EVS Broadcast Equipment S.A.

Please be advised that this conference is being recorded. I would now like to hand the conference over to our speaker today, Serge Van Geert, CEO. Please go ahead.

Thank you and welcome to all of you here to review with us the results of our first half year of 2024. Together with me, we have Veerle de Wet, our CFO, and Benoit Quirinen, who is our SVP Strategy and Mergers and Acquisitions. And we look forward to share today with you our results of those first six months. But before I start with the agenda, I'll leave the floor to Veerle to talk about the disclaimer.

Thank you, Sarah. This presentation contains, besides actuals, also some forward-looking statements with respect to the business, to financial conditions, to results and operations. of EVS and its affiliates. Those statements are actually based on our current expectations and beliefs of the management and are subject to a number of risks. We will dive into those risks later on during the presentation, but we could have potential material changes should any of those risks actually occur, and they might impact forward-looking statements. EDS undertakes no comp obligations to publicly release any provisions of those forward-looking statements to reflect events or circumstances after the date hereof and to reflect the occurrence of unanticipated events.

Thank you Veerle. So let's go to our agenda of the day. We'll be talking of course on the business update. Topic 2 will be an update on the recent transactions that we have announced regarding Mock Technologies and TinkerList. We have Benoit that will explain or give us an update on the market situation. Virla will talk us through the financial updates and the outlook that we have in front of us. And I will end with the conclusions before we give you the opportunity effectively to ask us questions and that we try to give you the right answers. So let's start with that business update. And I'm jumping to slide number five. So four topics I'd like to review with you. The first is the market and customers. We definitely see a strong order book and pipeline, so we're quite happy to see that our strategy, our PlayForward strategy is delivering the expected results. In H1, we saw especially EMEA and NALA regions and the LAP market pillar driving our revenue growth, so in NALA with our objectives and our strategy. And the last but not least here on this first stop is we're quite happy with the successful delivery of those major summer big events that we had over the last weeks and months. So we are really quite proud of what we've been able to achieve with our customers around the world. And I trust that many of you have seen some spectacular images over the last weeks and months on your television, on your iPod, or any other type of device that you use to watch live content. On the technology side, we continue to further work also on AI capabilities. Benoit will further during the presentation have one slide to focus on that, but we're quite happy and proud of what we're doing there with AI that EVS is introducing to further improve the life emotion that we create. On the balanced computing part, also the combination between on-prem and cloud type of applications, we definitely see that our thought leadership is further increasing, that the customers appreciate what we do there. Also, when it comes to security, to deployment in private cloud environments, for instance, so definitely we're making progress in that. And last but not least, we feel that we're offering the right mix between hardware and software. We like to repeat ourselves here that when we look to our engineering team, more than 80% of our engineers are working on software and about 20% on hardware. So we really think we have the right mix in development and that the solutions that we offer are really answering to our customer needs. When we look to corporate topics, a few topics to discuss here, you have seen early July that we have announced the strengthening of our commercial organization to capture the future growth. Remember we have announced that we were creating a team to focus on large customers, strategic customers, so that is definitely an addition to our capability to further grow in the future. We have a focus on North America, so we also further strengthen the team over there because we are absolutely convinced that a big part of our future growth will come from North America. And last but not least, we recently announced those two transactions, and we'll take a few minutes later on to further go into details in mock technologies and TinkerList. Last topic here is on the shareholder side. We definitely are happy to say that we further increase our revenue and our EBIT guidance for the rest of the year, and Veerle will further talk about that later in his presentation. We are happy to see that we continuously further grow our EPS, our earnings per share. And we also are announcing here that we are planning an investor day somewhere in the fourth quarter of this year to give a more in-depth overview to our shareholders or potential investors about what we're doing. Going to the next slide, our financial highlights. So in a strong order book, 141 million, which is plus 7% compared to last period last year. On the revenue side, showing a number close to 100 million at 91.1 million, so a new high in the history of EVS, which is 12% more than last year. And when we exclude big event rental, we see an increase of 7%. On the bottom line, EBIT, we also see a strong result with 23.8 million compared to 25 last year. Veerle will further explain later how we come to that number. but with a net profit which is further improving to 21.8 million compared to 21.2 million last year, and with a number of team members further increasing to 642 at the end of July, which is 35 more than at the end of July in 2023. Going forward in the agenda and having a few words about the transactions that we have announced over the last weeks, in fact, early August, We have announced that we are acquiring MUG Technologies in Portugal. The company was created in 2002. At this stage, about 47 team members with a revenue in 2023 of slightly below €4 million. They have a quite good experience in our industry. They have over 8,000 systems deployed worldwide with customers that we know well. They have expertise in video and media technology with a leading role in MXF video file format. That expertise, of course, is crucial for us because we believe that it is very well complementary to what we do. They are focusing on software and cloud-based products, which are focused on recording, transcoding, streaming, and OTT with a wide-label platform that they have optimized for digital media beyond pure broadcast. So we really are convinced that this is a very nice complementary activity and will help us to further strengthen our product offering towards existing and new customers. When we look at the business model, it's a combination between on-prem CapEx and SaaS. So that's also for us a very interesting opportunity to further learn about the size business model. So again, that's a very nice complementary addition to our current situation. The transaction represents a full acquisition amount of below 5 million euros. That includes also an out that might be earned over the next years. And we expect to have the closing happening somewhere in Q4 of this year. This depends on some third-party confirmations that we need to receive over the next weeks and next months. The strategic intent that we have with the acquisition of MoG is definitely a further strengthening of Mediaception and MediaHub solutions with new software solution components, especially for new software solution components that will help us further grow our digital and cloud components. We use their technical expertise also to accelerate our enhancements that we'll be adding to VMapp. Remember, we've introduced the VMapp to the market last year and implementing that since this year. And we also think that adding emoji to our capabilities will help us to further increase our channel partner approach. And last but not least, having an office now in Portugal, in Porto, will also give us access to more Portuguese R&D talent. We see quite some good universities working or delivering young engineers with quite some focus on technologies that are very useful for EVS in our industry. Going to the next topic is TinkerList. We did not do an acquisition, but we are participating to a capital increase in order to help them to further fuel their growth. Tinker List is a Belgian company based in Leuven, created by Erik Houters in 2014 together with Vero van den Abele. Today it's a company with about 24 world colleagues with a recurring revenue of slightly above 1 million euro and in growth mode. They mainly have European presence with a reference list that is quite impressive and we believe that we definitely will help them to further grow Europe, but also in other regions of the world, and especially also North America. They have a deep understanding of media production workflows, which is also for us very useful as we want to further grow in that environment. They have products aimed to ensure consistency between preparation and live production to leverage efficient and consistent media production automation workflows. And last but not least, their process model is fully SaaS-oriented. reasons enough indeed to help them provide additional means to support their growth plans. The transaction is where we take a monetary stake and the total investment is less than 3 million. This includes both the capital increase and certain convertible loans that we're providing them. Again, financial means to fuel their growth. The strategic intent is indeed supporting their growth through EVS World for Health presence. That is definitely something that we can do. It's opening doors for ThinkerList to go and present their solutions and also embed ThinkerList in our solutions as options inside the EVS Flexible Control Room and Media Deception Solutions. So we really see there the complementarity between our both product offerings. And we will provide thinkers with full autonomy to apply SaaS compliant go-to-market strategy for media production. So definitely they keep on working as an independent company. We have two seats on their board and we will give them some advice, but they continue working as an independent company. When we go to our next slide, slide 10, then we look at the corporate strategy that you've been implementing now since quite some years, where we go from products into solutions into an ecosystem. We see the different dimensions, what that means from capex only to more OPEX on demand. From mainly no BVANs before to growing into broadcast centers to go from EVS hardware to more software and even more software as a service. where before we were mainly in sports, moving into entertainment and news, and now also adding digital. And when we move to the next slide, we see where indeed Emoji and TinkerList, well, especially TinkerList in this case, will be helping us to grow. So we really think that both companies, TinkerList and Emoji, will be helping us in those different dimensions. So we're quite happy with those transactions. And that shows indeed that we are looking closely in further doing acquisitions and investments to grow our market presence, our product portfolio, and we intend to keep doing that in the next months and years, of course. So all in all, quite happy with those transactions. Happy also that we were able to announce that while we were in Paris in the EVS house during those Olympics. So that shows indeed to our customers that we are actively working on further helping them in providing them with the right technologies and solutions for doing their live productions also in the future. That brings me to the next topic here in the presentation, which is a market update, and we go to slide number 13, and I'll leave the floor to Benoit.

