VusionGroup

and welcome to today's SES IMAGOTAC H1 2023 results. Today's conference is recorded. At this time, I'd like to turn the conference over to Mr. Thierry Gadot, CEO, and Thierry Lumet, CFO. Please go ahead, sir.

Thank you, and good afternoon, everyone. Thanks for joining our conference call following the disclosure a few moments ago of our first half results. So you can follow the slideshow if you are connected on the web conference. And I will start with just a reminder for those who may not know us. SESI Magotag is the global leading retail IoT company specialized in digital solutions for retail. And in particular, the world leader in electronic shelf labels. We have about 750 employees worldwide. We serve over 300 retailers, including around half of the top 100 global retailers. And our technology is installed in such 5,000 stores across 62 countries. So that's for SES Imagota. Coming back to H1 performance. So H1 was the first semester of our new five-year plan, Fusion 37. And beyond being our best semester ever, I'm sure that in retrospect, it will stay as an important milestone in our journey with a number of remarkable achievements in these six months. Our revenue grew by 33%. Our order entries by 35%. We signed new blue chip customers. We finalized the development of our new revolutionary digital shell system, DSS. We signed our largest ever rollout contract with Walmart, thanks to this DSS innovation. We made two strategic acquisitions in data analytics and AI. We increased our operating margin by over 70%. We delivered 35 million positive free cash flow while funding high growth and strategic investments. So I will just briefly go through these achievements before handing over to Thierry for the detailed financial results presentation. So record semester, as I said, in both sales and order entry, growing 33% and 35%. Order entries reach slightly above half a billion euro for the semester. We signed several new customers, including some of the most famous and admired retail brands. Our ESL sales grew by 37%, a strong demand fueled by the inflation context, which drives prices' velocity. Our VAS grew by 18% to 53 million, a slower growth than expected due to the overall difficult context, which particularly affects consumption and retail operations. Some new innovation projects in this context have been postponed or slowed down. However, the mix of us has improved, driving better profitability, contributing to better profitability, and we made, in the semester, two strategic VAS acquisitions, which I will mention in a minute. So, as I said, H1 will stay as a watershed moment in terms of strategic investments, advancing our product portfolio, aligning it closer to retailers' needs and priorities. We made three major strategic investments in particular. The DSS finalization, BeLive acquisition, and memory acquisition. I will go through each of them. The first one is we completed the very critical final development phase of the latest generation digital shelf system, which includes the large-scale operating tests and large-scale prototyping and pilot manufacturing lines. So it's a very important step. I have this new system, which is illustrated on the slide here, where you see where we changed the paradigm, moving to a smart rail supporting IoT devices, including displays, which are now battery-less and radio-less. So it is precisely this new revolutionary platform in terms of hardware, software, and IoT technology that led to the large ESL rollout contract with Walmart US in April 2023. And that was obviously the first contract signed with this new platform, but a very important one. Second strategic investment, the acquisition of BeLive, of a majority stake in BeLive. As you all know, following the acquisition of Finebox a few years ago in Germany, we focused the company on computer vision and AI to develop the solution called Katana. We developed a wireless miniature shelf camera technology and developed a new recognition protocol based on ESL and camera synchronization combined with computer vision. We decided, after following them for a few years, to acquire a majority stake, actually 67% of BeLive in April this year, because it brings us a lot of complementary capabilities. First, ESL agnosticity. Any customers will be with our future new solution, able to use our CV, computer vision solution, independently from ESL. or from whatever ESL solution, or even with paper labels. Solutions for fresh counters are also one of the very important complementarity. Fresh counters are very strategic priorities, high contributors, high margin contributors. And, for instance, fruit and vegetables or bakery, which you see here in the slides, are examples of fresh counters that need, like all high-value perishable products, to be monitored in real time. It's also true for meat counters, dairy counters, and so on. So solution for fresh counters is also what we found in these assets of BeLive. Solution for planogram compliance. comparing theoretical planograms and realograms in real time. Solution for e-commerce install fulfillment, helping pickers find products in store when they prepare orders. Solution for autonomous stores, here you see an example in the B2B construction sector, solutions for traffic and queue monitoring also extremely a valuable type of computer vision engine so there is long list of complementarities really and we are now in the process of integration and convergence the future combined platform will be extremely rich functionally and technologically leveraging the best of the two worlds captain and be live All this is still emerging phase. It's the beginning of computer vision and AI technologies in retail, but we are convinced it will become one of the core technologies enabling precision in retail in the future, and we have definitely put together the best expertise and the best technologies assets in this field. Third and last strategic investment, the acquisition of memory. Memory is a leading French data platform for retailers and CPGs. with clients including Carrefour, Intermarché, Auchan, Casino, Monoprix, Cora, pretty much all French retailers, as well as over 400 CPG brands. It's an end-to-end SaaS platform for category management, enhancing data sharing and collaboration with suppliers. It's an 80% plus recurring revenue model. It's highly profitable. It's fast-growing, and it's beginning international expansion. Memory analyzes all existing sources of data commonly available in retail to turn them into insights on sales performance, assortment, promotions, merchandising, sourcing, retail media. The goal of the acquisition here is to do more than just grow memory. but to create the first IoT and data company. IoT datafies the store. It creates new sources of in-store real-time data to augment retail intelligence so that analytics can be applied to the broadest set of retail data ever, maximizing on-shelf availability, optimizing merchandising, and improving retail media performance. This drives also new value in the collaboration between retailers and suppliers because it provides more supply chain transparency, particularly in the weak point of the whole chain, which is the stores. So, indeed, H1 was a watershed moment for us, a very intense kickoff of our new plan with not only growth in difficult environments but profitable growth. And with this, I'd like to hand over to Thierry Lemaitre for a more detailed presentation of our financial results.

