Verimatrix S.A.

I think we can go. Thank you everyone for participating in the announcement of the 2023 results of Verimatrix. There will be my presentation at the beginning and Jean-François Labadie, our CFO. We will talk either about the results of the fourth quarter of 2023, which is the result of the year of the full year 2023. Before I start the presentation, I wanted to tell you that for the people who followed our story a little bit, in 2021 was the year in which we decided to change the business model, to move from a business model It was a business model that for the clients, our clients, it was capex and we had trimesters not balanced, all focused on the end of the year because it was capex for the clients, especially the telecom clients. We decided over a year of COVID and a little difficult to pass a SaaS model and a subscription model. this transformation, which is a transformation in depth for a company, because we were forced to redevelop a part of the products or adapt the products to a cloud world, and to redevelop the commercial force, to give another elan to the company to communicate to our customers the need to go to subscriptions and a cloud service that could give customers a lot more flexibility, a lot more speed in the information that we give to customers on the pirates, on the fraudsters, all the people who attack the goods of customers. It was a process that made us lower the declared turnover and profitability. But we already see, and Jean-François will give you all the figures for the year 2023, that the decrease in the figures to be made that we experienced in 2021 and 2022, we stopped this decrease in figures to be made. and we started to benefit from the transformation of our perpetual model into a recurring revenue model, on which we exceeded in 2023, 50% of our turnover today is recurring. This will allow us, on the one hand, to have a much more predictable turnover forecast per quarter, And on the other hand, to have continuous customer relations, without shocks or huge changes, quarter by quarter. quite satisfied with the fact that now the situation is stabilized. The team is all motivated to develop and grow in our cybersecurity and anti-piracy business. I wanted to introduce that to give a little bit of the feeling, the situation of our company today, and we will show you the figures for 2023. Who is going to talk tonight, you see on the slide, it's me as Executive Chairman and Jean-François Labadie, our CFO. Next slide. We are going to talk about our position in the cybersecurity market, the transformation of our technological society, which has a long history of strong skills and technologies in the world of security. Our offer is anti-piracy and our offer, defense treaty, which is the protection of application, devices and enterprises. Then there will be the results of 2023 and our vision for 2024, which will be presented by Jean-François. To give you a bit of a dimension of which market we are in, there is this slide from Gartner's source, which shows the world of security and cybersecurity, which has been fragmented into several verticals, and the two verticals in which Verimatrix is present are threat defense, application security, and anti-piracy, or data security. You see that these are markets that have a size of 5 billion, each of these markets, about 5 billion, 4 billion euros, with an annual growth of around 14-16%. These are significant markets and the need for security continues to increase. Today, with artificial intelligence and self-learning even more, we must on the one hand exploit the new software and artificial intelligence capabilities to better protect our customers, but there is also an even greater need to increase security in all areas.

Next.