So good morning, good afternoon to everyone. So indeed, All these transactions just strengthen our position to achieve our big and airy audacious goal, which is to become the number one solution provider in the live video industry. And in order to do that, we have the three solutions that you probably start to know with live section, which is focused on replay and highlight to elevate the fan experience with media section, which is about asset management for production for fast and easy content turnaround and media infrastructure for routing and infrastructure solutions to control and process all media workflows. And in these three categories of solutions, we did progress. In the three categories were used during the major summer events, which strengthened our position. In LiveSeption, the LiveSeption signature remains the reference in terms of workflow for premium productions. And ExtraMotion, the generative AI system, spreading for major leagues in U.S. And we will see in the next slide that we offer even more generative AI services on top of the extra motion. In the media section category of solutions, then we, in fact, deliver now the VR map solution that we announced at IBC last year. We started delivering it. and in fact this vr map is very important because it allows us to go from pure solution to an ecosystem vr map is making the link between media section and live section we continue to have a very good market traction in the lab live audience business market pillar in terms of order and globally we have MediaSection and MediaHub, which has been used and extensively used for the major summer event and contributed to the success. For the media infrastructure, we have the Strada Evolutive Routing, which is in operation in more and more customer premises. We have a success and high market traction for NeuronView, the multi-viewer solution that we launched at NAB last year. which is strengthening the neuron ecosystem, meaning that when you buy a neuron chassis, you have more and more applications that can be deployed on it. Cerebrum management and control solution is also gaining market traction, and especially in the U.S. We also get market traction from flexible control room solution, the solution that has been co-developed with RTBF, And we see that the solution is considered as applicable to other customers. We see requests on the market to have a similar kind of solution components. And on the media infra, we have to notice here that the media infra, meaning Cerebrum and Neuron, have both been used during some major summer events. Related to these. big events and major summer events, so it was a real success for the events started in June and for the events that just finished a few days ago. And we have also received nice quotes from France Television, quotes that are here extracted and translated from a post in Leco, a Belgian newspaper, on 9th of August. So the quote from France Television Engineer is, at the Olympics, EVS is everywhere but invisible. And another quote, which was from the production team, we work with EVS for more than 15 years. To our knowledge, it's the only company able to deliver such services. And of course, we will continue to support France TV, and other, let's say, broadcaster or rights holders for the Paralympics as well in the future, which is very important for our DNA to continue in this venture. So in terms of, if we move to slide 16, in terms of generative AI, so we started a few years ago to develop the extra motion. We started actually something like 2017 and continue to deliver. We launched the service a few years ago for extra motion and we see it applied more and more. And this extra motion is a generative AI system which creates smoother slow motion. It allows to actually have a quality of image which is close to super slow motion cameras, but not using these expensive super slow motion cameras, but to use it from any broadcast camera. And we now add more effects. again based on generative AI like cinematic effects to let's say avoid that our customers have to deploy very specific cameras with specific lenses. Now from any broadcast camera we can create this cinematic effect. We also have some algorithms that are working to maximize the image sharpness to really apply a deblurring effect. We also have some more algorithms to actually frame the image for social network. So typically, the social network images on Instagram, TikTok, and all these social media, they are more applied in a 9 cross 16, meaning vertical format. and then with our system it allows to automatically track the action so that we can publish directly without human intervention from a TV signal to a social media live signal without human intervention. So that also brings some value in terms of delay to live for all these systems and that prevents to have dedicated systems to publish on social network. And we are also working on an AutoZoom facility, which is from a 4K image enabling to really reframe the image to focus on the action. And so again, without human intervention, the system based on generative AI can detect what is the most important part of the image. And we are preparing even more effects for the future. With all these generative AI systems, we allow our customers, the live service providers, to increase the quality of the production without necessarily using dedicated specific camera systems. That means that we allow them to provide better quality with the same or lower costs. effects have been presented at nab already and going into the slide 17 the feedback was really impressive our customer they understand and they follow the evs strategy we have a lot of visits on our booth we discuss with customers very concrete projects large attendance of course from the north america and latin america clients And during our channel partner events, we receive each time more visitor, more interest for local channel partners. And it has to be noticed as well that beyond the broadcast in US, we also get more visits and more traction for what we call live audience business others, meaning the non-broadcast players like corporate, House of work ship like Governments that are really interested to better understand our system the value that it brings because they are also engaged into Optimizing the way that they are doing productions so in terms if we move on the next slide 18 in terms of contracts, so we had some public announcement of important contracts which are confirming that EVS is definitely perceived by our customers as a trusted and innovating partner in the broadcast transformation journey. Here to illustrate this, we have two live service provider, Alcas in Qatar and LMG in US, which are deploying new generation of solution, one for live section and one for media infrastructure. I will now hand over to Verle who will explain the different risks that we face.