Thank you, Thierry. So if we move to the financials, I'm of course very pleased to present the results for this first semester of 2023. We already published the revenue increase at 33%, and you can now see the more impressive profitability increase with the EBITDA growing plus 72% versus H1 last year. and an ebda margin standing now at 11.4 percent which is a 2.5 point increase versus h1 2022. we have consistently increased the bda margin over the past years but mainly by decreasing the opus to sales ratio in h1 2023 i've guided at the capstone markets there last november the ebda increase has mainly come from the vcm increase which is clearly demonstrating that our operations get more profitable. The VCM increase, which is plus 2.8 points versus H1 last year, and was driven by the improving profitability both on the ESL part and on the VAS part. Improvement on the ESL margin should show the improvement of the profitability in the coming quarters. Depreciation also increased due to the capacity cut over the past years and non-recurring non-cash items as we will see later, consists of IFRS 2 non-cash expense relating to employee performance shares and some M&A fees. EBIT now stands at 6% of the revenues. And below the EBIT, I am sure that you all noted the unequal contribution of IFRS to a more readable set of financials through this wonderful IFRS 9 restatement in connection with the warrants of Walmart. granted on June the 2nd. We will, of course, elaborate on this later on, but I would like to underline the fact that before this IFRS 9 impact, we tripled the net income at 15 million euros versus 5 million last year over the first half. On the following slide, you see the revenue evolution, nothing new. That's what we already showed in July. we already presented a quarter of a quarter growth of 34 percent and the h1 versus h1 last year 33 percent and of course a very significant order and trade of all of approximately half a billion euros mainly driven by the first sow for not in the us following slide You see that we keep the OPEX under control. OPEX in H1 stands at 48.7 million euros, which is a 13 million euros increase versus H1 last year, of which 7 million euros on staff costs and 6 million euros on non-HR costs. If we exclude the impact of the predictions that we made in H1, be alive and in the memory that Thierry just mentioned before, the OPS to sales ratio is slightly decreasing, so we keep optimizing and we keep streamlining the OPS to sales ratio. That's, of course, one of the commitments that we made. BeLive and InTheMemory, of course, they are slightly different business model. It's more like a SAS business model. And they are showing higher margin, but also higher OPEX ratios. Following slide, you see the evolution of the ABDA. And if you compare the ABDA between H1 last year and H1 this year, so you've got this evolution. It's, of course, mainly driven by the volume impact. That's the same criteria as the previous semesters. But this time, in H1 2023, you also see that the VCM rate impact is a positive impact, almost 11%, driven both by a deep improvement margin on ESL and on VAS. And, of course, it is partly offset by the increase in OPEX, €7 million on OPEX, on HR OPEX, €6 million on non-HR OPEX. Following slide on the CAPEX, and you see that we have a level of CAPEX which is €48 million. What we did in H1 is that we definitely focused on completing the development and the industrialization of the next generation digital share system. This is now completed. So, of course, these 31.9 million euros that you can see in H1, they will no longer exist in H2 2023. We also invested in H123 in IT in order to extend the SAP scope to more companies. And we also received the certification ISO 27001 on the cyber risk, which is a nice achievement as well. So on the overall CAPEX, we believe that thanks to the decrease in CAPEX to sales ratio in H2, which would be between 8% and 9% of capital success ratio in the full year, a little bit as of last year. And we will get back progressively from 2024 onwards to the guidance that we gave at the CID, which is 5% to 7% capital success ratio. Following slide, we wanted to make a focus this time on the working capital and more specifically on the operating working capital. which has really delivered a very significant improvement, and we are very satisfied with that because that is contributing to the cash flow of the period. So the accounts receivable, you see that they have decreased by approximately 13 days of sales. We are now