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.