VusionGroup

Good day and thank you for standing by. Welcome to Views and Group H1 2025 results. At this time, all participants are in the 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 one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Olivier Guerneau, Fusion Group's Investor Relations Officer. Please go ahead, sir.

Thank you very much, operator. Ladies and gentlemen, good afternoon, and welcome to our 2025 first half results presentation. With me today are Thierry Gadot, our Chairman and Chief Executive Officer, as well as Thierry Lemaitre, our Deputy CEO, Corporate and Finance. Thierry Gadot will make some brief opening remarks on the group's business performance, which we already presented to you at the end of July. Thierry Lemaitre will then make some detailed comments on our first half financial performance. And Thierry Gadot will conclude with some remarks regarding our full-year outlook, which we are upgrading today. After these remarks, we will be happy to take your questions. As a reminder, some of the information to be discussed 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 available on our website after the call. And with that, it's my pleasure to hand you over to Thierry Gadot for his opening remarks.

Thanks, Olivier. Good afternoon, everyone, and thanks for joining our conference call. I'm very pleased to present to you, along with Thierry Lemaitre, the second part of our H1 results, which is dedicated to the financial performance I will therefore hand over to Thierry Lemaître very shortly after just a brief reminder of the main highlights. So, Vision Group achieved an excellent first semester ahead of our guidance with 51% growth in adjusted sales at 649 million euros. Order entries were up 22% for the first half and the vast revenues doubled year on year at 91 million euros. Thanks to our strong business model and operating performance, our profitability continued to increase sharply, with a 300 basis point increase in EBITDA margin versus H1 last year. And we delivered a sharp increase in operating free cash flow, even when neutralizing the prepayments on large contracts, as well as a strong increase in our net cash position. We are confident also in our growth visibility for the rest of the year and have therefore raised our revenue and profitability targets for the full year. I will come back on this last point, but before I hand over to Thierry Lemaitre for the detailed comments on our financial performance.

Thank you, Thierry. Hi, everyone. Let me take you through the financials for the first half year. Let's start with revenues, which, as you know, increased by 51% in adjusted terms, driven by a strong traction in the US, showing 134% adjusted sales growth in H1. Vast revenues increased twice as fast as total revenues at 91 million euros versus 44 million euros in H1 2024. Vast revenues represent 14.14% of total revenues at the end of H1 this year, versus 10% one year before, and this has, of course, a positive impact on profitability. Profitability, in fact, also increased, driven by the variable cost margin. The adjusted variable cost margin reached 200 million euros in H1 this year, which is a 66% increase versus H1 last year. It is also almost three points more than the adjusted VCM rate last year. And this increase is mainly due to the positive mixed effect, which I mentioned before, between VAT and ESR for 2.5 points, and also a continuous increase in the overall profitability of our solution for 0.7 points. The forex impact is limited at minus 0.3 points on the VCM rate. In terms of cash inflows and outflows in USD, almost balancing each other. On the adjusted EBDA side, the trend is similar with 84% growth between H1 this year and H1 last year. The adjusted EBDA margin grew three points and reached 16.7 points in H1 2025, driven by the variable cost margin improvement and the slight decrease of the OPEX ratio by 0.2 points. Below EBITDA, the financial result reaches plus 6.1 million euros in adjusted terms. Thanks to the level of cash and the decrease of the interest rates, the financial income from cash investments exceeded the bank interest expenses. The group also incurred 2.5 million euros exchange gains. This leads to a cash financial income amounting to 6.3 million euros. As you know from the past semesters, the group is also booking IFRS restatements relating to the fair value of the warrants granted to Walmart and the IAS 21 impact regarding the unrealized Forex impact on the intercompany balance between the US and the parent company. They both impact the financial results and show a net non-cash negative impact of 20 million euros in the IFRS accounts. Capets now. They reached 98.5 million euros in H1, of which 76 were funded by customers. The capped funded by the group stands at 22 million euros in H1, or 3.4% of adjusted sales. Let's now have a look at the impact on the cash flow. In H1, the group generated a significant 120 million euros increase in its net cash position. The cash position exceeds the financial debt by 513 million euros at the end of June versus 393 million euros at the end of December last year. This increase in the net cash position is mainly coming from the free cash flow, which reached 192 million euros in each one this year. We made the same exercise as the previous semesters and calculated what the free cash flow would have been without factoring in the down payments and the manufacturing lines funded by the customers. And this shows a 58 million euros restricted free cash flow and a 53% adjusted EBITDA to free cash flow conversion. This calculation takes into consideration the operating rating capital at the end of June, which is 195 million euros or the equivalent of the last 21 days of the semester, which is also 6% of the annual sales. The other items impacting the increase in the net cash position of the group are the cash impact of the financial income for 6.3 million euros, the shares bought in the BUE placement for 16 million euros, two investments that the group made in H1 for 9 million euros, the dividends paid in H1 for 9.6 million euros, and some non-cash expenses impacting the EBDA and cash expenses relating to the performance share plans for a total of plus 12 million euros. And the last item, the impact of the volatility of the euro dollar exchange rate also significantly impacted the cash position in dollars for 55 million euros. This is a negative impact, and this is resulting from the conversion impact only because, of course, we will not convert these dollars in euros, but we will use them to pay future spending in dollars so there is no actual loss of value of the cash. If we now have a look at the trend and the coming trend, because I understand this is a question for some of you, we present on the following slide the total free cash flow in H1 this year at 292 million euros and H1 last year at 203 million euros. Within the free cash flow, we highlight the operating free cash flow defined as adjusted EBITDA minus CAPES funded by the group. We believe this is a good indicator of the cash flow of the group because it clearly shows the cash generated by the group before any time in impact of the working capital on the pre-funded CAPEX. It includes both the operating working capital, inventories, accounts receivable, and account payables, and the non-operating working capital, which is mainly the down payments. It is also excluding the prepayment by customers of CAPEX and the associated cash outs related to this CAPEX. This financial indicator increases significantly. It increased from €31 million in 2023 to €116 million in 2024, and it increased by 147% in H1 from €34 million to €84 million. This financial indicator should keep on growing in H2 this year and beyond. What you can also see on the graph is that the impact of the down payments, collected minus reversed, and the customer-funded CAPEX prepayment collected minus the cash invested for the CAPEX is positive in H1 for 108 million euros, but it is less than it was in H1 last year at 169 million euros. This mainly comes from lower down payment collected in H1 this year, and this trend should continue as the group will consume down payments. So what is the medium-term trend? The group should keep on generating a positive operating free cash flow consuming down payments, and the net cash position should remain positive. This positive net cash position is, of course, an asset to pursue the group's dividend policy and the funding of potential external broad projects. So as a summary, this first half year showed a very strong financial performance with a significant revenue growth and profitability improvement and an increase in net cash position. I will now hand over to Thierry for the outlook.