Yes, so as highlighted earlier on in the presentation, we do see some economical and geopolitical risks that we need to call out. Two of them we have been systematically calling out since the past quarter. The first one is obviously the microeconomic situation. where we continuously see inflation still being called out and potentially having an impact on interest rates, etc., but also on price increases and prices for components. Obviously, we continue to monitor that situation closely, and I think we have been doing that successfully over the past couple of quarters, but it is definitely a situation that requires continuous attention. A second risk that we systematically have been pulling out is obviously the management of our inventory and current components. We have to ensure that we can have enough inventory and the right inventory to continuously deliver our products and solutions within reliable delivery terms. Even though that risk is mitigating right now, so I think we have a better control and the market has been stabilizing over the past couple of months. Again, it is a risk that we continue to monitor and make sure that we're on top of it. We call out two new risks. First of all, it is the potential impact of upcoming elections in North America and the potential impact that the results of those elections may have on global geopolitical situation. And obviously there's one final risk that we highlight as well, which is very specific to the LSP market in the UK. We have seen two LSP customers actually going bust in the past two months, and there is quite some tension in that LSP market specifically for the UK. And obviously we're following up on that situation closely and staying close to our customers in this case. If we go to our ESG roadmap and our sustainable value creation, it's no new news. I think early in January, we received the silver medal from Ecovirus ranking EVS in the top 15 percentile of companies proactively managing ESG. So we're very proud of that medal. We have still reporting here the ESG risk rating also from Sustainalytics, which was rating us as a low risk last year at 13.5. The lower the number, the better the assessment. So I think it demonstrates that we're on a good track. We have some focus items for 2024. So we are redoing our carbon emission exercise. So we have been working on data quality to make sure that that carbon emission exercise is as qualitative as possible. And we will definitely redo the exercise based on data of 2023 throughout the year in 24. We're obviously working on all the CSRD requirements, which will have to be reported on in 2025 based on numbers 2024. And we're for sure defining and implementing the action plans to reach our 2030 ambitions. So that is definitely work in progress. And I now hand over back to Serge to discuss some evolutions of the leadership team.

Thank you, Veerle. Thank you, Benoit. So yes, let me take a few moments here to talk about the evolutions that we announced early July. evolutions regarding our leadership team. So the objective is to further focus on commercial activities and extend our commercial activities. So what you need to remember here is that Quentin Grutman, who was previously our Chief Customer Officer, has become our Chief Strategic Accounts Officer. We are creating a new team in that respect that Quentin is leading in order to focus on some large strategic accounts worldwide. He will help the local sales team to further focus on those big customers and further make sure that we focus on large opportunities and, of course, also windows large opportunities. So that's really an important focus that we have. It's to further extend the commercial capabilities by focusing on those large strategic accounts. So that's Quentin taking up that new role. While Nico, who was previously our chief marketing officer, is now becoming our chief customer officer and will make sure that he further scales the sales organization as a whole worldwide. So definitely we're happy that they both take up those new roles and they will help us drive our growth in the future. As Nicolas is taking that role of chief customer officer, we also have Oscar Teran now taking up his previous role as responsible for market and solutions. So in that team, one of the major responsibilities is product management. And I'm happy that we have now Oscar joining the leadership team to take up that role as our EVP market and solutions. Oscar brings quite some experience. In our industry, he has been now at EVS for two to three years. And before that, he has been also the CTO of Eurovision. So quite an experienced person from a Spanish background, bringing in quite some experience in our broadcast industry to the table. So we're quite happy in this evolution. We really believe that this is helping to further increase our commercial focus and helping us further to bring talent and experience around the table when you look at our EVS leadership team. So quite happy with the progress, and I'm sure it will help us to further accelerate our growth into the future. Going further here in the presentation, slide 30, talking about 2024. We are celebrating, as you know, 30 years of EVS, and I'm quite happy with, of course, the results that we're delivering this year that we're celebrating 30 years. Next slide shows you what you've been doing over the last week in Paris in the EVS house. We rented a house in Paris to invite customers, to invite EVS operators, to invite the press, to invite team members, but also board of directors and shareholders. So this was a great opportunity to have quite some persons joining us for celebrating 30 years. and also enjoying, of course, some of those Olympic moments in Paris. And last but not least, we took the opportunity to announce, indeed, our partnerships with MUG Technologies and with TinkerList. So we really are quite happy with all the positive vibes that we were able to experience during those Olympics. in our EVS house in Paris. We all believe this was definitely a big success. So this gives us quite some positive energy for the future. Going forward here, financial update, and that's one that Vera will talk us through.

