare that business to our direct comparables and competition, it's interesting to see how we compete and how we compare. The numbers you have on the charts, I think something we usually don't share too much, but we thought it was interesting to look at each of these vertical domains we are focusing on. So the core activity of iPhone Quest is a PDF software under the brand of Soda, security software under the brand of Adware, and the photo business under the brand of InPixio. And if we look at the growth specifically on the part of the business, we have been delivering a very strong growth. over 30% for our PDF business. When we compare that directly to Nitro or Foxit, who are our direct competition, we can see that we're really performing our environments Security, 28% growth, so pretty solid. And photo is a more recent business. We're still in the process of reshaping that environment, so this is maybe a smaller growth. But in global, we really have been achieving some strong results on these three different domains. The global business of Avonquest, I will say, is only delivering 11% of EBITDA today, which is usually less than what you should get from a SaaS software vendor. The reason is essentially that we have been just ending that transition. As we move forward, continuing to grow, that business, but more and more building that inertia of resubscribing this new user year after year, what you will see is a growth of that profitability to that 20 above threshold, which is really the ratio that we're targeting for that business. So the plan is really to continue to strong organically, very strongly in this domain, and as we go to build a stronger and stronger profitability and at the same time certainly continue to look for possible acquisition last talking about my device this remains a small portions of our of our business but doesn't mean that we don't spend a lot of time and energy. We really have been building that environment over the past five years. We spent a lot of time developing the code. We spent a lot of time also working with some of the key players of the IoT environments and building some very strong partnership with Sprint. Historically now we have T-Mobile and building some very strong relationship with really these key players. And what we've seen over the past few months post-COVID is really a ramp up of signing more and more new customers. Comparing to Avant-Quest or Planet Arts, we don't have on the very new environments, and IOT is still ramping up, we don't have a lot of listed company we can compare with, but what we have seen over the past few years was several acquisition on very direct competitions. That could be Cumulus CT acquired by Software Aggie, or ThingsWork acquired by PTC. More recently, DG acquired Axiot. And we do believe that we have a much stronger environment with a lot of value when it comes to capacity to deploy, capacity to address vertical solutions. So we still have a lot of expectation and we still believe that that will be a strong, really a growth for Clara Nova moving forward. As a conclusion to this introduction, again, Clara Nova is this controlling majority shareholders group with that strategy to build the value of that organization as a sum of the parts of each of our company and our portfolio, and looking at this direct comparable I've been talking to, we do believe that the value creation potential ahead of us is very strong, and our ambition is, in the medium term, time to really increase the value of the group by at least a factor of three. Even though we multiply already by five, we still believe there's a lot of potential growth ahead of us as still the value of the share we believe is still very strongly undervalued. Looking now at the actual numbers for this fiscal year 2021, once again, I will say, CloudNova delivered very strong results. We almost got to this half billion revenue level, which I think is a significant number after these five years of existence. We continue to grow over 20%. That includes 14% organic growth, the rest coming from acquisition we did back last year. Maybe more interestingly is to have been able to almost double our EBITDA So we've been really focusing a lot to increase that profitability for the past 12 months. And as you can see, the net income moved from $1 million to $14 million. So we really can see the equivalence between EBITDA and net income. And I will let Jean-Yves now present more in detail these numbers.

