VusionGroup

Good day and thank you for standing by. Welcome to the Vision Group Full Year Results 2024 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 or 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference has been recorded. I'd now like to hand the conference over to your first speaker today, Olivier Guernon, Investor Relations Officer. Please go ahead.

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to our full year 2024 results presentation. With me today are Thierry Gadou, our Chairman and Chief Executive Officer, as well as Thierry Lemaitre, our Deputy CEO, Finance and Corporate. Thierry Gadou will start with some remarks on the group's business performance. Thierry Lemaître will then make some comments on our financial performance, and Thierry Gadot will make some comments on our full-year outlook. After these remarks, we will be happy to take your questions. As a reminder, some of the information to be disclosed on our call today is forward-looking and subject to important risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the Safe Harbor statement included in our press release and on slide three of this presentation. This evening's release was issued a short while ago and is available in French and in English on Vision Group's website, vision.com. The slides of this presentation can also be found on our website in the regulated information section. A replay and a transcript will also be made available on our website after this call. And with that, it's my pleasure to hand you over to Thierry Gadou for his opening remarks.

Thank you, Olivier. Good afternoon, everyone. Thanks for joining our conference call. I'm very happy to present our performance for the last quarter and the full year of 24. In a nutshell, first, so Vision Group achieved the record Q4 and passed the 1 billion mark in annual adjusted revenues, up 25% year on year. Order entries in 24 grew by 71% at 1.6 billion euro. EBITDA reached slightly over 160 million, up 51% year-on-year, and EBITDA margin improved by 270 basis points at 15.9% of sales. Free cash flow generation reached 391 million. Looking ahead, the momentum of the company is excellent. And for the full year of 2025, we see adjusted revenues growing at an accelerated pace at around 40% with a target of €1.4 billion in adjusted revenue for the year. We expect VAS to grow twice as fast as the top line, so that's around 80% growth. And our profitability should continue to grow. That's for the headlines. Before handing over the floor to Thierry Lemaitre, who is next to me, to review our financial figures, let me just maybe summarize the key achievements of last year. So I said Vision Group achieved a record Q4 with adjusted sales of over €350 million. That's a growth of 47%. and a record H2 as well at €580 million, up 36% year-on-year. Both are our best quarter and semester ever. North America saw very strong growth and has become our first geographic market in 2024. Vision Group is the leader in the region, and this position is a major asset for the years to come, given the very strong dynamics in this market. In Europe, Despite the finalization of a very large multi-year rollout contract, which explains a temporary revenue decline, which was anticipated and announced, the region is gradually compensating the gap, achieving an excellent fourth quarter, close to the record sales of Q4 23, and that's thanks to strong growth in France, Southern Europe, and the United Kingdom. Overall, revenue for the full year in Europe is near half a billion euro, And despite the decline year on year, our average growth over the past four years since 2020 is at 24% per annum. And that's well above our long-term growth guidance for the region. We should be resuming growth in 25% in Europe. And of course, globally, we passed the announced 1 billion mark in adjusted annual revenue with a growth of 25%. 25%, which is roughly in line with our average growth over the past decade. As I said, order entry reached 1.6 billion euro, a growth of 71%. And of course, that's thanks in particular to a very large contract signed by Walmart US. Although, please note that this record number does not yet include the last tranche of that contract, which was announced at the very end of the year. This excellent performance was also due to many other wins in both Europe and North America, some of which were publicly disclosed, and you see the logos on the slide that is presented. Others were signed, too, towards the year end and have not yet been disclosed, but should be disclosed in the coming weeks. And those wins cover all kinds of retail verticals, not only grocery, but DIY, pharma, health and beauty, consumer electronics, home and garden, automotive, etc. Regarding the Walmart U.S. contract for the rollout of H10s, I just remind the different steps of that very historic achievement. You remember that the first pilot with H10 started four years ago. Then in March 22, we announced that pilot was successful and we were going to extend the pilot to more stores and enter into a strategic relationship with Walmart. And 50 stores were subsequently equipped with a new version of the solution. And then that phase was very successful too. And in 23, we signed a framework agreement for the complete U.S. rollout and the first firm PO for a first tranche of 500 stores. That phase was successful too, and in 2024, we signed two major contract extensions of 1,800 stores in April and 2,300 stores in December, completing the framework contract that had been signed in 2023. And again, note that the December last range order entry of around €1 billion will be accounted for over the following quarters in 2025. Now, this exceptional success with the best, the world's best performing retailer, and by the way, the world's largest company, is essentially based on two fundamental and disruptive innovations that are a game changer for retail. And I want to say a few words on the EdgeSense revolution because many people think EdgeSense is just a new ESL system. In fact, since the invention of ESL 30 years ago by our company, EdgeSense is the biggest retail IoT innovation, which will enable a shift from single-purpose ESL-only technology to multi-purpose unified digital shelf systems. And that will