Yes, thank you, Sash. So first of all, 525 is the first top 24 top line performance. We still continue to see a strong top line performance, underpinning actually our continuous growth path. First of all, our order intake, our order intake ends at 87 million, which is an increase of 7.1%. It does include around 7.8% of big event rentals. So if we exclude big event rental order intake, we currently see a decline of around 3.5%. It's not concerning from our point of view. Given the fact that we see a very strong pipeline, our funnel is growing by 44% compared to last year. And this is definitely supporting growth of our order intake at a full year basis. So definitely order intake, we believe we're on good track and we believe we're on good track to reach our full year objectives. From a revenue point of view, Sergio already mentioned a performance of 98.1 million euros. It's a growth of 12.2, again, including already around 4.5 million of big event rentals. So excluding these big event rentals, we still see our base business growing at 7.2%, which is for us a nice way to see and obviously also a reason for us to reconfirm and upgrade our guidance. In terms of order book, we're very happy to see as well that our order book is continuously growing. It's growing with 6.6% and is a total of 141.7 million at the end of June. And the good thing is that we at the same time also see our long-term order book still growing. So beyond 2024, the order book is now at 67.6 million. already I would say growing actually with about 15 million euro compared to the beginning of 2024. Finally the secured revenue in this top line performance is at 172.2 million at the end of June and obviously sandwiched positively for the full year. If we look at the revenue in a little bit more detail you'll find on slide 26 actually the spread by market pillar and by region By market pillar, you will see that obviously the impact of the big event rentals is about 5% of our total revenue number in first half. But you see the growing impact actually of our lab market pillar as Benoit mentioned before. And so this is part of our play forward strategy and we see that this activity is increasing in the market. Global and geographical split, again, the impact of big event rentals is at 5%, but we see a very strong growth both in EMEA and NALA, and definitely those NALA being very much a focus area for us. This is very nice to see. We do see APAC actually declining a little bit in the overall total compared to last year. I think APAC had a very important first half revenue last year when it comes to one specific or two specific deals that we signed at that moment in time in Australia. The good thing is that post Q1, first half results, we signed a very important deal again in APAC, sending us again positively as well that we will also realize growth in that region as from Q3. If we look at the profitability, we see a very nice gross margin. Gross margin is at 71.9%. It's actually 1.2 points better than last year. Do mind that that number includes a reclassification, so a new way of taking into account internal assets. Internal assets previously were reported as a cost of bum, as they were considered in inventory. As of 2024, they will be considered as fixed assets, which is the normal way of accounting for them, and it's actually impacting depreciation. So this change in accounting policy is actually increasing our gross profit margin, but it's also at the same time transferring costs from our cost of bond to our OPEX in the depreciation line. So it's actually a shift in reporting. If we look at the restated number, so we restated first half 23. If we restate first half 23, we realize the gross margin of 70.7%. So that is a 1.2 points improvement. Prior to the restatement, the margin in first half 23 was a 17.3%. So it's about 0.5, 0.6% change. Next to that accounting change and that re-flatification of internal assets, we definitely see an improvement of our BOM costs, actually reflecting our increased components of software in every part of our solution. We see every solution actually performing better, except for live section, which is staying stable in terms of BOM margin. But we definitely see all the other solutions progressing. which is a testimony to our cost management and our sales price management. If we look at our OPEX, so our operating expenses that include auto revenue expenses and ESOP, they are at 46.7 million, which is an increase of 28.7%. It is an important increase, but it is an expected increase. First of all, it is driven by additional resources that we have been adding. As you may remember, we started hiring again in second half of 2023, and we continued hiring in first half 2024, as mentioned already by Serge to strengthen some teams, primarily also in North America. And we added around 42 FD on average, comparing first half 24 to first half 23. So that obviously has an impact. We also have the impact of the depreciation of assets, intangible assets that we have created in the past. So this is around 1.1 million being added by default linked to the launch of the VIA map. And then we have some smaller additional expenses that are linked to the support of major big events over summer period and obviously ensure the success of those events. And obviously, the change in accounting of internal assets is impacting this OPEX as well. It's important to notice that OPEX is fully progressing in line with our expectations, so we don't see any deviating factors there. Taking then a look at the first half EBIT margin, the margin definitely remains strong at 24.3%. If we do compare it to last year, it is a decline. So we are now at 23.9 million. We were at 25 million last year, so it's a 4.4% decline. Yes, we do have still a strong revenue performance, but it is coming with an increased cost base as a result of the hiring done. and as a result as well of the depreciation of internal assets or internal intangible assets developed in the past. Again, this EBIT is in line with our expectations and it is still a very profitable performance. If we look at the financial handle, then this is combining a view on earnings per share and the balance sheet. So earnings per share are growing. They are growing as a consequence of obviously the strong revenue performance, the solid margin performance, gross margin performance, and the balanced OPEX performance, but also positively influenced by strong financial results. So we have a 1.1 million positive financial results, which is a result of our hedging policies and of our cash management. So we ensure that we have optimal interests on our cash, which are definitely delivering a good contribution to the earnings per share performance. So earnings per share of 1.54 euro per share, growing 1.3% compared to last year. As mentioned, we have a very strong net cash position. So our net cash position is at 51.5 million, growing 15.6 million. It is a combination of a very strong cash flow from operations in first half, obviously compensated by the final dividend being paid in May 2024 of €0.6 per share. And finally, trade receivables. You see that our trade receivables, yes, they are increasing. We're at €74.1 million. So compared to first half 23, it's actually an increase of 13.3 million. But you see that we have plotted the receivables against the sales numbers. And you see that the receivables are actually fully in line with those sales numbers. Which is important for us to note is that we continuously improve the constitution of our total receivables. End of 2023, we had quite some receivables that were overdue. Actually, 38% of our receivables were overdue over 90 days. We're happy to share that this has reduced now to only 10%. So it's a huge improvement working together with sales on our aged receivables. And we're actually also happy to see that 66% of our receivables at the end of June are not due yet. So we do see that aging of our trading in the receivable account is definitely very, very healthy. A word on slide 29 on intangible assets. So in 2022, EVS launched two internal developments, two internal projects with expected returns in a couple of years later. The first one you all know, it is linked to ViaMap. ViaMap, we actually completed the development phase in Q4 23, where we had a viable product. And at which point in time, we also started the depreciation in fourth quarter of 23. We do still have continuous development in this area, but they are run in a business as usual mode and are actually reported into OPEX. We did the official market launch in July of 2024, and we will have the first customers operationally ready over summer in 2024. So we're now delivering our first operational and customer project. What is important to say as well is that we do see a significant pipeline on ZiaMap, a good market traction, and that we have some key strategic wins identified to go and position the AMAP in the market. The second project that we launched in 2022 is still in development with an expected launch date in 2026. It's really a minor project contributing for 0.1 million in first half in terms of intangible assets. But we did launch in first half a new project that is linked to the evolution of technology foundations, balancing hardware with software capabilities. We foresee an overall spend there of $5.9 million over three years, and the launch date of this project is targeted to be in 2027. We have spent around $0.4 million of capex in first half on this project, and we will continue investment there in the next couple of months. If we then move to the outlook on slide 31, you will see that based on a secured revenue end of June at 172.2 million and also based on a solid pipeline and obviously also taking into account the acquisition of mock technology, we have decided to upgrade our revenue guidance. Our full-year revenue guidance is now upgrading from an initial range of 180 to 195 million to now a new range, 190 to 200 million. So from a spread of 15 million, we go to a spread of 10 million. The long-term order book, as mentioned already, is growing, which is also sending us positively for the basis that we're building for 2025. And obviously, a lot of the orders that we will sign in second half 2024 will contribute also to the order book in 2025. As a consequence of the upgrade in the revenue guidance and the strong profit performance in the first half, we also upgrade our EBIT guidance. We now call an EBIT guidance from 40 to 46 million compared to an initial guidance of 30 to 45 million. So the spread is also narrowing marginally to 6 million spread versus 7 million previously. And this concludes the financial update.