below 60 days, 47 to be precise, versus 60 at the end of last year. The most striking impact is really the very good job which has been done on the inventory side. We are now standing at 68 days of inventories versus 100 last year. We even succeeded in increasing the inventory in values, minus 5 million euros, despite the very significant revenue growth. and we are now stabilizing the accounts payable at approximately 75 days so all in all we succeeded in gaining approximately 10 million euros operating working capital impact on the cash and that is of course very beneficial that is contributing to the the very good news which is the positive free cash flow that you can see on the following slide And we posted 35 million euros, positive free cash flow in H1. This is, of course, coming from improving profitability, improving operating margin capital, as we saw before. Of course, large down payments in connection with the very significant order entries that we recorded in H1. Of course, we had also to pay the one-off DSS-related capex. We also had to fund the acquisition of Believe and Memory for approximately 90 million euros. So all in all, we ended up with approximately 35 million euros free cash flow. Of course, I can already hear some people saying yes, but that's essentially due to the down payment. So I made the calculation for you. And if you restate the elements which will probably not take place in H2, essentially the one-off payments on the DSS capex, the acquisitions of BMRI and B-Live, and assuming that you've got no down payments in H2, then by definition we would have generated €20 million net cash over H1. So that's a very good performance. And of course, that is a performance which is now there and that we will keep repeating over the next quarters. So we end up the semester with a net cash, net debt position, which is very sustainable. six million euros net debt if you compare the net debt to last uh 12 months a big year that's a ratio of 0.01 so that's 0.01 time so that's a very very sustainable financial structure then just the two financial uh technical slides on the ab2b reconciliation so you see that essentially between the EBIT and the EBITDA, except the depreciation expense. You can see the equity M&A-related fees, approximately €900K, and the cost, non-cash cost, of the performance share plans under IFRS 2 for €4.4 million. Then, of course, we cannot completely skip the impact of the Walmart warrants and the IFRS restatements. So, under RFRS, we have to assess the fair value of the right granted to Walmart to be allowed to buy SES-immigrated shares at a predefined price, approximately €112, for a certain period of time. This fair value was assessed using a Black & Scholes method at €153 million on June 2nd, when the shareholders' meeting approved the grant of €1.7 million to Walmart to vest, of course, on their conditions. The fair valuation at the size of the warrants resulted both in an asset and the liability in the balance sheet as a debt. The liability is then considered as a financial debt under IFRS 9, and it is revalued at every closing. At the end of June, on June the 30th, the fair value of the warrants was revised down by 75 million euros, mainly on the back of the decreasing share price of SES in Malta between June the 2nd and June the 30th, this valuation decrease resulted in a financial income but in the pnl for 76 million euros on the other side of the balance sheet the asset is a contract asset that will never be revalued but ifrs standards consider that it must be amortized against the revenues generated by the rollout of the walmart contract of course we will provide the full details of this resentment we have of course agreed in the past to have a pure equity-only dilution impact. So impacting the P&L as if it were a cash payment makes absolutely no sense, but it is something that we have to accept under the IFRS. So, of course, what we will do in the coming quarters and semesters is that we will give the full details of all the restatements, both on the financial income, but also on the revenues. generated by the restatements of these Walmart worlds. So, of course, we want to repeat once again that this restatement has no cash impact. It's pure dilution, pure equity impact. So, just consideration made under IFRS standards to have this kind of first image of what the cost would be if it were a cash item, which it is not. So that's it for the financial presentation. Now I leave the floor to Thierry to say a last word on the guidance.