As I announced, our annual recurring revenue today is more than 50% of our total turnover. Two years ago, when we decided to change the business model of the company, we announced that at the time we had about 30% of recurring revenue and we announced that our goal was to reach 70%. And as you can see, we are in the right direction to reach our final goal of 70%. It's final because we think there will always be customers who would like to keep or buy perpetual licenses and keep the security part in their servers. But it's a great goal that we reached in 2023 and shows that the transformation process has been completed. We, in security, are a company that has more than 25 years of security. We started with security in semiconductors and then we developed all our activity in security software. There are more than 500 million devices in which we have loaded our security software. either to protect applications or to protect data and video requests for customers. 500 million devices in the world have our integrated software. We are 270 people in our 8 offices in the whole world and we have had 153 certified patents in the years. We are a company 50% of the population are software developers and we have a lot of innovation in several countries around the world. Verimatrix has been known for years as a security leader and there are three examples in which we have won awards and we are recognized as a leader in cybersecurity in the whole world. Next. Our management team, here you can see we have eight people in the management, four of the eight people are based in California, in San Diego, because the core of Venimatrix, Venimatrix is made up of two companies, the main company that is Insight Secure, which was founded in Aix-en-Provence 25 years ago, and the social sector of the company is still in France, and we are on the side of France, but a large part of the management activity is in San Diego, which was the city in which Verimatrix was founded, which we bought back in 2019. There is me as executive chairman and general director, and we have Azaf Ashkenazi, based in San Diego, who manages the company every day with his position of Chief Executive Officer. Jean-François Abadie, who is based in Aix-en-Provence, in Paris. Valérie Convert, our VP of Human Resources, is based in Aix, and also often in Paris. Andy Baer is the owner of the anti-piracy business unit, which is based in Glasgow. That's where we bought a company at a time to have the application protection technology. Tom Paulage is based in California and he is the owner of the cybersecurity business. application protection and devices. John Samsell in California as VP marketing director and Kim Vogel, who is the head of research and development. A stable team today. We have had a lot of changes since 2019, 2020, 2021. Today we have a stable team, very well linked, coordinated by Azaf, with a Next. As I told you, we sold our device when I talked about 500 million clients, which are software that goes into the devices to protect the applications, in 500 million devices, but they are present in 120 countries around the world. We have eight offices, especially in Europe, our research and development, our employees, more than half of the employees in Europe in several offices. We have this distribution for two reasons, a reason for skills, a reason for costs and also a reason because we bought during the years companies that were based either in Glasgow or in Helsinki and we still have employees there. San Diego was where the core of Verimatrix was when we bought it, and Mexico is a rental center, and we are present in Mexico and Hungary to have a lower cost on the engineering part. You know that California is quite expensive. We have developed locations to be more competitive from an economic point of view in these countries. Half of our turnover is in the Americas, 35% in Latin America and 15% in North America, and 50% is in EMEA and Asia-Pac. It's 50-50 in our business. Next. In short, this slide is a very important slide because if I focus a little bit on this slide, we can really see who the company is. Even today, 83% of our turnover is in anti-piracy. Anti-piracy is the protection of videos on linear television, by OTT and by all services around video on demand. In the past, the companies that did what we call CAS, conditional access, protected only the video part for the clients. Today, and since 2021, we have developed a complete offer in which we anticipate the attack of the pirates. We can degrade the content, the video, or completely block the pirate that is attacking our customers, no matter in which location, in which place. And we are very, very fast to do all this. And we sell to our customers a monitoring system, that is to say, with screens. No, we don't sell screens, but the software that the customer with the screens can watch in real time all the attacks that the pirates do on their This business that goes from linear television to streaming, we sell it with two business models, a perpetual and a SaaS. We have a very flexible offer that allows us to take market share because our competitors were very late to make a SaaS offer They did not understand at the time that the clients were ready to change from CAPEX to INOPEX and have a much longer-term relationship with subscriptions. On the other hand, there is pure cybersecurity. It is 7% of our turnover, but we must not It's not exactly 7%. With the cybersecurity software, part of our anti-piracy figure is made with this software. That is to say that the cybersecurity part is much more important for us than the 7% that you see on this line. The defense treatment part that is on this slide is the specific part for application protection in different verticals. Our traditional vertical is the OTT distributors, the telecom operators and all the operators that distribute video requests and data. The right part, with the specificity of the defence treaty, has been successful in other vertical markets, in the payment world, with bankers and financial institutions, in health, in automotive, in applications for electric cars, and also in electronic games, gaming, entertainment. And on this side, a strong traction of the vertical markets, which are not our traditional markets, which ask us to protect their applications. And all this is done only with SAS, only with the subscription.

Next.

I show you these slides, which are slides of market analysts who position us On the left, on the left side, you see there are several competing companies that work in this market and they position Verimatrix as the leader of this industry, which has the most market momentum on the vertical to say that customers are very favorable to Verimatrix. Because our traditional competitors, which are listed on this slide, NAGRA, IRDET, SeneMedia, they had an offer with a security solution on the card. We were the first to arrive with a software solution without a card. Everyone thought it was impossible to protect the access, the conditional access with a software key. And we managed to change the data and the market. And we took significant parts of the market for our more flexible and competitive approach. On the right, this is a part that shows our position in the defense trade on the cybersecurity market. All adjacent markets are all companies that work either in device security, or on application security, or on security of what we call end device, end response. They are all companies that really lack the cybersecurity part in which Verimatrix is fundamental. They are companies that from time to time we participate with them, we make offers together, but they are all companies of considerable size to which Verimatrix brings solutions.