Thank you, Thierry. And as I said earlier, as we speak, our visibility is quite high for the rest of the year. We increased our targets for the full year. Our new annual revenue target is now around 1.5 billion euros on adjusted basis, compared to 1.4 billion previously. which represents a 50% growth versus 40% previously. We also believe that we can exceed our initial target of 80% growth in vast revenue for the whole year. We now also target an adjusted EBITDA margin increased by 200 to 300 basis points over the whole year compared to 100 to 200 basis points previously. This increase in profitability should be accompanied in theory stress this point just before, buy positive free cash flow generation for the full year. Finally, based on our strong backlog and pipeline, we're also confident on growth perspectives for next year. With this, Thierry and I are happy to take questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now go to our first question. One moment, please. And your first question today comes from the line of Benjamin Tillman from Barenburg. Please go ahead.

Hey, good evening. This is Ben from Barenburg. Thank you for taking my questions. Three, if I may. So first one is on the target for 2025. So in H1, you had an adjusted EBITDA margin of 16.7%, and now you're raising the guidance. So I was wondering if you could give us a little bit of color. Where exactly is the operating leverage coming from in the second half of this year? Is it mostly the VAS outgrowing significantly the ESL revenues, or is it coming from both segments? That's the first question. Thank you.

Hello, Ben. Yes, on this topic, I think that the trend that we saw in H1 will continue in H2. You're right. There is an overall positive impact coming from the vast ESL mix, which is driving the variable cost margin up, and also an overall improvement of the profitability of our offers, driven by scale effect and cost optimization.

essentially driven by the variable plus margin and to a lower extent by the OPS ratio you said you had a second question Ben yes second question would be the typical question you guys get maybe an update on the Walmart situation and Can you give us any update how many ESL or for how many stores did you deliver ESL so far? How is the rollout going? Any issues in terms of execution that popped up in recent weeks?

No, everything is going fine. We are always a bit reluctant to talk about nominative questions about our customers, The program, this one, is obviously a bit more famous, so it's going well. Our four lines, by the way, or set of lines of production are now, as I speak, fully operational, and so the program is at a significant pace. So there is significantly more now than 1,000 stores. sold and it's going fast and it's going well. So, yeah, that's what I can say.