Yes, thank you, Thierry. And, of course, just picking up on the last point, I mean, this is why we also mentioned now in our table the economic net result. So, I mean, the economic net result is 15 million, the 91 million – Accounting result due to IFRS norms has not a lot of meaning. It's a big number, but it's not a lot of economic meaning in this case. And to a certain extent, it is the impact of the Gotham attack because it's only related to the fall of our stock, the very severe fall of our stock in June. Otherwise, this would not even happen. be there in our account. So just needed to be said. So anyway, excellent results. The outlook now, well, as Thierry said, I mean, we are showing in H1 very repeatable trends, actually, and improvements. So for the second half, which is underway, we anticipate revenues in line with the annual target of $800 million, with in particular a strong Q4, both in sales and order entries, and a continued growth in profitability. And sorry to repeat myself, but in 2024, it's a little bit the same. We continue to see ongoing strong growth, particularly driven by the acceleration in the United States. which, by the way, is already happening also in H2. And, again, further growth in profitability. So that's for the outlook. We should continue to improve our business model, our operations, our revenue, and our profitability in the coming six to 18 months. So with this, thank you for your attention. And I think Thierry and I are happy to take questions if any.

Thank you, Mr. Speaker. A reminder to the participants, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We pause for just a moment to allow everyone the opportunity to signal for questions. We will take the first question from Johannes Ries from Apple's Capital. Your line is open. Please go ahead.

Yes, good evening. To pose a few theories, only two short questions. First, some people are a little bit disappointed, you know, that... the software and service business had not grown in the same space. Do you see an acceleration in the second half, or at least in the year 2024? Because, for example, if you ramp up the Walmart deal, and this is a deal where they bought a lot of software and services, that should at least have a positive impact.

You mentioned, Johannes, that you had two questions. What is the second one?

The second one is the impact of the two acquisitions on the bottom line. Also, there are drivers for VAT, I think. And secondly, are they earnings enhancing going forward?

Yeah, so in the vast business, again, I think the vast business is very innovation-related. So it has been, again, it's growing 18% in each one. The growth should be, I mean, higher. But we need to take into account the fact that some of these companies projects are innovation projects for retailers and currently the times they are crossing are difficult and again very difficult you know with the mix of inflation of consumption decrease in volume and of operational cost going up they are under they are struggling a bit so sometimes they postpone a bit new innovation I mean innovation projects And so that's why, I mean, 18% should not last for long. We think there is going to be an increase in the growth of VAS definitely. We are very confident on our target for the five year in terms of VAS revenues. We are building, you know, a product portfolio that has been also completed as you mentioned and as we mentioned earlier, with the two acquisitions. So, again, computer vision and AI are new emerging technologies in retail, but they're going to be core in retail. So sometimes those projects can take time because they need a big change. For rollout, they need a big change in operational process. but we are very confident on the growth and the high growth. We have a target, an average growth target in vast revenues of 40% to 50% in average over the plan, and we are absolutely confident on this target. And for the second part, I will just let Thierry mention the impact of the acquisitions. Yes, yes.

Johannes, we mentioned on the slide regarding the OPEX, that actually these two acquisitions have a slightly accretive impact on the ABDA, a limited plus 0.4 point impact on the group ABDA margin. So that's the impact of these two acquisitions.