effectively datafy and digitalize the physical store and enable multiple use cases for retailers, shoppers, and suppliers. So just to take a minute here, what is EdgeSense exactly? and what is Fusion OX. The EdgeSense is a digital shelf system consisting of a smart shelf edge rail and IoT devices or IoT nodes such as shelf labels, cameras, and sensors. ESL are only one of the many applications of EdgeSense. The EdgeSense connected smart rail that you see again following, I hope, the slide because otherwise it might be a bit difficult to follow, but I'll just be very short, the Edgechains Connected Smart RAID is the solution's cornerstone asset, as it provides power and data connectivity to all IoT nodes or IoT devices that are clicked on the RAID. It neutralizes connectivity and data and power. And the Smart RAID is operated by a completely new software operating system called Fusion OX. which is based on the BLE standard, the Bluetooth Low Energy Standard, but with many proprietary features which optimize power, security, scalability, speed, and other performance features. Here, a quick note, standard Bluetooth exists and is a standard, so it's widely available. But it has never been an acceptable protocol for retail IoT. And the new retail IoT protocol that we developed with Vision OX and with the associated new semiconductor has been developed in close cooperation with Qualcomm. The EdgeSense infrastructure and Vision OX effectively turns the store into a smart grid where products, associates, and shoppers are located, connected, and synchronized. The EdgeSense rail also unlocks the power limitation by mutualizing power for all clicked in IoT devices and by achieving unrivaled power efficiency. Moreover, That smart rail will soon be powered by light harvesting technology, which will solve the power management problem of retail IoT in general. The HN smart rail will also soon include rail-embedded AI-powered miniature shelf cameras for full real-time shelf vision and shelf data. That's why the HN's infrastructure is a unified, multipurpose shelf digital system, And that future proves the store, and it provides not only optimized DSL applications, but also product fencing, precise indoor location and navigation for associates and shoppers, real-time shelf monitoring, and many other applications. Exchange is also a so-called infra-less solution because it leverages third-party existing Wi-Fi access points from Cisco, Meraki, NIST, and many others, saving huge CapEx and OPEX for retailers. So I think 24 will stay in our history, not only because of the 1 billion euro achievement, but even more as the year of the accelerated launch of Edge Sense and Fusion UX with on top the world's largest retailer. And of course, Fusion UX has been, as well as Fusion Cloud, a great driver of our VaaS development. So regarding VaaS now, Our revenue from software services and non-ESL solutions reached $106 million in 2024. That's slightly down by minus 3% compared to 2023. Within vast revenues, recurring services, which represented 54% of vast revenues, or $57.4 million, grew by 35%, while non-recurring services fell by minus 28%. In a difficult context, economic context, where distributors slow down certain projects or internalize certain services. But in the fourth quarter, VAS sales grew strongly, both non-recurring, 32% growth, and recurring VAS, which grew by 48% and reached an annualized run rate of 65 million in Q4. We see that strong growth continuing in 2025. Now, one of the main drivers of vast growth, I was saying, is the Fusion Cloud. And Fusion Cloud's installed base grew rapidly to now 25,000 stores and 165 million cloud-managed IoT devices. As a reminder, at the end of December 23, the cloud installed base was 17,000 stores and 82 million ESLs. So you see the momentum is very strong, and the strong dynamic will continue in 2025. Interestingly about our vast strategy, one of the last new wins of the year was the Fresh Market, a US grocer. And what's interesting about this deal and was well appreciated, I believe, was they decided to roll out upfront a large part of our solutions portfolio from ESL to data and AI solutions. as opposed to gradually onboard new products over time. This Fusion 360 approach, that's how we call it, is really a very good showcase of our strategy in enabling the digital transformation of retailers. I talked about Hsense and Fusion OX, of course, but many other innovative developments came out of our nine R&D centers in the world. I remind that 30% of our staff is in R&D. and which were presented at NRF in New York. So on this quick video that you see, you can have a feel of what has been this fantastic event. NRF, you know, is the main annual event of our retail tech industry. And this year, I think you can be proud that Fusion Group was truly the highlight of the show, the busiest booth, and the place to be. Thousands of visitors were on our booth, nearly half of the top 100 retailers, came to the booth, including an unprecedented number of retail C-suite executives. In addition, our solutions were also presented by no less than 10 partners on their own booth, including some of the technology blue chips, Google, Microsoft, Qualcomm, SAP, Cisco, Instacart, and others. So we were in many, many places in NRF that year, The room was also packed for the highly anticipated conference that was given by our U.S. CEO, Philippe Bottin, and Walmart's head of U.S. operations. And obviously, nowadays, everybody's watching Walmart because they are the best performing retailer in the world in many respects. We presented many innovations at NRF across our broad solutions portfolio, including the prototype of Fusion Live, our new store AI assistant developed by memory, a new mobile version of Captana AI, our new solution Fresh Connect, an end-to-end farm-to-store supply chain traceability solution for fresh products, and various other specialty retail solutions in eyewear, in fashion, in automotive retailing. That's it for me as a conclusion before handing over to Thierry for the financials. I would say 2024 was truly a wonderful year, full of excitement and passion for what we are building to serve retail and consumers. And Thierry will now explain how we convert passion to cash.