Next.

Here is another company, Quadrant, which positions us in the cybersecurity sector. And you see, we are at the top right, among the leaders of this market segment, which is the protection of applications. the market analysis that puts very matrix like the part of the company that has more impact on customers and with an excellent technology next when we started with our anti-piracy offer in 2021 we The objective was to say, we're going to SaaS, but we have to give the customer a little more security. What does anti-PRS mean to us? We'll give you an example. CAS, conditional access, protects the content, but we don't protect before the content. That is to say that the pirate will work on the content that is protected to try to break the secrets and appropriate the digital goods or the film of our client. We said we will protect much wider. We will do anticipation services and we will avoid that the pirate can get to the content, try to break the content. In addition to the anticipation revealed when there is an activity that goes towards the client under the protocol to break the secrets of the client, we give the information to the client and we can act very quickly to stop this fraudulent activity. And we have several products that we offer to customers to do all this. Multi-DRM, edge protection, that is to say, delocalized servers, watermarking and monitoring systems to monitor all the activity of pirates on the market. And you see how many, there are several customers, many customers, I would say, who have agreed to go towards our complete solution. There are considerable names. We can't put all the names of all the customers because there is, you can imagine in cybersecurity, many customers don't want us to tell them that they buy security from us or from someone else, And these are the clients who have allowed us to communicate. You see, there's Deutsche Telekom, Swisscom, there's Mola TV from Indonesia, there's Sky, there's GAO. GAO is Reliance, it's the second largest operator in the world. It's Indian and in India. There's Megacable in Mexico. We really cover the whole world with our solution. And there's still a list of of the prices we took at NAB last year. NAB is the biggest entertainment and video show, and NAB recognized us as the product of the year. That is to say, our anti-pirating solution was considered by the Americans at NAB as the best product of the year 2023. We can move on to the next slide. On the defense treaty, as I told you, on the pure cybersecurity part, there are other markets, the 7% we were talking about earlier, are markets in other verticals. They are verticals in which we did not invest much, but rather the companies that sought us. Because to enter the world of health, fintech, automotive, entertainment, we would need a much larger, broader organization than Verimatrix. We are organized a lot in the world of video, and we have a smaller organization in the world of cybersecurity. And we are very... It's good to see that in the automotive industry, in health, in the financial sector, it's the clients who are looking for us. They need our technology, zero technology, zero-code technology, which is not disruptive. To use our technology, they don't need to reopen the application, redevelop the application with our security. But we can... protect all customer security without changing the application that was developed before by the software publishers. You know, security We should always think about security before developing solutions that sell in the market. But still, in IT, there has never been a real culture in the whole world of security. And we are here to solve all the problems in the software industry of the editor who develops products without security. but we have technology, as we say in English, seamless, that is to say, without a technical impact to redevelop applications. You see the names of the companies that buy our protection for their applications. Next. Okay, I'll let Jean-François speak, but afterwards, if you have any questions, Together, we can give you all the answers. But I pass the floor to Jean-François to show you the figures, the comparables. OK, Jean-François.