Thank you, Veerle. So that brings us to the conclusions of our presentation here today. So going to the six key learnings that we see at this stage on slide 33. Key learnings are the following. So we see that the industry is keeping on with consolidating, and you see that we play an active role in that. So we're quite happy with the progress we're doing on that front, and we'll continue to do so, definitely. It's part of our strategy. We see that the big tech providers are still in the place, of course, and we don't expect them to go away. We expect them to further invest and also help us to grow our own business by the investments that they do. We see that media infrastructure or infrastructure in general is definitely a cornerstone of big changes which are happening as we speak. So that is also helping us further grow our company over the next years. We see that business models are shifting. They shift slowly from CAPEX to OPEX, but definitely we are following that trend and giving our customers the opportunities to choose more and more between one or the other. Next topic is about cloud. Definitely cloud, we see it as just an enabler as another one. So definitely we keep on further developing our technologies to make sure that they're compatible with cloud deployments, be it private or public cloud deployments. But that's definitely part of the whole picture. And last but not least, we see our market shares in the different markets that we serve continuously increasing. So we're quite happy to see that progress. Definitely our play-forward strategy is paying off. It helps us to grow and to take market share from some of our colleagues in the market. When we look at the focus topics for the next months on slide 34, The key activities for the second half of the year are the following. We continue delivering on the large multi-year modernization projects that we have won over the last months and the last years. We have a continued focus on North America and Latin America and the new lab customers and channel partners. That's absolutely part of our strategy and focus for those next months. We are leveraging our new solutions to continue the increase of order book. You've seen Vele talking about our pipeline increasing very nicely. So we really trust that we'll be able to transform part of that pipe into additional order book. We'll be working on the closing integration of mock technologies over the next weeks and months. We'll continue to expand our EVS solutions offering organically or through acquisitions and strategic partnerships. And last but not least, I will further focus on cost control based on the growth system, as we absolutely want to make sure that we are able for the future to further fuel our growth. So that brings me to my last slide with conclusions, slide number 35. Our objective is definitely to reach sustainable and profitable growth for 2024. We see that our play-forward strategy is generating the expected sustainable and profitable growth ambitions. With the two M&A transactions announced on August 2nd, we will be able to further support our future growth ambitions. We are planning limited further investments in our cost structure and will focus for the rest of 2024 also on cost control. You've heard Veerle talking about a revenue guidance increase that is indeed now somewhere between 190 and 200 million. And also on our EBIT guidance, we have increased that to reach a target somewhere between 40 and 46 million. And the targeted dividend in line with our policy will be 1.1 euro for this year, 2024. So overall, we're quite happy with the progress that we are making. We see quite some positive indicators that our strategy is really delivering on the expected results. And we think that, indeed, the 24 will be a new high in the history of our company. So we look forward, indeed, to deliver on those guidances. And we look forward to further turn that pipeline into an order and take over the next weeks and months. So that concludes here this session or the presentation, and we'll be happy to take some questions at this stage.

Thank you so much, dear participants. As a reminder, if you wish to ask a question over the phone, please press star 11 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 11 again. Please stand by, we'll compile the Q&A roster. This will take a few moments.

And now we're going to take our first question.

And the question comes from the line of David Wagner from ING. Your line is open. Please ask your question.

Yes, thank you. Good morning, everyone. I've got the first question on the pipeline. I'm trying to make sense of this 44% growth. Could you comment it and help us understand its meaning? So what I'm thinking about is maybe quantify it or compare it to this to give us an order of magnitude and explain maybe the sort of probability you've demonstrated in the path of achieving the pipeline and how fast you can transform the pipeline into orders. Second question on the gross margin. So what level of gross margin should we expect basically in H2? I think based on your guidance, there is a good chance we'll have higher sales in H2, more big events. So should we expect the gross margin to be up? And is this why you dropped? It seems to me you've dropped your comments, your previous guidance that the gross margin could be slightly down this year. Last question for now on the OPEX. Again, when I look at the guidance, I have the impression you implicitly assume around 100 million euros of OPEX this year, which would imply, let's say, more than 20% growth in OPEX in H2. While if I remember correctly, last year in H2, you had quite a few exceptional expenses. You started to depreciate via MAP. You fronted some investments. So how much of this OPEX growth in H2, let's say, is prudent? So it's related to big events. And then related to that, going forward, can you explain your growth system? So basically, how should we think about OPEX growth going forward? Thank you.

OK, thank you, David, for those questions. I'll take the first question, and then I'll let Veer also comment on the second and third question. So the first question is about pipeline growth. So definitely, we are focusing on measuring our pipeline in more detail compared to before. And with the introduction of, for instance, also via MAP, we see quite some opportunities arising and customers knocking on our door to replace aging systems that they have with some of our colleagues in the market. So definitely the VMAP introduction is creating some healthy growth in our pipeline. The pipeline in such environments or for such a type of project can take quite some time before it transforms into orders because those are typically large projects, multi-year projects, that take one to two years before they land into an order. But it's a mix of different products with different lead times, I would say. But the biggest growth definitely comes from media exception and with bigger lead times before we transform that from a pipeline into an order. I hear you ask the question what's our capability to turn pipeline into orders. That is throughout the years we've seen that was more than 50%, definitely we think a nice number. I don't think that 50% is lost to competition, for instance, but that sometimes also means that some projects are just cancelled and are not done for one or another reason. But we are quite optimistic to see that pipeline growing and that's for sure an important indicator that we'll be able to further increase our order intake over the next weeks, months and years. And I'll leave Veerle answering the other questions about growth margin and about OPEX.