Hello, everyone. As Thierry presented, 2024 was an incredible year, and it's also the case of the financials showing improvement on all the lines of our P&L. The key financial highlights that we will detail in a minute are the revenues, €955 million in IFRS and €1 billion on €10 million adjusted revenues growing 25% versus 2023. The EBDA, €105 million in IFRS and €160.5 million adjusted EBDA growing plus 51% versus last year. And the cash with a change in net cash of €365.6 million. On the following slide, as usual now, we are presenting two sets of figures in IFRS, and those who adjusted are some non-cash IFRS restatements. And I will go through these adjustments at the end of this presentation. The figures I will comment on are the adjusted figures, which are giving a more economic vision of uterine groups' performance and cash effects over the year 2024. So in 2024, adjusted revenue grew 25% at 1 billion and 10 million euros, beating our 1 billion euros adjusted revenue guidance. The adjusted variable plus margin grew 44% at 29.3% of the sales, which is a 3.8 points improvement versus 2023, and puts the group in a good shape to reach 32% in 2027. Adjusted EBDA increased 51% at almost 16% of the sales, which is also a significant 250 basis points improvement versus 2023, quite above the revised guidance of 100 to 200 basis points improvement. The adjusted EBIT margin and adjusted net income margin grew both by one point versus 2023. So in 2024, the group's net income totaled 53.4 million euros in adjusted terms and the loss of minus 28.9 million euros in IFRS. If we focus on the following slide on the adjusted EPDA margin improvement between 23 and 24, it is improving by 2.7 points of sales from 13.3 in 23 to 15.9 in 24. And this increase is mainly coming from the improvement of the VCM, variable cost margin, at constant ESL VAS mix. This increase reached close to six points over the year, driven by volume, scaling, R&D designed to cost, but above all, innovation and increasing differentiation, which are actually stemming from the unique combination of hardware and VAS. And if the ESL-VAS mix had just remained stable in 24 versus 23, we could have even generated two points more margin in 24. OPEX ratio also increased by 1.1 points in 24, mainly to support future growth in Europe and also in the U.S. On the following slide, from EBITDA to EBIT, in IFRS or in adjusted terms, the main changes are coming from the non-cash effects of first, the performance share plan expense, and second, the amortization expense. The latter increased by 21 million euros, reflecting the start of the amortization of the H-Cents R&D capitalized project early 2024, and in H2 2024, of the first manufacturer in line invested to provide Walmart with large volumes of fetch stands, rails, and displays. On the following slide, you see the analysis of the financial income. The interest expenses slightly decreased over the year at 11.5 million euros versus 12.4 million euros last year due to some debt repayments. Cash was invested in the second half of the year and generated 4.7 million euros income. The high volatility of the euro-dollar exchange rate, especially in H2 2024, generated realized exchange losses that negatively impacted the net income by minus 7.1 million euros. This resulted in an adjusted financial expense of minus 15.7 million euros in 24 versus minus 5.6 in 23, this change coming mainly from exchange losses. On top of that, the group also accounted for two large non-cash IFRS impacts. The first one is an entry that you are familiar with. It is the revaluation of the fair value of the remaining non-exercise warrants granted to Walmart. I remind that Walmart is entitled to exercise part of the warrants they were granted, but has not yet exercised any of them yet. The evaluation is performed as usual by a third-party expert, and resulted in an increased sell value compared to 23 of 21.9 million euros that negatively impacted the financial results. The second impact comes from IS21 standard, which provides that intercompany transactions have to be translated into the functional currency at your end, and any potential exchange difference arising from this conversion should be booked in the consolidated P&L, although the underlying transactions are eliminated. In our case, Vision Group in the U.S. is collecting the prepayment in full of the manufacturing lines, which are invested by the parent, Vision Group SE. Vision Group SE is therefore borrowing dollars from Vision Group in the U.S., and although these intercompany positions are properly eliminated in the consolidated financial statements, The exchange difference in the accounts of the French parent company has to be booked in the P&L. This represents a minus 12.5 million euros non-cash expense deriving from transactions that were eliminated with no cash effect or loss of the value for the group and that will settle with no cash impact. This IFRS restatement is adjusted in the financials that we present today. That's it for the P&L, so now let's move to the CAPEX. CapEx in 24 reached €158 million, of which €117.3 million were already funded by customers and therefore are cash neutral for the group. What was invested and funded by the group is €40.7 million, 4% of the revenues of the group, of which the vast majority, 80%, is consisting of capitalized R&D and IT projects. Let's now switch to the free cash flow generation. The free cash flow defined as shown on this graph reached an impressive 391 million euros in 24. So I already anticipate that some of you are asking what the cash flow would have been excluding the effects of the down payments on the prepayment collected from Walmart. The first level of answer is that our cash flow is simply EBITDA minus CAPEX which is 160 minus 40 equals 120 million euros because we have no or very little payment defaults. If you want to factor in your working capital component, this is what we present to the right-hand side of this slide, presenting, as we did in H1, the normative cash flow over the year 2024. First, excluding the effect of the cash outflow to purchase the manufacturing lines, which account for 117 million euros, and second, recalculating the normative working capital adjusted of the down payments and prepayment of the manufacturing lines. And at the end of the year 2024, as you can see on the low part of the slide, the operating working capital accounts receivable plus inventory minus account payable amounted 262 million euros, which is the adjusted revenues generated over the last 44 days of the year. This is therefore a 12% working capital to sales ratio, which is quite comparable with the 15% at the end of 2023 and H1. If we apply this 12% margin capital to sales ratio to the 205 million euros revenue growth in 2024, it results in the change in margin capital negatively impacting the cash flow generation by minus 25 million euros. Therefore, the normative cash flow over the period would have been plus 86.5 million euros which is 54% of the adjusted EBITDA of the year. On the following slide, we present the full cash flow statement. And as you can see on the first line below the free cash flow, it was decided in September 2024, based on the strong cash flow generation and the strong cash position of the company, to settle a share-based incentive plan in the U.S. in cash. This plan that we always wanted to settle in equity was finally paid for in cash and treasury shares to avoid shareholders dilution. We believe it was a good decision because 50% of this plan was settled with treasury shares bought at 114 euros and the remaining in cash. At the time of the transaction, Fusion Group's share price was around 146 euros, much below the early started price and even the current level. which was also an incentive to settle in cash rather than generate further dilution for the shareholders. Considering also the other cash items in the financial income, minus 14.7 million euros, the dividend payment, minus 4.8 million euros, and other items, many consisting of non-cash items in the EBDA, the change in net cash amounted to 366 million euros. Based on the net income of the group, and this cash flow generation, our Board of Directors decided to propose at the next shareholders' meeting in June the payment of a dividend of €0.60 per share. I will complete this presentation with a transparent view of the adjustments made in the set of adjusted failure versus IFRS 1, and we start on the following slides with the two IFRS... Oh, sorry. I skipped one slide. The sole net cash position, of course, yes, just wanted first, of course, to report the fact that we grew the cash position over the year 2024, and we also repaid part of the debt, notably the PGE and also a repayment of the RCS, which is explaining the current evolution and significant increase of the reported net cash from 27.2 million euros in 23 to almost 393 million euros in 24. On the following slide, as I was saying, I will share with you a transparent view of the adjustments that we made in the set of objective figures versus the IFRS warrants. And we start with two IFRS 15 restatements that account for minus 55.8 million euros. These restatements impact revenues, EBITDA, EBIT and net income, and relate to warrants, initial fair value amortization, I would say, and the average price, including future volume-based price decreases. The second set of adjustment is the revaluation of the fair value of the warrants, which is negatively impacting the financial income and net income by minus 21 million euros. The third set of adjustment is the IS21 effect that we elaborated on previously. And the fourth adjustment is the default tax effect on these adjustments amounting to 7.7 million euros. I remind that all these adjustments are non-cash, under relating to one large rollout contract in the U.S. So that's it for the financial presentation. I'll now hand over to Thierry for the 2025 outlook.