Okay, perfect. And then maybe third question, if I may, is a general update on orders coming from EMEA clients. I mean, EMEA has a little bit been under pressure over the last 12 months, so any color from what regions in particular or roughly when we could expect new orders. I remember in the latest earnings call you said that you expect that, let's say, the downturn in EMEA is over. You expect orders to grow in H2 year over year. Is that still the case? And yes, in what regions? Is it fair to say that you announced Eroski in Spain, that this is something where we could expect more adoption to increase? Is it going to be in your home market? Is it going to be the UK? Any color on email would be very helpful. Thank you.

Yes. So actually there was already, as I think we mentioned earlier in July, a growth in order entries in Europe. So the downturn, I think it's a little bit, let's say, let's not forget there is comparison basis issues here because we've been going extremely fast with very accelerated rollouts. so it gives a comparison basis which looks like a downturn, but I think the business in Europe is showing good momentum. There is an excellent pipeline. We've announced a number of deals, including also in the UK. As you remember, we're optimistic about new deals announcement in the near future. Our win rate is excellent. Of course, there are some macroeconomic headwinds, you know, in Europe, and everybody knows that. That can slow a bit decisions, but we definitely aim at reversing the trend during the course of this semester. And yes, and I think the momentum comes frankly from many areas. There are, you know, for instance, the central Europe, Germany, UK, But also the countries in which we have a very significant installed base are actually delivering growth because they have a lot of renewals of installed base to come. And since we have a lot of innovations over the past five years, it's a growth driver for us. Yes, the macroeconomic headwinds exist in Europe. It's slowing down investment in some cases, but there is a need for our solutions. And so the prospect is good for at least a part of our solutions which really addresses the challenges, which is reducing costs and reducing OPEX for retailers in particular.

And then maybe one last question. You mentioned that out of the four, EdgeSense manufacturing lines are now up and running. What would happen if you would sign another rollout in the U.S.? I mean, I know Walmart is a different ballpark, but you could use those lines to also manufacture EdgeSense for a customer that is not Walmart, or would you require a fifth line to achieve that? Because I would assume that all of the four lines you have now up and running, they're running at 100%. close to 100% utilization just for Walmart. So how would that work if another Tier 2 retailer in the U.S. would decide to install your ESL?

Yes, you're right, Ben. Actually, the four lines, we consider that they are fully dedicated to Walmart. Just keep in mind that we have also invested to a much lower extent but we have also invested in our own line of production, which means that it gives us the flexibility to have kind of a buffer period between the time when DMS would invest themselves, because the model is still the same. We want to remain really a tapet flight. So by definition, it's up to DMS to invest. If by chance we were to sign a contract with a limited visibility, we still can produce H-Sense on our own manufacturing lines.

Okay. Okay, cool. That's it from my side. Thank you. Thank you very much, guys. Thank you, Ben.

Thank you. As a reminder, if you wish to ask a question, please press star 1 and 1 on your telephone keypad. We will now go to our next question. And your next question today comes from the line of Flavien Bordemont from Bernstein. Please go ahead.

Hello. Good evening, gentlemen. In the presentation, you said that UBCN margin improved by 250 bits. Can you please elaborate on that? What made you draw this improvement? Is it due to the volume, the increase in volume of ESLs sold, or is it mainly because of the surge in non-recurring VASC revenues? My second question is, what did motivate you to increase revenue guidance? Is it because you are going to sell more ESL to your main customers, or is it because of something else? And lastly, I heard in the news that you were considering a dual listing in the U.S. Can you tell me if it's true or not? Thank you.

Hello, Flavien. So thank you for your questions. I will take the first and the last questions. And just on the first question regarding the VCM rate improvement, so we mentioned actually it's a combination of three items, two being positive, the first one, which is the mixed impact. So, of course, since we have 14% of our revenues, which are VAS instead of 10% last year, and we've got a much better margin on VAS versus ESL, is driving the VCM rate up. And this is explaining approximately 2.5 points increase in the VCM rate this time. We also have globally a better economic environment for ESL and VAERS. It's approximately 0.7 points. And then we've got the Forex impact, which has a limited but a negative one, minus 0.3 points. So all in all, that is explaining the change in the VCM rate between H1 last year and H1 this year. The last topic regarding the dual listing, I don't know where it comes from, but actually I can confirm that we are not working out this scenario currently. So we don't intend to get a double listing, dual listing in the US. And can you just remind us the second question? For the new guidance.

I wanted to understand why you increased your guidance. What motivated you to increase it?