Thank you very much, Pierre, for these words. So a couple of slides on financial results. It's a pretty good year we have behind us, so it's a pleasure to be describing, sort of analyzing these numbers with you tonight. As Pierre said, we are coming close to 500 million euros in yearly revenue, growing 15% at actual forex rates, at real rates, so to speak, 21% at constant exchange rates. with a 7% of impact due to the acquisition, whether we put them in there or not to do a like-for-like analysis or use the full numbers, and 6% of impact from the foreign exchange. We'll have a further discussion later on about what the real impact is. Obviously, it impacts revenues. There's a very limited impact at the bottom of the P&L, at the EBITDA line, which we're going to be analyzing later in this presentation. What's especially satisfying for us is the fact that all three divisions have really contributed each in their own way to these numbers. At PlanetArt, we grew from 17 million euros in EBITDA in 2020 to 34, almost doubling. ratio of EBITDA to revenue went from 4.3% at the end of 2020 to 7.2% in 2021. So it's a pretty significant increase even in relative terms to the revenue. with Planetar just contributing the bulk of it with improved marketing efficiencies, which we've described in quite a few of our press releases across the year. In the case of AvantQuest, it's really the successful transition to a SaaS model where marketing, customer acquisition costs are really being driven down as a proportion of new or recurring revenues. And in the case of MyDevices, revenues have been pretty, revenue growth has been very limited. But what I think is interesting is that the client will see there are a couple of signs in the MyDevices revenues that point to an interesting future for the company, which obviously we strongly believe in. but the company was also very pragmatic in adjusting its fixed costs while the COVID crisis was prevailing and is going to be probably exiting the queue in a few months and we hope will be visible in the revenue numbers. As I said earlier, there is a strong impact, minus 6% on top line numbers, but these foreign exchange variations don't impact the EBITDA. As you can see, it's 7.2% at constant exchange rates, EBITDA 7.3% at actual exchange rates. As we've explained before, what we have is a natural hedging strategy in the sense that where we have revenues in a currency, we also have expenses in the same currency, and so very limited impact. of the differences between currencies impact the EBITDA. Cash continues to improve, in particular cash flow from operations before changes in working capital, which we think is a very interesting way to look. In a sense, this is real cash flow coming from operations, which more than doubled last year. we see a change in working capital requirements this is there is no change to the structure of the business in terms of working capital requirements what's going on is at the end of 2020 we had this strong increase in revenues at the planet out driving a strong increase in variation in working capital requirements at the end of 2021 the the growth was slightly was more flat and that sort of created the opposite effect in terms of variation in working capital requirements. Net-net is, it's just a matter of the growth of the business, there's no change to the structure of the business, the structure of the balance sheet of Planet Art, and to the contrary, behind that change in working capital requirement, what we see is real good news around the cash flow from operations, the full working capital requirements before WCR. strong decrease in that cash flow used in investing activities. What you see here is 10 million, which is related to the acquisition of PDF Escape by AvantQuest, the acquisition of CafePress by PlanetArt, obviously, as well as the premises, if you wish, of the transaction we did in August. There were a couple of transactions that we entered into with the minority stakeholders in the request at the end of january of this year which go into that 10 million numbers that you see there and then finally online net cash flow from financing activities it's just the interest expense on the existing debt at the end of june so obviously excluding any potential or any accrued interest expense on the convertible bonds that were issued in august As I said, net cash remains solid. The debt has gone down by 4 million, the financial liabilities, the financial indebtedness, and available and pledged to the available cash has gone from 83 to 90. So obviously net cash, which is the difference between the two, went up from 14 to 25, a pretty strong base for a pretty healthy financial situation for the group. Pierre, if you want to take us through this performance.

So, let me share with you a few words on what happened during this last fiscal year for each of the business. You know, a very quick presentation on this. So, Planet Art, as Jean-Yves was mentioning, you know, nothing but good news. We sustained, I will say once again, a very strong growth. coming both from the historical business, but also very good integrations of personal creation, which is really today delivering very nicely into the business. It's something we acquired over a year ago for a very small amount of money, so we buy the business at 18 million. and it represents pretty much over $100 million of business today with nice profitability, pretty much in line with the rest of the business. So I think it's a very, very strong acquisition we did back then. We're still working, and we did work this year with the integrations of Café Presse. We anticipate and prepare the acquisition of ICME. So we really work on all fronts at the same time growing the business and preparing for the future with these various acquisitions. Maybe the most interesting has been focusing on improving the profitability of the