Yes, in terms of growth margin, definitely we do see that it might be a little bit lower in the second half, possibly due to the mix that we see in the second half as well. But it will largely stay in line, currently targeting for like a 70%. um margin at a full year basis so um so definitely more or less staying in line from an opex point of view i think we will see the opex growth decelerate in second half so we will not see growth numbers like we did in first half basically because we started hiring already in second half of 2023 and also because we started already um the depreciation like you mentioned that it um in fourth quarter of 2023 so okay we will add one quarter in terms of depreciation um but we see we'll see a deceleration we estimate that on a full year basis the opex will grow like 15 to 16 percent um so it depends if you look at when you when you reference a hundred million number um it depends if you look at opex or discretionary as well so um OPEX number will rather be at the 91 million level mark.

1516, that is growth, that is in H2 or was it full year? No, full year. Full year. Okay, thanks very much. And on the growth system that Serge mentioned, so to focus on the cost control in the coming years, can you come back and elaborate on how we should be thinking about OPEX growth in the coming years?

And what is this growth system?

Yeah, I'm not sure what you refer to with growth system in OPEX, but I think 2025 will be a year where we stabilize again. So if you remember, we had also a year of stabilization in 2023. It will be the same for 2025. So again, we need to consolidate all the hirings that were done. We also believe that we will have stabilized a couple of regions and are up to the right staffing level with the hirings that we did over the past couple of quarters. So we believe that 2025 will rather be a period where we stabilize OPEX again.

Okay. Thanks. Thanks very much. I have more questions, but I will go back into the queue.

Thanks. Thank you. Now we're going to take our next question. Just give us a moment. And the question comes from the line of Alexander Kramers from Kepler Chevron. Your line is open. Please ask a question.

Hi, good morning. So yeah, to follow up just on David's question. So on the new outlook that was provided and considering the answer that you just provided, so you have quite good visibility on the cost structure, on the turnover. So I was just wondering if the year progresses without any additional volatility, do you expect to be on the upper end or the bottom end of the outlook that you provided? Second question would be on the growth on LAP in the USA. Benoit and Viro already mentioned some some drivers there, but I would just, if you could just pinpoint the main drivers and how do you plan to strengthen the team there. And then the third question would be on if you could provide some additional clarity on the thermal and the LSP market because It wasn't completely clear what is happening there. Does that have anything to do with the replacement cycle? Just trying to get a bit of a better explanation whether this is related to the replacement cycle or whether this is something structural. And then the last question is just to better understand what type of elements were included in inventory and are classified as other tangible assets. Thank you for that.

Okay, thank you Alexander for those questions. So let me take the first question out, the new outlook. Will we be on the upper and the lower guidance? So I guess that we all hope that we'll be on the higher one, so that's the hope of everybody. And if you look to the past and how we have announced the guidance, the history shows that we're always on the upper one, on the upper end. But that's definitely not a guarantee that this will happen again. I can only refer to that and that we all hope it will be on the higher side but the reason why we give a guidance to numbers is that we know it will be somewhere in between but not exactly where of course. Then talking about the thermal and the LSP market in the UK. What we see is there are some smaller players that can't compete with bigger LSPs in the market and are indeed forced to stop activities. That is what we've seen over the last months in the UK. We've seen some big customers also investing in their own capacity, which means that there was less need for the services of LSPs in the UK in that respect. But we've seen some customers, broadcasters, investing more in their own capacity. So that is a regional effect that is playing. Does that have anything to do with the replacement cycle? My first answer would be we don't see it like that. We don't see the link there between the replacement cycle or those people going post-op. And then the third question, I need to refer to Virle. Or the intangible asset.

Yes, for the intangible assets. Thank you. So it's primarily employee team member costs. So I think that your question was the composition. So it's primarily team member costs put into the balance sheet.

And then there was a fourth question about NALA growth of the LAB, so life audience business. So we see a growth of live audience business. As I did mention, we go in lab others, meaning that other type of organization than broadcasters start to be interested by our solution, especially since we now offer media infrastructure solution, which is applicable for a much broader kind of customers. And we see market traction, especially through channel partners. We strengthen our team. with our new SVP operations that you have seen published on our blog. And we are also strengthening our team in terms of channel partner management there so that we can provide the right support for the channel partners to grow in this area.

Thank you. Now we're going to take our next question.

And the next question comes from the line of Michael Rook from DeGroove Betacam. Your line is open. Please ask a question.

Yes, good morning, everybody. My first question is on the sales guidance, and I'm going to try to challenge you. If sales in the second half of the year would be similar to the first half of the year, then you would meet your sales guidance range. However, in the second half of the year, the event rentals will do about $10 million versus $4.5 million in the first half. Then APEC will benefit from a very large project. And we saw last year how much that can benefit sales. So that's probably going to be higher than the first half as well. Then VMUp will be contributing to sales for the first time in the second half of the year. That will also be helpful. Then historically, Americas was roughly similar in H1 and H2. So that's not going to push it down. And then EMEA historically was a bit higher in the second half than in the first half of the year. So if I add up all these ingredients, then your outlook for the second half looks a bit conservative. So my question is, what is uncertain to you that your current sales guidance is what it is instead of being more optimistic?

Thank you, Michael.

Well, I think you've seen us over the years being conservative and prudent in our guidances. And I think that we don't change our way of working here. So, is it prudent? Well, we think it's realistic. Might it be more? We hope so. But the future will tell effectively if that is the case. Don't forget also, and I think Vierle pointed out that we still have delivery terms which are typically of 20 weeks. So most of the orders that will come in in H2 will be for delivery in 2025. So that definitely is also an important element to take into consideration.

