Verimatrix S.A.

Ladies and gentlemen, welcome to the Very Much Rich Conference Call. I now hand over to Mr. Anedio D'Angelo, Chairman and Chief Executive Officer, and Mr. Richard Bachard de Tournier, Chief Financial Officer. Sir, please go ahead.

Thank you. Thank you. Thank you to all for participating to this call for the first quarter 2020 revenue release. And I'm happy even though I am at my home. I am north of Italy, which is a region very strongly by the COVID-19. But let's say happy to report our figures. As you can see from our presentation, We did 20 million in revenue for our core activity, with 3% growth quarter Q1 on Q1, Q1 2019 on Q1 2020. As a consolidated revenue in IFRS, the growth is 26%, because if you remember, we acquired Verimatrix end of February 2019. We have a stronger growth into subscription business and I will explain about our strategy that we applied in Q1 2020 with a 68% growth from Q1 of 2019. Recurring revenue of all of this maintenance and subscription. at a growth of 14.2 million. These are the basic, let's say, the figures that we announced with the Q1, but you can read the press release. Some comments, the comments about, first of all, even though you hear a lot about COVID-19, we have put all the necessary measures to protect the health of our employees. And as of today, we have no one in our company that has been positive to COVID-19. I'd say that Verimatrix is a company who develops software products and services. And therefore, our employees were quite used to work from home. So for us, overall, it was not a problem. a big shock of having the employees starting all working from home. We have only a few employees in Germany that need to be there to deliver some secret codes and so for practically 98% of the company, they are all at home since March 8th. The business has been quite resilient because, as you may imagine, there was a big consumption of content at home. There was a strong increase of content at home. Therefore, we suffered in the beginning of the year, especially in Asia, Pacific, in January, February, by a shortage of sets of boxes that were delivered to the final clients. And, you know, we take what we call royalties from set-to-box because part of our software sits in the set-to-box. And the set-to-box manufacturer, they manufacture mainly in China. And January, February, the Chinese manufacturing plants were closed down, and they had difficulties to deliver set-to-box to the client. But we had a huge increase in number of set-to-box delivered. during the month of March, and therefore the royalties were quite substantial in the last month of the quarter. As you know, Q1 is typically a low quarter compared to the rest of the year, but we have seen there was a small change into the activity, while the current customers, they increased the number of subscribers, and therefore our revenue on subscription customers have increased, while the revenue on new cafes, new investments for new projects or launching new solutions has been a bit slowed down compared to the first quarter of 2019. Especially in Europe, for the new investment, there was a slowdown. In Latin America, the demand has been very strong, and we have achieved all our targets for USA and Latin America. So there are some challenges, but the business has been quite resilient. The position, the financial position, as you know, is largely deleveraged. We have a solid financial situation. We have no risk for the company. We have a good pipeline for next quarter. And therefore, there is no risk from a financial standpoint. And we believe that we could even look for some acquisition going forward to increase the product offering and our SaaS business and the subscription business. The demand for content is growing a lot. We believe that the content provider and the telecom operator should make the content available at a lower price into the market to expand even more widely the market. You know that FBI in the Federal Bureau of Investigation in the U.S. has just released a report saying that all types of fraud over the network, over the Internet, has grown during Q1 of 2020 by 646%. So the fraudsters are more active in Q1, while If we take only our sector, this project doesn't affect only video and the overall program every sector, there are the content owners that want to distribute even recent movies since the theaters are closed down and movie theaters are closed down, they release movies, and you can see that on Disney+, they release over the network even quite recent movies. Therefore, they need more security, and it is also an opportunity for us, for our business, looking forward. Most of the activity we have done has been to push more for recurring revenue and the subscription business. We know that some telecom operators, even though they are growing their usage base and their customer base, they are demanded from governments to distribute content at a lower prices. And therefore, an offer of subscription, they see it more favorably because they do not have a high capacity to invest. we are increasing the recurring revenue going forward to have a more solid base for 2021 and 2022. Our contracts are minimum three years, but they go even up to five years. We have decided not to give indication for the future because The COVID-19, as you have seen, behavior is not under control yet, and we don't know the impact that could have on the overall business. We have kept, from one side, a tight control of expenses for the company to increase and keep our profitability, our cash, for the future. But also, we have kept... the employees quite motivated. Just to tell you, you know, we are in 14 countries worldwide, and every employee is working from home. So my personal decision has been the decision to motivate, keep the employees quite motivated. We applied the salary increase that we had promised beginning of January, so we did not cut the salary increases So from one side, we keep a tight control of cost. From another side, we have been motivating our employees to look for innovation. We have issued a new, we have set up for a new prize to give to our employees that we call Isaac Newton during Q1. who have an innovative idea, and we will give an extra bonus prize to our employees to motivate them to push ahead for innovation. We need to be ready for the market once we will be free to travel again to be present into the market with new products and new solutions. Therefore, I did decide not to cut into the company people or anything, so COVID-19, for us, it did not impact, not on morale, not on the revenue, and I keep a very strong optimistic attitude for the long-term potential for the company. I believe that once all the lockdown will be released, we have better opportunity, strong opportunity to emerge much stronger from this crisis. So, these are just a few comments, if you wish, because we announced the revenue of Q1, but I'm very open to all the questions that you may have, and also Richard with me are ready to answer to all the questions.

Thank you, ladies and gentlemen. If you wish to ask a question by phone, please press 01 on your telephone screen. We have the first question from Stefan Uli from Odobe HF. Sir, please go ahead.