Okay, super. Thanks a lot. Maybe a short follow-on. Some statement to the pipeline. How is the pipeline developing now? after maybe you signed the Walmart deal, which is a lighthouse deal, definitely. On the other side, the more negatives that the economy, especially in Europe, is speaking.

Yeah. So, again, as we said in the outlook, I think currently there is a crisis in consumption and in retail, which is global. And And in this context, you have, I would say, an increasing gap between the best retailers who invest in their future and in their transformation and maybe some who are a bit more struggling. So what we try to do is really to focus on the best. And you've seen the blue-chip names that we acquired in H1. It's not only Walmart. You've seen a number of incredible names which are – you know, very famous brands. We try to focus on this. This is why we're confident on the fact that this year we will, you know, have around 30% growth. This is what we are confirming with our target. Next year we continue to see, you know, strong growth because the pipeline is, you know, is very big. It is a bit more focused on the retailers on which we try to focus. Maybe the part of the retailers who are, in the crisis are investing in their transformation and will win, obviously, in the future. So it is this strategy that we have, and we see growth absolutely for next year but also for the next five years because we are only at the beginning of this transformation. And when they will start delivering all their results, it will become to be a mainstream strategy. let's say, playbook for all the retailers in the world. So, yes, we see growth, as I said, and it's because the pipeline is in very good shape.

Great. Thanks a lot.

We'll take the next question from Gilles Crespo from Alizé. Your line is open.

Please go ahead. Hi. Actually, well, thanks very much to both of you, and congratulations for the great margin improvements. One question. Unless I'm mistaken, I remember from the CMB last year that you mentioned that operating leverage was to improve over the next period. Here, from what I see, VCM, well, the variable cost margin, improved stronger than the EBITDA margin, which, to my view, would mean the operating leverage decreased rather than increased. which is surprising to me against a growth of 33%, which is a great growth. So I wondered if you could comment on that.

Yes, of course. What we said at the capital markets there last year is that we would move the EBITDA margin from 9.5% in 2022 – to 22% in 2027. And we said this improvement in the EBDA margin will come two points from the improvement of the OPEX two sales ratio moving from 12 to 10 points. And then the improvement, the remaining improvements will come from the VCM ratio that would gain approximately 10 points. So we are exactly on this trajectory. We want to gain two points on the OPEX to sales ratio, moving from 12% of the revenues to 10% of the revenues. And if you consider the like-for-like increase of the OPEX, Actually, we have a slight decrease. We have a minus 0.8 point OPEX to sales ratio decrease between H1 last year and H1 this year. So we are on this trajectory, and we are on the same trajectory on the VCM rate improvement. because we have improved it by 2.8 points, and we want it to gain approximately 10 points over the next coming five years. So we are exactly in line with the guidance that we gave at the Capital Markets Day.

Okay. Thank you very much. Well, it was my misunderstanding. I thought you were focusing on the fixed costs and very much appreciate your clarification. Thanks, Jerry.

You're welcome. Final reminder to everyone, if you have any questions, please press star 1. We will take the next one from Ben Seelman from Barenburg. Your line is open. Please go ahead.

Yeah, hey, good afternoon. This is Benjamin Timmons from Birnberg. First of all, congratulations to the good results. Numbers and free cash flow are looking good. Maybe one more or maybe two more questions. First of all, are there any capex we should be aware of that might be back-end loaded in H2, which could push free cash flow into negative territories again? Maybe that first. And then the second question would be regarding the pipeline in the United States. You mentioned it a couple of times now that you are in negotiations with a lot of great names in the United States. Is it therefore likely that we might see some new press releases regarding new rollouts in the United States in 2024, maybe somewhere like H1 2024, just to get a little bit of a picture, like at what time could we expect further rollouts to be announced in the United States? Thank you.

On the first one regarding tapets back-end loaded that would trigger negative free cash flow in H2, no. So there is nothing, no specific tapets that should drive negative free cash flow in H2.

Okay. Okay, perfect.