Thank you, Thierry. So I mentioned the key messages already at the outset. So I'll just say the strong momentum we've seen in 2024 will continue and not only continue but grow. For the current quarter activity growth, We see a continued growth in line with the last year's trend, so we expect Q1 growth to be around 25%. Then things should further accelerate. With an order book and pipeline at an all-time high, we have a strong level of visibility. So for the full year, we expect adjusted revenue growth of around 40%, as mentioned, to reach $1.4 billion. That should be around $600 million in the first half and $800 million in the second. And we expect VAST to grow twice as fast as the top line growth rate, so around 80% for the full year. We also expect profitability improvement to continue with adjusted margin growing by an incremental 100 to 200 basis points in 2025. And the increase of profitability should be accompanied by positive free cash flow generation. And we stay very confident on our Vision 27 strategic plan going forward. Thank you very much. And I think we can move to questions if there are questions.

Thank you. As a reminder, to ask a question, you will need to press star 1-1 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We will now take our first question. Please stand by. And the first question comes from Ben Tillman from Berenberg. Please go ahead. Your line is now open.

Yeah, there it goes. Good evening. A couple of questions from my side, if I may. First one is on VAS or on recurring VAS in particular. You have guided for 80% VAS growth, revenue growth in 2025. I was just wondering if you could give us some color how this could be split between recurring and non-recurring VAS because If I factor in the Walmart numbers, it's actually quite likely that your 160 million cloud-connected ESL will probably double. Is it fair to say that recurring bass is also going to grow with roughly 100% and then non-recurring bass should go with roughly 33%, 34%? Any color on these two line items would be very helpful.

Well, it's a very detailed question, Ben. What we can say is that we see both components of VAS growing significantly. It's not, you know, it's sure that we anticipate, you know, again, maybe a stronger growth on recurring, but at this point, it's still, you know, depending on the number of factors, we're at the beginning of the year, so it's a bit early to give this level of precision, so let's wait a little bit. But for sure, very strong top-line growth, that's for sure. We see both components growing significantly, and that's what I can say right now.

Okay, see you. Maybe second question would be on Captana in particular. Maybe you can help us a little bit, like how was the year on the software and on the hardware side for Captana in particular? Do you see strong demand for the cameras? Is it below or above your expectations that you had for 2024?

Well, we see strong demand for computer vision in retail. I think I mentioned it's going to be a very big wave. Together with DSL, it's going to be a big wave because retailers and the whole ecosystem, CPGs, need to understand what's going on on the shelves. So it's still an early stage solution. We are growing. We have very big projects. A lot of our technology, a lot of our solutions don't have a linear growth. If you think about the way EdgeSense developed, it's been a long-lasting project. And all of a sudden, it takes off. And when it takes off, it goes very fast. I think you would have seen 25, one of the drivers of, you know, in our cloud, Vision Cloud, and I mentioned Vision OX growing fast. And again, those are slow developments. There is a nature of what we do that always have the same pattern. It's slow to develop because it's based on subscriptions. It's based on recurring goals with the cloud, goes with the adoption of our infrastructure. So it's a bit slow, but then it goes quite fast. So We have no doubt, you know, computer vision and data in general, because it's really combined, you know, data analytics and computer vision is a very, very strong asset in our portfolio. It's going to grow, you know, quite fast. It's still in early stage, but you will see one of our software products already going out of this phase in 25, driving growth very much. And so you'll see the pattern that we're developing. So they're very, very promising big projects on computer vision, I can tell you. And I mentioned something that should be of interest to everyone is we are also reinventing that, reinventing, I would say, understanding how to integrate, I mentioned it earlier, computer vision inside the exchange infrastructure as an additional feature of the HN infrastructure by embedding miniature cameras on the rail, benefiting from the mutualization of power and connectivity, which is very important in the case of cameras because it's very high consumption devices. And once we've done that, it's going to be, you know, a very, very, very strong competitive advantage in that space.