business, and with a fairly spectacular deployment from 14 to 26 million of profitability for the part of the business, which is really getting to a certain level of maturity now, which is getting the business very interesting. And still, even though we had some glitch over the past quarter, certainly a lot of potential moving forward. When it comes to AvantQuest, it was really about finalizing the transition to SaaS. This is pretty much almost behind us. The vast majority of what we sell, I think it's over 90% now, are SaaS solution. So we've really moved in the entire operations and sales toward the SaaS model. Again, that had an impact on the the limited growth of the revenue that certainly had a strong impact of last year profitability. But as you can see, moving into this fiscal year, we really start to see the benefits of moving to that model with a profit that went from 7 to 11 million. And this is something that we should continue to see developing year after year as we at the same time continue to grow the business. As I was showing you before, we have a double G growth on all of our verticals, so we at the same time grow the business, we now move on the subscription base, and so we're getting more customers, and we are renewing historical customers at a lower cost. So this is really a very strong double effect, and what we hope very quickly is to see both the growth of the revenue and the continuing growth of the profitability. And again, as I was mentioning before, we continue to look at possible acquisitions to accelerate the deployments of that business. MyDevice, again, small part of the business. As you can see, the revenue declined, but maybe even though the EBITDA was improved as we control that environment through the COVID, and again, MyDevice was a part of the business which was really the most impacted by the COVID. The really point we wanted to highlight with my device is that the increase of the annual recurring revenue has been very strong. So at the end of the fiscal year, June 21, it was at about 1.4 million, which is 80% almost bigger than it was last year. So the decline of the revenue is really coming from that historical business that we deploy specifically for Sprint. That was a one-shot business that we really developed for our partners and mainly Sprint. That was a one-time deployment. But now as we move forward, we're really into the modes where we are signing recurring customers on a monthly basis and we are seeing that AR part of the business growing literally month after month. So we really get to the points where we are seeing that business ramping up. We're talking about small revenue compared to the rest of the business, but again, it's extremely sticky business. Once you get your setup, it will be very hard to move out of that environment. And we're really seeing now a ramp up at the commercial level. And again, we believe that business will finally be growing as the other business moving forward. We wanted now to give you some updates about the various operations we did. But before that, a quick word on the changes we saw over that first quarter. So we had that announcement that for the very first time, after 23 quarters of double-digit growth with PlanetArt, we saw for this past quarter a slowdown into the revenue of PlanetArt. Essentially for two reasons, completely external to our business. On one side, post-COVID, people were not anymore behind their computer. They went to the restaurants, went back to work, they were able to travel again. So clearly we can tell the volume of traffic, which is essentially what we monetize to get customers, has been just less and smaller. That means a small opportunity to convert and transform customer to our product. So clearly this had an impact. It will come back, we're not concerned. We are getting into the holiday seasons, Thanksgiving. is a few weeks away, so we assume things are going to come back very quickly. The second external factor which also had an impact was that transition from Apple within iOS for what they call the app tracking. So today, the customer have what we call opt out. They have to accept to be tracked. for the various mobile developer, apps developer, and as you can imagine, most of the people, quote, refuse to be tracked, even though it's just a way to be more efficient, what we offer to customer. So we suddenly have lost that capacity to see through these possible customers that we're trying to acquire. We usually sell well to a female population under a certain age, so now we don't have that visibility anymore, so we're currently working with Facebook, we're currently working with our marketing partners to work around that situation you know it happens in that environment so these marketing rules are changing used to be google that's apple so we're currently working to adjust our marketing channels to these two environments and you know we we assume that at one point we'll get back to normal situations again everyone is impacted by that situation We believe that we are shrinking less than our direct competition because we maybe are more agile again in our capacity to adjust to this new environment, but this is certainly something we have to deal with. We're working on, we've been working on that actually for the past couple quarters already, and we are trying to prepare moving to a different environment. We believe that we will go back to growth in the next quarter. We are still confident in our capacity to achieve our targets that we presented for the horizon of 2023. This was only related to PlanetArt. We had absolutely no impact on AvantQuest or my device, so that was really specific when it comes to mobile environments with PlanetArt, and again, we hope this will be over soon. What we want to do now is to give you more details about the operations with you for summer, and Jean-Yves will tell you more about that.