As we explained in the press release, the DSS final phase being over in H1, this part of our capex will reduce. So I think we gave a guidance in the press release around the overall full year target. I think we gave a a range of 8% to 9% of revenue, and it will then come back in the following years to our range of 5% to 7%. Regarding the pipeline in the U.S., well, you know, first I'd like to stress again that even though, of course, the spotlight has been a lot on Walmart in the first – in the first uh half of the year uh we actually ended the year with a press release mentioning three uh you know big wins in the us um for you know uh significant rollouts and yes we did mention the names but um but it still exists and uh and we will be a bit more i hope we we would be a bit more give more information about these rollouts later on when the customer is okay. But they are significant. I think we mentioned earlier that we are reaching very soon with all the orders signed or installed close to 6,000 stores. We are going to be, I'm sure you mentioned H1. I think we should be reaching around probably not far from 10,000 stores in H1 next year. We're in good shape. So we don't announce everything, but, you know, you will see the traction already between H1 and H2, I think, first. And the acceleration that we mentioned now is really significant in the United States, really significant. We're talking about, you know – So pipeline is very big. Announcements have been, you know, made also outside, you know, Walmart already. And, of course, it will continue.

Okay. Perfect. Thank you very much.

I'm just back from two weeks, you know, sort of a tour of a number of our customers and prospects in the United States. So I'm quite on this subject right now. and very bullish on our prospects in this great country.

We will take the next question from Valentin Paul-Johan from Stifel. Your line is open. Please go ahead.

Thanks. Hi, all. Do you hear me well? Yes. So congratulations for your growth margin management and also for your working capital. So I have two questions, please. On growth margin, so in H2, is it fair to assume that you can significantly increase your growth margin on ESL thanks to the euro-dollar parity if we keep the same parity as of today?

Well, I mean, I'm not sure I understand your question. You said, can we improve the gross margin thanks to the euro-dollar if we keep the same euro-dollar parity? We can further increase, yes, because we still have some economies of scale. So we have some economies that we can generate and savings that we can generate on the purchasing costs. So, yes, it's right. Without any impact of the euro-dollar forex impact, yes, in dollars, we can generate additional savings in H2 versus H1, yes.

Okay. And regarding the working capital, if my understanding is correct, you got around €130 million of down payment for an order entry which was 500 million euro in h1 so it's around 25 is it something that we can um take for the years to come i think it's a bit uh well it's not exactly a consistent between all the customers we had uh

significant down payments on a couple of them, and for some other customers, which are usually a bit more little customers, we have zero or limited down payments. So the 25% is not a normative ratio that you should apply on the order entries. That can really differ from a quarter to another one.

Okay, thank you.

We'll take the next question from Obert Matet from Matet Company. Your line is open. Please go ahead.

Good evening to both of you, Jay. Just one question to make sure I understand what has been written in the press release tonight. Should I understand that the price paid for memory and D-Live is 19 million euros? or did I got it wrong?

No, no, correct. That's approximately, it's a bit less than that. That's approximately 88 million euros, but yes, we said roughly 90, yes.

Okay, okay. Thank you very much. That's all for me.

The next question from Lauren from . Your line is open. Please go ahead.

Yes, good evening, Therese. So I have three questions. So first one, coming back on your two acquisitions in this H1, can you give us a favor on a pro forma? So what would be a full year sales of those two companies, ABDA, just for us to be able to model a bit better? The second question regards your guidance for the second part of the year. So you call for a strong Q4 and other entries in Q4. So what does it mean in Q3? Do you expect a bigger growth in Q3, smaller growth? Could you quantify it? And last question regarding your DSS platform, which is up and running now, having finished the development for Walmart. So what will be your commercial strategy going forward? Is it the product you are going to put in front of everybody everywhere, or will it come later in Europe, for instance?

So I will start, Laurent, regarding the ABDA or the pro forma. You know, we already gave guidance. When we presented the revenue, we said approximately 2% of the revenues were deriving from these acquisitions. And we said that they represent approximately 0.4 points incremental ABDA margin. So you see the trajectory. These are not very big figures. So you've got a sense. of where they are and what they can deliver on the full year, I think. Okay. On Q3 trends.