Okay. That's That's helpful. Thank you, Thierry. Maybe one more question from my side would then be on memory. So as I understand, memory revenues are mostly generated in France, which is a fairly saturated market already. So I was wondering if you could give us a little bit of color maybe in terms of what demand we can expect for memory. Do you already have some pilots ongoing for international customers? So we can expect that maybe memory is one of the best software solutions that could see an uptake in 2025. And then basically the same on N-Gage. I think by the end of 2023, N-Gage was installed in 105 stores. Maybe some update on N-Gage and memory would be very helpful.

Yeah, so... Memory is already expanding outside the borders of France. You're right. It's originally a very French-centric solution. We have already won customers outside France, and projects have started in the rest of Europe, in the Middle East. We are currently building the team in the U.S. That takes a bit of time, but it's also a very important market and we're making great progress. And memory is also a transformation agent for our whole strategy, because I mentioned one of the solutions we presented at NRF, which is Vision Live, which is this sort of cornerstone data platform covering the upper layer of the Vision platform. That was developed by memory, but that's typically a Fusion data solution. So they have also a role in building the data solutions that completely combine all the data sets that we create with our IoT equipment. So there are two roles of memory. And the third one is also very important to combine with Captana because memory helps combining Captana shelf data with other type of trading data and create more insight out of that. So the memory for sure is going to be a driver of growth in VAS certainly in multiple ways actually. There is the international expansion, which starts with building the teams. And then there is also the fact that they are redeveloping a number of products. They are basically embedding data in all of our solutions. And that's a very fundamental role that was probably the main reason why we acquired this company. And Engage is an extremely promising company. platform. As you know, Engage is essentially triggered by two major innovations, but they are very recent innovations. So nobody should be expecting something to be at scale very quickly. Certainly, it's going to grow, but The two innovations I mentioned is, of course, VisionOX because it enables to connect and locate shoppers in a store. So if you think it's the agent to do navigation indoor and connectivity at the shelf edge with shoppers. And the second one is full-colour ePaper. So those two things are critical enablers for Engage. We have very nice... In fact, we hesitated showing you... a video of one, let's say, large-scale experiment, a pretty large-scale experiment that we have now, and this is starting in a very large hypermarket chain in France. But it's starting now that all the technology enablers are ready, so it will be a very exciting area of growth for us. It's very central in our strategy. because it's very fundamental for retailers to tap into this growth opportunity and profit opportunity, i.e. to monetize their traffic in their store, which is a huge asset for them.

Okay, that's super helpful, Thierry. Thank you.

All in all, I would say that we have, you know, the growth that we mentioned. So we gave a guidance and it's a combination of all these, knowing that a number of things will take off this year, a number of things will take off and be very visible in 26. And all this is, you know, is our, you know, like a chance all of a sudden takes off. And, you know, but it was very small three years ago. Nearly invisible. So that's our passion. Yeah.

Okay, understood. Maybe a follow-up question. You mentioned on Engage that you have an experiment ongoing with the hypermarket chain in France. Is that a company you did business before with? So that is a company that has already your ESL installed or is that a totally new company in your customer base and they're simply interested in Engage and something else?

We will make an announcement about this, but the great thing about Engage is that it's totally ESL agnostic, so it doesn't need to be on a retailer that has ESLs or that has our ESLs. That's the great thing about it. It's a little bit like Captana. Right now, we roll out Captana in stores that have Pricer labels or many other competitors' labels. We also have special features when they have our own labels. And certainly, Edge Sense is going to be a paramount example of perfect synergy. And I think it will be really a preferred solution in the future. But it can be an agnostic situation. So we don't need to have our own ESLs to be rolling out Edge Sense. Because it's rolling out Engage, sorry. So in this case, it's a large chain, and they have multiple sources of generations of ESLs from various, and it doesn't matter. And even some stores are with paper, so it still exists, even in France.

Okay. Okay, perfect. Thank you very much, Thierry. I go back into the queue.

Thank you. We will now take our next question. Please stand by. And the next question comes from from Bernstein. Please go ahead. Your line is now open.

Okay. Can you hear me? Yes. Yes. Yes, we can hear you. I have two questions on my side. The first one, can we give us the breakdown of Walmart and non-Walmart revenue within the Americas and APAC revenues? And my second question is that you mentioned an announced deal during your presentation and that should be disclosed during the coming weeks. May we have some color needs maybe mentioned in each region these deals are coming from? Thank you.

Just regarding the breakdown, we have a constant and very consistent policy not to give any details regarding specific customers, so we will stick to the communication that we provided tonight. We will not give more details on a customer-by-customer basis.

For the second question, I just wanted to say that we are sometimes allowed and most of the times we are allowed to to mention at some point and to make press releases about our customer projects and rollout contracts. So sometimes it all depends on the customer. So I just was mentioning that the very high order entries were including a number of deals in Europe, in the US, a number of logos were on the chain because those are the deals that we had announced. publicly and there were others that were not allowed to announce and that we will be announced in the future so obviously if we're not allowed to announce I'm not going to give any flavor we'll just have to wait but it's just to say yeah it was let's say the the logos that have been announced are not all the wins so there are the wins but you've got the the order entry numbers anyway so that that's that's included And I also mentioned what was not included in the deal signed before the end of the year, i.e. a very big €1 billion final tranche of the Walmart Framework Agreement.

Okay, thank you.

Thank you. We will now go to our next question. Please stand by. And the next question comes from Aurelien Sivignon from AutoBHF. Please go ahead, your line is now open. Hello, Aurelien. Hi, gentlemen.