Okay, so basically the usual timing. Do you deliver something in December or January that can make a difference? But perhaps the EMEA base in the first half was quite strong at 49 million. Is there something like a large project in there that may not happen in the second half, which distorts my view on EMEA?

Well, history is never a guarantee for the same things to happen in the future. Revenues are based on projects that happen, that might be delayed. There is a strong pipeline, as you've heard. So we are quite confident in achieving nice figures for H2, but remain cautious in calling numbers. Okay, perfect.

That's clear. Then my second question is on Viamap. That is commercially launched. First customers will see their installation. Is this product sold as a license or as a software, as a service model? Or can the customers choose between the two?

Well, today that's mainly sold in a traditional way being in a CapEx solution. So we sell a solution upfront and the customer pays for that. And linked to that, there is a service level agreement. So there is recurring revenue coming out of the sale So it's a combination of CAPEX with recurring revenues coming from the service level agreement that is being provided together with the solution.

Okay, and based on your first customer wins, is that something that we will notice in the second half sales figure? Can it be tangible enough to already add a few million or should we think as a much slower start that will grow over time?

That will definitely be translated in several millions in our revenue numbers for each tool.

Okay. And in which regions do you see the most traction? Is that Americas or EMEA?

We see in both EMEA and North America, and we even see that in Asia Pacific, specifically in a country like Australia. Okay.

That's encouraging. Suppose that the license is 100. Suppose I buy the product, I pay you 100. How many years do I have to pay a service fee and what would the service fee be on an annual basis? Is that 5 or 10 relative to the 100? How is that structured?

Yeah, that will be more between 10% to 15%, depending on the level of quality that the customer is asking for, or even slightly above 15%. And that will last as long as he's using the system. Because remember, those are systems that are being used at the heart of their operations, that they are using to create their content. And so working without a service level agreement with such a system seems very strange. last on for probably seven to eight years, typically the lifetime of such systems, or even longer. The contract may vary. That might be a yearly renewal. That might be a three-year or five-year contract, depending on the customer. But we give him the option initially to choose which duration he wants. And there are, of course, incentives for taking longer durations as from the start.

Okay, so you sell it for 100 and you generate another 100 over the lifetime, depending on whether the customer renews or not and extra features. So that's quite interesting.

Yeah, and we expect, if I may add to that, we expect that we'll be selling additional, not only that initial deployment, but it will be expanded with additional capacity or new features or capability throughout the lifetime that might generate additional revenue as well.

Yeah, just like those camera features that you add, all kinds of new software apps for slow motion and sharpness. That also works with Viamap, extra features.

That's the ecosystem of which we are referring to.

Good. And then my final question on gross margin. Fairly, you mentioned the gross margin will be slightly lower in the second half of the year. Is that slightly lower versus the first half or versus last year?

No, so that's versus first half, yeah.

Okay, okay, clear. That's it. That's it from my side. Thank you.

And I think, Michael, to add on CMF, so I think, yes, definitely we see a pipeline and definitely those projects might contribute to our order intake in second half, but do mind that the deployment cycles of those projects are a little bit longer, so potentially it does not contribute to our revenue base in 2024.

Okay, well, not being a software specialist, I imagine if a customer wants installation, well, it's a software product, so that's easily done, quickly done, but then there's probably sort of a learning curve or training mode which delays your sales recognition. Is that the case then?

In fact, these kinds of projects, it's not just installing the software, it's also making sure that the software is integrated with the third parties in an environment. So it's bringing a solution for the customer, which can lead to a deployment time, which can lead, let's say, between six months and 18 months, depending on the complexity of the project, depending on the situation to the customer.

Yeah, that's indeed, I always suspected it's much more difficult than just plugging in the USB key and uploading the software, but that's quite long, six to 18 months.

But Michael, if I may make a comparison with ERP software, that's also only software, but it takes quite some time to have the whole organization adapting their work processes to that new environment.

Okay. No, no, it's clear. It's understandable. Good. Thanks for the explanation.

Thank you. Now we're going to take our next question. And the question comes from Guy Sips from KBC Securities. Your line is open. Please ask your question.

Yes, good morning. I will limit myself to two questions. First is on Merck technology. You highlighted they have 8,000 systems employed worldwide? Can you give us a potential? If you put the EPS quality stamp on it, what what could be the potential for that? And what kind what the competition for for for them? Second question. is on the the price increase you did in february of this year how is that received and and are you planning new price increases or do you only do it once a year or is another one expected in september thank you thank you i'll ask benoit to answer mock technologies and if he will talk about the price increase

So indeed, Mock Technologies, they deploy a lot of systems in their history since 2002 for the last 20 years. In fact, some of the systems have been deployed for, let's say, tier one broadcasters and typically for tier two workflows applications. And in fact, we want to use some of the products of MOG into our solutions. We also want to apply different forms of synergies and certainly, as mentioned, leverage the talent there. So, all of this will be disclosed along the way when we do the integration on how exactly we want to, let's say, leverage all this talent, the technology and the products that we acquire.

Yes, thank you. And in terms of price increases, so yes, we did a partial price increase in February of this year. So it was a selected amount of products and solutions that were increased. We did the analysis again and we decided not to increase prices in September. So there will not be a second price increase this year. Obviously, we also always try to limit it to one increase per year, have to not have too many changes. So I think the design we did earlier this year was the right one. And yeah, how is it being taken up by the market? We don't see decreases in our discount that we have to provide or discount policy. So we don't have to provide higher discounts to go and win deals. So we do believe that it is still a balanced view.

Okay, thank you.

Thank you. Now we're going to take our next question. And the question comes from the line of David Bagman from ING. Your line is open. Please ask your question.

Yes, thank you. Thanks for taking an additional question. You described that you have several strategic must-win opportunities in H2, and I think you're making quite clear that it's about via map prospect. I think you explained that basically these are more going to end up in your order intake than in 2Cs, but can you come back on the potential opportunity? I understand it's all multi-year opportunities, kind of large ERP-like, let's say, sales. Could you a bit quantify how much it could be, basically? That's my first question. And then, secondly, to come back on the LSP market and the sales being down 8% and putting aside the UK, which seems a bit quite specific, Do you think that this is just phasing or let's say tough comps or could it be macro related? So clients getting investment capex. Is it just actually related to big events that some production of sales moves to big events and so you couldn't sell to LSP? So if you could elaborate a bit on the sales growth or decline rather in each one.