Well, I think, you know, we were ahead of our guidance already in H1, but as we explained in July, we wanted to carefully, you know, analyze the various effects which are not all going in the in the same direction of the dollar going down, which has an effect on our revenues because of the revenues in dollars, but at the same time there is tariff. And so, you know, we were ahead in H1, so mechanically we could have concluded that already in July, but there were a number of other effects that took time to evaluate. And so it is not something really new, but it's just a careful evaluation of where we are now. And so we see now we are confident on the same H2 roughly as was, you know, kind of anticipated, plus a little bit more. And then the advance that we have in H1. So that's why. We waited until today to make it, but nothing really.

And could it be linked to a contract announcement by the end of the year?

No, because usually the contract announcements don't impact the short-term revenues, so it would be totally different. But, you know, we have other entries on a daily basis. We have news on the business on a daily basis. So, I mean, but it would not be that because, anyway, it would not have an impact on 25 if there was anything, you know, very significant announced or that would not impact.

Great. Thank you.

Thank you. Once again, if you would like to ask a question, please press star 1 and 1 on your telephone keypad. We will now take the next question. And your next question comes from the line of Julie Kripal from Alizez. Please go ahead.

Good evening, gentlemen. Thank you very much for taking my question. I'll have only one, actually. It's regarding the Walmart contract. I'm not looking for specific customer infos. but I just wanted to confirm on the contract that the midpoint of the contract, you remember that the way you counted IFRS meant that the midpoint would be significant, and looking at the current ramp-up of your deliveries, when would you expect this midpoint of the contract targeting, let's say, 4,600, I think, point of sales, and is it legitimate to expect it somewhere in Q1 or Q2 26?

Gilles, I think that you are referring to the impact of the weighted average price in IFRS. Exactly. Okay. And we said that it should reverse in the course of H2 this year, and we confirm it is the case. Okay, H2, 25. Yes, correct.

Thank you very much. That's all for me.

Thank you. We will now take the next question. And your next question comes from the line of Laurent Gelbar from BNP Paribas. Please go ahead.

Good evening, Laurent speaking. Three questions on my side. So the first one on the guidance upgrade regarding the turnover, is it due to faster rollout with your main clients or it is basically broad-based with all your key clients? The first one. The second one is, can you comment on your deal with Nielsen IQ, your partnership? How is it going? And if you see better traction on Captana? And the third one relates to your VAS upgrade regarding the guidance. So is it recurring VAS or non-recurring VAS? And last point, you said, Thierry, you are comfortable regarding your your level of growth for next year. Can you elaborate a bit on what makes you comfortable for next year, please?

Well, I'll start with the last question, because I think the answer is very simple. We have a very large backlog and a large pipeline, weighted pipeline, which makes us very comfortable on the growth perspective for next year. So that's very simple. strong visibility, and we are confident enough to make that statement of solid growth for next year. Regarding Nissan IQ, we just signed it very recently, a few months ago, so we are now entering pilot phases in some countries and working on the the joint offering, et cetera. So we are more in the early stages of this partnership because it's a partnership that includes developing joint offers, so it takes a bit of time. But it's moving well, and we are entering into operational pilots now. And yes, Kaptana, I think I gave a bit of color also in July. Kaptana is now, you know, implemented in a number of retailers in many countries. We have, you know, momentum. We're improving the solution a lot. And we have, we mentioned a few developments in some accounts like Carrefour, but there are others. and in several countries. So Kata is a very promising solution. And, you know, the partnership with Nielsen will also contribute to the growth and the rollout of this computer vision in retail. And, yes, and, you know, the statement on Vaas growing beyond the initial target is, you know, it's because our model roughly is to bring value-added services on all our customers. When you grow a little bit faster, you always have also an impact on the VAS generally. So there is a natural impact, positive impact of having an upgraded revision on the total revenue, and it implies also that we are positive on the VAS impact.

And regarding the top line upgrade, is it due to faster rollout at your main client, or it's broad-based?

Yeah, I mean, it's generally speaking, as I said, you know, it's all the clients, the ones who are really in the process of rollout, tend to try to accelerate because they know the return is... They have tested it at scale usually. They are in the process of rollout, so they can go maybe a bit faster. So it's that, but it's also some deals that we signed and some of them we announced. I said that we were optimistic in new deals also in the near future. So it's a combination of things where we now have sufficient visibility. based also on the momentum, the reality of the momentum of each one. So I think we gave a, you know, quite an aggressive, I mean, an ambitious target at the beginning of the year. We are, you know, revising it upwards. Now we are a few, you know, eight, nine months into the year, so we have a bit more visibility. But it's a combination of factors which are both on ESS and on VAS, and so it's... It's a bit of everything.

There is not one element. And maybe a last one regarding the tariff situation in the US. I think you were trying to make your products exempted from potential tariffs. So could you elaborate on this? It has been changing or not? And if you have tariffs, have you changed your mind on how to handle them?