Congratulations for the results. I've got three questions, mainly on the outlook. Yes, can you hear me?

Yes, we can hear you, Aurelien.

Hello, can you hear me?

Yes, we can hear you.

Okay. Sorry for the lag. Good evening, gentlemen. I've got three questions on the outlook. First, expected growth acceleration in 25 seems stronger than expected. And I was actually wondering if it's might also come from a faster rollout of the second trench with Walmart or this is only the result of the wins you just mentioned recently. Then second question on margin development this year, do you expect the variable cost margin to grow again in percentage terms in 2025 Or should we, let's say, rather assume the 100 to 200 bps increase of ABT margin would be more likely the result of a lower OPEX to sales ratio? And finally, regarding investments, excluding assembly line, 24 capex to sales ratio was quite lower than the 5% to 7% sweet spot. So should we expect a more normative, a more normalized pace of investments going forward in 2025? Thank you.

We'll take the two subsequent. Regarding the growth acceleration, the answer is no. It's not done and it's not based on the, let's say, the final tranche that was signed before the end of the year because this will more impact 26 and beyond. So it's not based on that. It's based on all the order entries of the year and the planning of deliveries and the and ramp up, which we have a certain visibility on now. And so that's the result of the visibility we have. So it's nothing that was really sort of new or recently changed, I would say. For the second question, I'll let maybe Thierry.

Yes, on the ABDI margin improvement of 100 to 200 bps, that will mainly come from VCM. We will, of course, monitor the performance over the year. We need to invest in OPEX in order to be able to be really present in the field and capture all the opportunities, both in Europe and in the US. So most of the improvements will come from VCM, maybe to a smaller extent from OPEX. And CAPEX, yes, you're right. It's below the 4% to 7% guidance. Let's keep the 5% to 7% capacity to sell ratio guidance so far. It's true that this year we were a little bit below. I would like to keep this guidance for the coming years.

Thank you. We will now go to our next question. Please stand by. And the next question comes from Valentin Paul-Johann from Stifel. Please go ahead. Your line is now open.

Good evening, all. Do you hear me well?

Yes. Good evening.

So congratulations for your excellent results first. And I have a few small questions, please, maybe more on industrial matters. Regarding production lines, could you please confirm that Mexico is still a relevant location for the three remaining lines to build, given the current trade situation with Trump? And I'll let you answer this question and then I will... follow-up for the next question.

But the lines are not exclusively in Mexico. Currently, we have a combination of Vietnam and Mexico, and we are not aiming to have all the lines, all the three additional lines in Mexico. That's a choice to be made. That would be probably a combination of several locations and not only in Mexico.

Okay, so Mexico and Vietnam, and is it possible to build a line in the U.S., or is it completely impossible given the economic questions?

No, no, it's not impossible at all. So we have, as you know, we have two, as far as the U.S. market is concerned, right? So because we're talking here about that. So as far as the U.S. market is concerned, we have two main EMS partners who are both absolutely able to operate on the three geographies that you mentioned, and many others, by the way, but in this case, we're talking about that, Vietnam, Mexico, and the U.S., right? So the scenario of moving lines in the U.S. is under study. It's, you know, it's not difficult to We're quite flexible because we already have two geographies operating with these two partners, with both of the two partners. So it is quite a good position that we have in order to be flexibly adapting where we assemble what. And obviously those two partners can easily assemble in the U.S. when needed and if needed. Let's wait until we have a clear view on what's the impact of the tariffs and everything. So we're in a good position in that respect, and we feel very confident.

Okay, and maybe a question about your pricing policy, because if tomorrow the US were to apply high tariffs, that will weaken the economic equation for your hardware solutions. Do you think it will make sense, probably, to adapt your pricing so as to transfer the value added from the tag itself to the or the digital system to the use of the software or the communication protocol or something like that in order to invoice as much as possible from the American entity for a local service and to cross the border with hardware with the lower price possible to reduce the impact of tariff. This will not be a debatable bypass given that following the change in tariff policy, the profit initially recognized in Mexico or Vietnam or whatever, will then be recognized in the U.S. or it will represent a win for the U.S. country. Can you give us some color on this, please?

Well, if you can send me your resume, because I think we might be benefiting from your sales tactics and pricing tactics. No, it's a good point. I mean, there is a number of things of levers that we can investigate, and we are exploring a number of things which are on the manufacturing side, on the pricing structure side, and a number of things are possible. And I remind that, anyway, we have contractual provisions in which change in tariffs is not to be bared by us, but by our customers. So it's also another type of protection. But you're right, it's one of the tools that we can, or the instruments that we can use in the future to be moving, sort of basically moving value and pricing based on that type of criteria. But you mentioned there is one thing, and we're not too worried, is that the tariff, especially given all the flexibility we have to manage that, that would really be a problem in terms of the ROI. Because we feel the ROI of our solutions is quite significant. And that is also another, I would say, type of protection.

Okay, thank you.

Thank you. We will now go to our next question. Please stand by. And the next question comes from Laurent Gelbert from BNP Paribas. Please go ahead. Your line is now open.

Yes, good evening, gentlemen. So a couple of questions on my side. The first one regards the order index for the fiscal year 2024. If we exclude Walmart, which has been a massive win for you, what is the underlying trend in terms of order index? That's the first question. The second one is, do you expect to be able to clinch large retailers in the U.S. in 2025? following your NRF exhibition and the fact you were mentioning that half of the top 100 companies were attending your event in that area. And the last point regards the Trump tariffs. So if Trump decides to increase the tariffs in Mexico by 25% or whatever, we don't know really, do you expect your guidance to be bulletproof, any kind of tariffs being implemented by Mr. Trump?