Thank you. Thank you David for those additional questions.

The map definitely is generating interest. We also see the size of the opportunities increasing and the size of orders also increasing. It starts to be common to see projects worth several millions, can be three up to seven, eight millions. more and more we see such opportunities arise, and that's also why we see that pipeline increasing like it does as we announced. So the size of the deals is increasing. The time to close the deal is also not getting shorter by that, but definitely the size of the deal is increasing and the number of opportunities of such sizes is increasing. So I trust that answers your first question. Then on the LSP market, The situation that we see in the UK is very specific to the UK and the competition level that there is in the UK. Let's not also forget that the interest rates are still high, and for some players that puts additional pressure on their business model. But in other regions of the world, for instance North America, we see a healthier LSP market. Europe is tougher for LSPs, no doubt about that. The contracts that they get are typically for several months while in the US LSPs typically sign contracts for several years. There are different market dynamics for LSPs in Europe compared to in the US. The big events that are being planned in the next years will play a role, but that's mainly in North America. We expect to see some growth there to happen over the next months and years due to the big events that are being planned in North America over the next years. But it's definitely for LSPs a regional situation that really might differ from country to country.

if I we can distinguish let's say between new customers or increasing install base and then replacement of existing server you see a change you see how would you describe the LSP market what could we expect basically in H2 or in the coming let's say two three years rather stable rather down thank you no we expect that to be to stay stable

that's how we see that the lsp market yeah that's our expectation okay thanks thank you and now we're going to take our last question for today and it comes from lan of hugo math from sycamore your line is open please ask your question

Hello, thank you for taking my question. My first one is regarding the MOG technology. If you could provide any details on the EBIT mounting profile, please.

Thank you for that question.

Vir or Benoit, we know MOG is mainly software, but do we know, can we share here with those numbers? EBIT.

No, the composition of the revenue was requested. If it's mostly hardware or software.

It's mostly software. In fact, it's mostly software and they resell third-party hardware for most of their revenues.

And they do have some project-based revenues as well as they participate in a couple of EU funding projects. So, yeah, it's primarily software, a little bit project-based, and then a small portion that is hardware-based.

So, if I understand correctly, the profile of margin could be higher than your margin currently. Yeah.

Benoît. In fact, but... Not that sure that it scales the same way as it is today.

Yeah, today at least from an EBIT point of view and obviously we're starting the integration right now and so from a margin level we yet have to identify how everything consolidates into our numbers. But from an EBIT point of view it is today a company that given its scale is not yet EBIT positive. So definitely, at first instance, there will be no contribution to the EBIT level. But obviously, this is the synergy plan and the goal of the business plan, the combined business plan, is to absolutely make sure that we drive scale and that we can make sure that we contribute to the bottom line as well.

Okay, perfect. Then I have a question on the order intake trend that you foresee in H2, especially based on the comments that you made on the potential pipeline that you have currently, which seems quite strong. Should we assume that you would be able to grow again in terms of order intake in H2 compared to H2 last year, if we exclude a big event during time?

Okay, thank you for that question. Well, it's our intention. We have an intention to deliver sustainable and profitable growth throughout the years. So in order to be able to achieve that, it means indeed that our order intake needs to go the same way. So also continuously increasing year after year. So it's definitely our intention. Will it happen, materialize? Again, the possibility is there, but we cannot guarantee at this moment that it will be like that. Okay, I see.

Very clear. And then on the bigger event rental, you mentioned that you expected that this part of the business will continue to grow in 2025, especially in the US. Is it the case also for all the division or is it only the case for the US that you foresee a growth that we pursue in the coming year?

Yeah, the big event rental, remember, is typically every two years during the even years when you see those big sport events like the World Cup, like the Olympic Games, like the Euro. So don't expect in 25 big event rental numbers or maybe only a very limited one. So we'll be back in 26 with important or more important big event rental numbers. What is important to note is that our scope keeps increasing in those environments. Also now the media infrastructure solutions that we acquired in 2020 are now fully used in all those big events that we are supporting. So that shows that our customers are taking benefit of our extended product portfolio and that by doing so our scope and the revenues are typically further increasing.

Okay, I see. And then given this comment on the big event rental for next year, do you expect to be able to compensate this revenue loss in 25 with other revenues given your order good and the order intake trend recently?

Yes, well, we are not giving yet the guidance on the revenues for next year. We've seen in 2023 that we've been able to do that, exactly what you say, compensate for not having big event rental in 2023. So we more than compensated and we did quite big growth in 2023. You'll have to wait some more time before we announce our guidance for 2025. But I can only refer to the fact that our ambition is to grow and to achieve by 2030 a number one status in our industry. And we know that for achieving that, we will have to grow both organically and by doing some further acquisitions.

To give an accurate response on the gross margin of MOG, in fact, it's slightly above our gross margin today.

Yeah, thank you. Okay.

Okay. And then my last question is regarding the FTE headcount. So for H2, do you expect a further increase in FTE compared to end of H1 or should we expect a stabilization in terms of headcount?

We'll be close to stabilization for sure.

Okay, perfect.

Thank you very much.

Yes, obviously, with the knowledge that the people from Mark will be added in fourth quarter 2024, so reported numbers will definitely grow.

Thank you.

Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced.

Once again, if you wish to ask a question, please press star, one, one.

Dear speakers, there are no further questions for today. I would now like to hand the conference over to Serge van Herk for any closing remarks.

Okay, thank you. Well, thank you to all of you for attending here today to our H1 update. As you can see and hear, We are quite optimistic about the future. There are some risks, of course, but we are definitely on our way to deliver a new high when it comes to revenues with a strong profitability as well. So we are quite happy to see that our strategy is delivering the expected results. And again, we are quite also proud of what we are achieving with Customs amount world especially when we talk about those big events which were again a big success So thank you for attending and looking forward to give you a further update after q3 of course and in the meantime and we'll try to make sure that we Transform as much pipeline into order and take of course to show a very nice results later this year So thank you for attending And looking forward to meet soon or answer more questions if you might have in the next days and weeks.

This concludes today's conference call. Thank you for participating in our All Disconnect. Have a nice day.