Yeah. Well, I mean, again, just to – regarding Q3 and Q4, you know, when we say we anticipate revenues in line with the annual target, we made 380 in H1. So, I mean, to be very clear, it means we're anticipating 420 or so in H2. And what we know is that this is not going to be split exactly in two halves, but probably, you know, in a stronger Q4 than Q3. But in any case, to do 420, which will be, again, a record semester, the two quarters are going to be strong, right? But it's going to be slightly more, you know, in Q4 than in Q3, just because, you know, we know the timing of deliveries and, you know, the supply chain topics. It's going to be through, and it's the same in – but both quarters will be strong, and the total will be in the ballpark of 420 or plus. So that's for the – and the blood –

There is, you're right, there is a base effect, just nonetheless, because Q3 last year was a very strong quarter. So it doesn't change, of course, the performance of this year's. But on a relative basis, it's true that the growth in Q3 will be maybe slightly lower than the growth in Q4, just because of this base effect when we had a very strong Q3 last year.

I see the point, yes. Okay, yeah. Last year we had a very strong summer because we were in the midst of a big rollout in Germany. So it's been – I think we were around 180.

Yes.

But in absolute terms, it's going to be a good performance in all quarters, but a stronger Q4, the sum of both would be 420. That's sometimes – A question of supply chain and lead times and deliveries. Regarding the platform in the new DSS platform, of course, we called it the next-gen digital shelf system for a good reason, is that over the next five years, it is bound to to gradually replace and be predominant in our sales just because it makes more sense. It's a revolution in many ways. So we will, of course, extend it, and we are already starting to extend it to other customers. We right now have, I would say, a primary focus on the U.S. because it's a new market. frankly, from ESL standpoint. It's a new market, and you want to start a new market with your new platform. Having said that, it only applies to a big part of retail, which is grocery, because it's shelf-driven. In many retailers, you know, you don't have shelves. Like, If I take, for instance, a retailer like Ikea, you don't have really shelf labels or very few, less than. So it applies for grocery. It's going to be first for U.S. because it's such a strategic and high-growing and high-growth market, but it's obviously the next generation system for everybody. You know, it took us.

And, Thierry, grocery so far, it's how much of your mix?

Grocery is 70% of retail, and it's roughly around that for us. I mean, this is why a lot of pure players want to go in grocery. This is 70% of retail. So it's about the same. I don't know exactly the number. I couldn't tell you right now. No, that's fine. We are at three-quarters of our revenue is about grocery.

Thank you. Thank you.

Thank you. We have a follow-up question from Gil Scrasper. Your line is open. Please go ahead.

Yes, hi, Kerry. If you allow me, thanks for taking the second question. Back on the VCM, would you split it in between improvement due to the progression of VAS and due to improvement on the ESL side, if you could? And second question, still on the VCM, is on the ESL side, if there is any improvement on the VCM, I assume that the improvement would be will be on the earlier version of InagoTag before moving to the new so-called Walmart standard. And my question was here, will this margin improvement translate into this new Walmart standard for the ESLs? I hope it's clear enough.

So roughly on the full year, The improvement of the VCM ratio will mainly come from the ESL. So I don't want to be much more precise than that. But on the full year, that's essentially the improvement of the ESL, which is going to drive the improvement of the total VCM rate. That's the first point. And then, you know, part of the improvement that we generate is also due to the scale effect. So the higher the volumes we can aggregate on any generation of ESS or hardware, the more scale effects we can generate. So whatever the solution, Fusion or DSS, that will be the same phenomenon.

Okay, very clear. Thanks.

It appears that there is no further question at this time. Mr. Speaker, I'd like to turn the conference back to you for any additional or closing remarks.

Well, okay. Well, thanks for your attention. Thanks for your questions, and thanks to many attending our call. We will be back at the end of October very soon for our Q3 report, and I want to wish you a great evening or afternoon. Thank you for being with us today. Bye-bye.