No, I think that currently we still have an exemption due to the fact that the product coming from Mexico are complying with the USMCA law. So that's it. But there is not much more that you can do. So that's the situation so far.

OK, thank you.

Thank you. Your next question comes from the line of Benjamin Tierman from Barenberg. Please go ahead.

Yeah, hi, guys. It's me again. Just one quick question on your non-recurring and non-cash items in the P&L, which was 21 million in H1 this year and last year. It was a little bit more than 9 million. And I was wondering, it's written in the press release that most of that was related to IFRS 2. I was wondering whether any earnouts related to your acquisitions that went into that as well, because if I remember correctly, I think in H124 last year, there were some earn-outs related to the acquisition of memory included, and I was wondering if that was the case this time as well. Thank you.

No, there is no such item this year, so it's entirely due to the way we need to account for the performance share plans under RFRS2.

Okay. Okay, cool. That's it from my side. Thank you, Thierry.

Thank you. We will now go to the next question. And your next question comes from the line of Valentin Pauljan from Stivel. Please go ahead. Good evening, everybody.

Do you hear me well? Yes. Perfect. So I have two questions on my side, please. The first one on margins and the second one on capital allocations. So for the first one, Just if you could please confirm that you spent around 300 million euros in the four production lines currently dedicated to Walmart, which are amortized over five years, therefore generating around 60 million euros of depreciation that are not included in your VCM calculation rights.

So we confirmed that the total amount that is funded by Walmart is $320 million, that it is not fully invested yet in H1, but it will probably be fully invested by the end of this year. And yes, it is amortized over five years. And of course, since it is amortization, by definition, it comes into the P&R on the depreciation and amortization expense line, so it's not included in the VCF.

Okay, perfect. And about the capital allocation, because you have a lot of cash currently, and you will stay cash-rich, even if it will decrease a little bit due to the unwinding effect of the working cap, but Did you define an M&A budget and how much is it if it is defined and how fast you ideally would like to deploy it and what would be the perfect target? I mean, what kind of solutions or technologies are you looking at and in which geographies you are targeted? Any granularity on the M&A policy would be helpful.

Yes, so I will answer on the first one, which is, I would say, the capital allocation policy, and I will leave Thierry Alvarez on the kind of M&A or external growth project that you might consider. First of all, you know, we said that our policy is to accelerate the growth when possible through external growth projects. We said that we always want to remain below two times EBITDA. And so far, when you have a look at the project that we are considering, there is no project which is going to lead us to two times EBITDA net debt. So we still have a very strong firepower to do some M&A deals that we do not consider to do in one time and that we do not consider to do in one or two years. So we've got multiple projects, different sizes. And of course, some of them could be funded through that. But at the end of the day, it's really very unlikely that we'll reach two times APDA in debt very soon.

Yes, and regarding the potential things we're looking at, I mean, we've always been looking at the possibility of accelerating the development or the deployment of our strategy. We saw that, what was it, two years ago, three years ago, with Memory and BeLive. We look at things that essentially grow, I would say, the Fusion data. So we have, you remember, we have three main divisions, Fusion IoT, Fusion Cloud, and Fusion Data. It's essentially around the vision cloud and the vision data, so essentially the vast area which we want to accelerate, and there are three areas, the analytics world, retail analytics, retail media, which is a big topic going forward, and obviously AI. So all this is the core of what we look at, with always the same sort of focus We are about modernizing the physical, you know, part of commerce, so the physical stores. That's what we do. We transform them into data assets, into, you know, digitized assets, into very automated data driven. So that's still the same focus. There's no diversification away from that. We really focus on that, but we build a portfolio that allows us to really maximize the impact for our customers. and also simplifies the digitization by bringing, you know, different parts that are worth more than the sum of each individual part as a system, as a platform. So that's what we do. And, you know, so as we said, as I said, Thierry mentioned it, we have firepower. We are able to do things in no rush. to do things, but we look at carefully in terms of geography. I would say there is a strong focus in the U.S., but also we're not neglecting Europe as the last two acquisitions three years ago were in Europe. So there is a focus in the U.S.

Okay, thank you.

Thank you. There are currently no further questions. I will now hand the call back to Thierry Godot for closing remarks.

Thank you and thanks to all for your participation. See you maybe this week for some of you at NRF Europe which for the first time takes place in Paris. It's going to be a big event and we are a big partner of that event so it will be very visible if you join. And and we'll meet again on October 22nd for our Q3 sales figures. So have a good evening or afternoon. Thank you very much.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.