Yes, so regarding your first question, it's true that Walmart is a big driver of our growth, and that's normal. And all the more since in 24, as you know, there is a temporary, let's say, decline in the revenue of Europe because we were having also a cycle effect of a very large rollout that was sort of that is ending. And so there is a decline on that side, which is normal, and it's gradually compensated by all the new wins. So all in all, we see very clearly, going forward, all the segments of our business growing. So Europe, which obviously is a non-Walmart part of business, because Walmart is not any more party in Europe, Walmart, Europe growing, then the rest of the world, Walmart growing fast, obviously, non-Walmart growing fast, because it's a very balanced growth that we see in the future. Our pipeline, you mentioned it, I mentioned it, our pipeline is very large. Actually, right now, I think in our pipeline, we have more than 80% of the top 20 retailers which represent A very significant part of the potential because, you know, the top 20 in retail represent 85% of the revenue of the top 50. So, you know, it's highly, it's very important. And we basically are either a partner or we have in our must-win list the others, but more than 80% of the top 20 are in our pipeline. And so, yeah, the pipeline and the backlog has never been, you know, it's at an all-time high. So we expect growth in all segments of the business. And that's what you can say now. That's your first question. Then your second question, I think, or the third question. Yes. Yes, so obviously the consequence of that is, yes, we expect to sign contracts and large contracts in the U.S. in 2025, in 2026, in 2027. You know, the market is just beginning, to be frank. So it's something that is absolutely not target. And the third one was about the... What is the tariff, right?

Does it challenge the guidance?

No. I think for many reasons. First, we are very flexible in many ways from, let's say, production location, as I explained, and right now we see that Mexico and Vietnam are are in different situations. And by the way, nothing is completely sure in either position, so it shouldn't change the guidance. We see most of the customers that we are basing our growth in 25 very, very convinced about the ROI of the solutions and not in a way that we see any sign that if there was a tariff increase, let's say there was, that it would change the pace of rollout and obviously would have no impact in the European business. I'm not only talking about the U.S. So in that respect, we see because of the risk mitigation on the one hand, on the manufacturing side, and because of the substantial ROI of the solution, we see no risk in the guidance. Based on that... that specific risk.

Maybe on that one, I mean, a follow-up question regarding your solution, headchains, and the fact that you get, you will be able to pull out the solution with light harvesting within the store. Do you see your competitors coming closer to yourself in terms of solution, or are they still, according to you, miles away from what you can deliver today?

I, I think we, we are, uh, we are quite ahead because, uh, and, uh, so, but the nature of competition is always to, to, to, to try to close the gap. But, um, we have good reason to think we were really, uh, uh, ahead in that because, you know, it's been, uh, been working on that for, uh, for, uh, for a while and, you know, quite a number of years. Um, we are also, you know, in a very unique situation. I don't know many of these cases where a very significant part of our growth and of our business is going to be based on our newest and most advanced and most differentiated solution. It means we are building not only technological advantage, but at the same time, we're building a scale advantage which is massive because we are rolling out the largest retailer on the planet. Very often, your star products are growing, but they are still small. And so in that respect, you are still on the same line. Here, we are building at the same time very strong technology advantage and a scale advantage. So we always are a bit paranoid, and only paranoid survive. You know that in technology. So we're careful, but we think we've never been in a more favorable position as now, both from the market maturity and market demand and from our own intrinsic position.

Thank you.

Thank you. We will now take our next question. Please stand by. And the next question comes from Adam Gildea from Bank of America. Please go ahead. Your line is now open.

Hi. Thank you so much for taking my question. Just a quick clarification question on my side. On slide 20, when you went through the breakdown of VCM improvement, of the 590 basis points improvement that come from ESL and JS margin, would it be possible to give a little bit of color on what percentage or a broad split of that between recurring VAS increasing as a percentage of overall VAS revenue and maybe any improvement in the actual ESL hardware margin? Thanks.

Well, I will not give you a precise figure, but the flavor is that it's largely coming from the hardware. But just keep in mind that our capacity to be able to be strong on the gross margin is coming from the fact that we're able to combine solutions which are both hardware and VAS. That's because customers are interested in potentially buying VAS later on, that they are also selecting us on hardware, and that we succeed in getting some product differentiation, and therefore some pricing power. So it's always very difficult to be able to make a clear split between both, but definitely, yes, it's true that we have this year, again, good improvement on the hardware business.

Okay, that makes sense.

And it's driven by the, you know, the strong innovation in the hardware. You know, we should probably rename all these ESL and DSS. Yes. And probably this will become, you know, sort of IoT division because it's... Okay, we'll take two more questions.

Yes. Thank you. We will now take our next question. Please stand by. And the next question comes from Johannes Reis from APIS Capital GmbH. Please go ahead, Johannes, now open.

Yes, good afternoon, both theories. Congratulations, two really outstanding numbers and a really great forecast. Only two short questions from my side. The first question regarding the impact of the currency. In the past, the strong dollar was always negative. Will in 2025 this turn around? If the dollar gets further strength, is it good for you, or is it still a track? And a second question, maybe on the pipeline you can update a little bit how maybe the pipeline looks outside the traditional groceries business, which is by far the largest, but maybe how much the other verticals in the retail now start to pick up.