Thank you, Pierre. So, I just wanted to take the time to again explain some of these post-closing events that happened during the month of August, something we've been working on for, in some cases, several years. And so we think it's important to just go through these again, even though they're not really, strictly speaking, part of the fiscal year 2021 accounts. Two steps in this transaction. A strategic investment of 65 million euros that was announced on August 11th, 15 million in stock, 50 million in convertible bonds, we'll go into some of these terms. Two leading investment firms, one US, the subsidiary doing private investments, public equity, in technology markets for one of the largest asset management groups in the world. The other, an Australian fund called Ophir, and the first one was AIDS Capital, the second was Ophir. And at the same time, once we had agreed the funding the same day, in the same press release, we announced the firm, the binding agreement for the buyout of the AvantQuest minority stakeholders. Just a few words. We had control of the AvantQuest group. but they were owning a bit more than 64% of the economic interest in that unit. These are the interest we bought from them. We announced the buying from in the middle of August. We're well on track to complete our transaction and announce its full closing at the end of October, which should be in a week's time roughly. for 98 million euros as was listed on that slide. Again, quick profile of the investors, Hades Capital Management, a private equity firm doing mostly pipe deals in technology in the US, Ophir, and They were really important for us because, as we'd announced in the past several times, it was a major goal, a major objective for us to be able to stabilize the shareholder structure and defragment a bit, so to speak, the capitalization table and create a group of cornerstone investors in the company, which we're happy to have done through this transaction with Aids and Affair. people who can work with us and assist us and partner with us in the medium term and the long term to grow the company as we ramp up growth in the business. um again as i said 65 million euros total 15 million as a with a capital increase with the cancellation of preferential subscription rights um subscribe 5 million by 8 10 million by your fear and 50 million through the issuance of a new convertible bond with several unusual characteristics, which I'll go into further. One being to start with, 87%, 86% in conversion in the strike, which is the price at which the convertible bond can be converted into shares. On this slide, which is a bit busy, I apologize, what we do is list a couple of the option pathways that are open to the holders of the bond as well as to the company. The company is the top of that timeline. AIDS capital is the bottom part of the slide, and it's sort of listing some of the things that can happen on one side or the other, just trying to draw your attention to one number, which for us is important, is the fact that We've capped the returns of eights until the point at which the price per share reaches 27 euros, giving you a sense of the fact that there's pretty strong belief on the side of the company. that this share is severely devalued, as Pierre mentioned, in that we've organized this transaction so as not to dilute the existing investors too much, give to hate some of the returns that, as equity investors, usually they are looking for, and at the same time, again, not have a dilution impact on the cap table that would be too much. hence this slightly unusual structure, an unusual structure which is pretty aggressive from the company's perspective in the sense that, again, that strike price of 86% we think is unusual and very much in the favor of the company, and they share a deal that was validated by Ophir when they came into, when they invested into the company, sort of giving a bit of a, validation from an outside perspective and a new investor coming into the company. On the whole, 11.6% average price, when you average all of the different pathways, the equity side as well as the convertible bond side of this transaction, very limited direct dilutive impact, limited indirect dilutive impact, even if the convertible bond were to be converted into the equity of the company. A record conversion premium of 87%, pretty unique in the market. And something which we look at, and I think our investors would agree, we look at quasi-equity, no covenant, it's junior, it's unsecured, and it leaves us with free hands to manage the business as we see fit. And again, looking forward, using that cash in the short term to buy out the avant-quest minority interests and be able to capitalize on the fairly strong cash flows and the fairly strong EBITDA that we see in that division at the moment. On that slide, what I'm listing is the various slices of the transaction of the acquisition of the Canadian stakeholders. 153 is the valuation for 100% of avant-quest. Since we own 35%, only 98 million remain to be paid without the different numbers, 47 million in cash, 29 million in Clara Nova shares to be issued at the end of the month, and 23 million euros in IOUs and debt of various maturity. And again, the conclusion, why do we do that? We simplify the group structure. We have cornerstone investors investing in the company. We can integrate 100% of the avant-garde net income without that friction of 65% of the interest not being added to the net income attributable to owners of the company, which going forward is very much going to be an important metric for us to follow going forward. Since AvantQuest has been a transaction that's been in the making for a few years and was actually publicized in 2019 and for various reasons wasn't able to close at that time, just wanted to give you a sense of how this transaction compared to that 2019 transaction Roughly speaking, the enterprise value is roughly the same. It's 141 million now, it was 139 million euros then, so basically the same price we are paying. Just wanted to draw your attention to the fact that this is a very different asset that we're buying because If the price remains the same, the company is much more profitable now, so we've gone from an EV to EBITDA ratio of 19.5, almost 20x, to a ratio that's more like 13%, with, we think, a fairly high potential for increase in value. When we compare ourselves to the median EV to EBITDA of AvantQuest competitors, we see that it's more than 40%, so we think there's quite a bit of upside to our investment, to this acquisition of the minority stakeholders There's a change in the capital structure. Obviously, we've mentioned it several times. We have more investors as cornerstone investors in the company. We go from 84% of free flow to 72%, 73%. Obviously, some of these may actually be traded in the market afterwards, but it's still pretty much a pretty strong increase in capital. investors, officers, etc., which constitute that cornerstone group investor that I mentioned before. And then just to finish, a couple of conclusions why we think this is a major milestone in the Clara Nova's history. We're validating the strategy and its prospects through professional investors. We're starting to build the foundation for a group of cornerstone investors supporting the company's strategy and its growth. They provided us with the resources to buy out the avant-garde minority interest, something which we had wanted to do for quite a few years actually, and all of this leads to 100% of the net income and all of the future cash flows of that fairly profitable division being available to avant-garde shareholders.