Hi, Johannes. Good question on the currency. Actually, it turns out that in the past, it's true, we had much more cost in dollars than revenues. Now we've got some profit. So the stronger the dollar, the better it is for us in terms of margin. So yes, it's true that when the dollar is stronger, it is supporting the improvement of the profitability.

So there is a chance that the dollar...

get further strengths therefore maybe good support and on the pipeline yeah on the pipeline I think so we see already looking looking back we see already a very strong trend particularly in Europe where we expand in literally all the verticals of retail and the And what we do is we also try to adapt to those verticals with very verticalized and special solutions. I mentioned a few during the call earlier. But so we're developing – we're very serious about the non-grocery. Obviously, there are many, many sort of obviously – Even in Europe, there are still a very large number of retailers to still penetrate in terms of in the grocery area, or they say the food in general, but including convenience stores, hard discount, et cetera, and general supermarkets. But there is a very big potential in fashion, in non-food, in specialty, in eyewear, in plenty of them. We have a very, very large portfolio of quite specific solutions. For instance, we have developed, and it's very relevant for a number of retailers in the world who are absolutely sort of greenfield for us right now, solutions where in the same device you have not only the display, not only obviously the pricing function, but also the security, the inventory, and the location functionality, all in one device. Now, you can think of so many areas in retail where this is critical, and this is just new. So we have plenty of growth avenues in many other areas of retail which have, you know, we're just scratching the surface. And this is because we are managing, you know, growth in the long term. So the question is, where is going to be our company in 20, you know, 7, 20, this we know, but in 28, 29, 20, 30, and retail is a huge sector with many, many, so I just wanted to illustrate, yes, the pipeline is big and we're working with, I mentioned automotive retailing is a great sector on which we have solutions that are starting to ramp up. It's a very big one. You know, sort of, it's a, It's something for the future, not everything we scale. We've given our growth target for the year and our target revenue for 27. But there is a lot of things going on behind those plans and a lot of very exciting solutions to optimize retail in tens of verticals.

Super. Thanks a lot.

Thank you. Thank you. We will now take our last question. Please stand by. And the last question comes from Gil Crispel from Alize. Please go ahead. Your line is now open.

Good evening, Thierry. I would like to extend a usual congratulations for the results and the momentum, the perspectives. Thank you very much for taking my question. If you allow me, I'll have two quick, very quick one for Thierry and one for Thierry, well, one for our, two for our beloved CFO, One is, there is an IFRS restatement related to Walmart contracts. I just wanted to check whether it would continue over the new tranche, over the 4,600 stores, or whether this was something, so is it about a cover contract? or was it related to the first two phases? And then I'll go on with my two follow-up questions.

On this topic very specifically, so I mentioned that there is an impact which is 55.8 million euros negative impact in IFRS. These two restatements combined, yes, they will continue up until the end of the rollout. So it's not only for experts to face, that will continue up until the end of the full completion of the rollout. Okay, for all Walmart stores, correct? Yes, yes.

Thank you very much. One little one still for you is, could you give us the status of the rollout with this large customer? You mentioned 200 customers. stores at the end of H1. Where did we stand at the end of H2?

We had a kind of a commitment with Walmart to deliver to Walmart 500 stores, which was the first tranche, the first SOW, and we stuck to this commitment, so we delivered 500 stores to Walmart.

Excellent, and thank you very much. And the last one is a little wider. Either of you may shed some light. Fusion has been deploying its technology based on both open standards and some more closed. Well, and I guess Walmart was part of the pressure to open some, to use some blue, et cetera. Now that Vuzion is getting bigger and bigger, could you give us some light on what Vuzion's position is going to be against large software editors specializing on retail, be they ERP or more specific or dedicated software, such as price optimization software, etc. There is a whole array of software editors, and I would be most interested if you could shed a little light on this. Sorry for this being possibly a little open question for a conclusion question, but thank you for your light.

Yes, so it sounds more like a two-hour conference than a closing remark. No, but I would give you the short version of the answer. We are absolutely with a clear strategy of becoming, let's say, an enabling infrastructure. So it means that we do develop a number of services on the platform, but we You mentioned, sorry, I mentioned in NRF how many booths on which we were positioned. It was, of course, our booth. We had one of the largest booths of the whole show, but we had 10 other booths that were displaying our solution. And I mentioned it was really a very large tech and software companies, including companies like Blue Yonder, which fall exactly in the category. Why? It's because We are digitizing the store. We're datafying the store. But this is an infrastructure that provides data for a large array of software vendors who can develop use cases around understanding what's on the shelf, understanding who is in the store. And so there are multiple plays around store efficiency or shopper engagement. And retail media. So we see ourselves as, you know, an infrastructure partner for these companies. And so we're working increasingly as a platform. And we will in 25 announce new strategic partnerships where our role is to be a platform that is enabling because, you know, that's what's missing right now in the CPG retail value chain. What is missing is what? is data in the store. It's opening the light in what's going on in the store. And that's really what we try to do. Not to do all the use cases. There are plenty of partners who can create value with what we deliver. And our positioning is this one. So I said it's a short answer, so I'll make it short. But I hope it does address the fact that we are going to collaborate with more and more vendors, we announced a partnership recently with a company called StrongPoint, which has a great solution in terms of in-store fulfillment. It's much better for us to have these players trying to build in-store fulfillment applications on the base of our platform, and that's a win-win situation where we share value and create value much faster. in the world. So that's our strategy.

Thank you very much.

Thank you. Nice being with you and see you soon. Well, soon. Actually, end of April is going to be our next conference. So in the meantime, have a great evening or afternoon for the U.S. auditors. Thank you. Bye-bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.