Thank you. Thank you, Amedeo. Good evening to all of you. So, I now propose to you to go through the financial results of Verimatrix, as Amedeo said. We are very satisfied with these results because it had been a long time since Verimatrix had stabilized its turnover and you will see it later. Well, we are now stabilizing. We even generated a slight growth on exercise 2023. And the reason why we managed to stabilize the turnover is largely linked to the success of subscription offers. So we are starting to see the positive effects of new offers and especially of the new business model that Verimatrix has been pushing since the beginning of 2022. As a rule, we have two very important criteria for the transformation of Verimatrix. It is obviously the growth of subscription revenues. And there you see that our last guidance was at 60% and we finally reached, over the whole year, 69%. So we have accelerated the growth of the revenue of subscriptions on the exercise and particularly in the fourth quarter. What is this due to? It is due to the good conduct of the ARRs, so all the revenues that we have signed with the clients who are on board and that we are now able to activate a little better quickly to generate revenue. I have a little comment on ARRs. We finished the year a little below in terms of ARR growth. So is it a point of concern for us? Not at all, because in fact we identified very well the reasons why we did not reach 40%. The reasons are purely technical, of contract signatures that have shifted to the beginning of the year 2024. I will not reveal to you the secrets of the first quarter of 2024 at this stage, but it is not a matter of lost business, but rather a technical gap in signatures. So that obviously does not question the trajectory of the group. Other important elements on the year, if we take the sum of recurring revenues, since I told you about subscriptions, but in addition to subscription revenues, Verimatrix has, from the base of its traditional customers, maintenance revenues, that is to say the 15% that we make on the value of the licenses sold to each of its customers. So with subscriptions and maintenance, we reach 31 million dollars. In growth of 16%, 31 million dollars, that means that we have reached 50% of the total turnover of the company, which is now sitting on recurring revenues. We were a little less than 45% in 2022, and Amedeo reminded her, we were at 35%, less than 35%. at the end of 2021 on these same indicators. So the transformation is changing and I told you a little bit about the contracts whose signature has been shifted over the first quarter. Another element of satisfaction, since we knew at Verimatrix that when we were going to change the business model, there would be an important impact on the trajectory of the turnover, so a turnover that was going to drop. And for us, it was essential to maintain a positive EBITDA, to work on the cost structure while continuing to invest in the transformation of the group. And then, little by little, to finally put Verimatrix in a situation where the cost structure will allow to absorb a growth in the turnover and will allow to generate a growth EBITDA. This is what happened in 2023. You can see that our EBITDA has increased by 18%. We generated a little more than 1.3 million dollars of EBITDA on the exercise against 1.1 million a year ago, at least on the 2022 exercise. So, do you remember the situation at the end of the third quarter? Verimatrix had a low turnover, compared to the first three quarters of the 2022 exercise, mainly because of non-recurrent revenues, the licensing products and the rebates that we touch on the decoders. So it was a bit of a complicated situation. The very good news is that the third quarter was very profitable for Verimatrix, very profitable, I would say, at several levels. The first is recurring revenue that continues to grow, including subscription revenues, which have seen a growth of 32% over the fourth quarter, 3.7 million against 2.8 in the fourth quarter of 2022. A control of maintenance revenues. You know that maintenance revenues are associated with the broadcasting market, so these are revenues It's going down slowly, but the good news is that the drop is very low and completely mastered at Verimatrix. And the third good news is non-recurrent revenues. We have had important orders from our historic customers, especially in the Latin American region. I can quote Brazil, for example, or Mexico in particular. And so we had a very good fourth quarter on non-recurrent revenues, particularly carried by licenses. In total, the turnover of the fourth quarter is growing by 6%. We will look below. I will not comment on ARRs because ARRs are only relevant in comparison with the whole of last year. So I will go back a little further, but you will see that we have a nice growth of our ARRs. I remind you, ARR is the first indicator that shows that Verimatrix is in the process of transformation. And then, once we have embarked on these ARRs, there are activations and we are beginning to recognize recurring income for future exercises. So, since we are talking about ARR, so here you have the evolution of ARR since the first quarter of 2022. So, you have interesting elements, I'll do a little history again. First quarter of 2022, Verimatrix is starting to launch new offers that will address the OTT market, I think of StreamKeeper, or which will be addressed to the cyber security market that Amedeo described to you for the protection of the codes, the protection of the applications and the connected objects. So these are offers that are launched under a recurring format. So we put a few quarters before seeing a little bit of ARR growth materialize. And you see that from the third quarter, 2022 and until the last quarter of 2023, we have a regular growth every quarter of this ARF amount. This is very satisfying because it means that we are starting the year 2024 with almost 15 million of subscription revenues that are guaranteed at Verimatrix. This same amount was only 11 million by the end of 2022. So this is a very nice demonstration and we are still on this same dynamic for the coming quarters. We have set ourselves as an objective. to make ARRs grow every quarter at Verimatrix. So, 15 million, I will come back to it later on the comparison compared to last year, but we're going to have a little fun and then we're going to look at the turnover of the entire year. So 61.6, which is 1% growth compared to the year 2022. So, 1% growth is a very good performance. Why is it a very good performance? you see that recurring income has increased by two figures. We are at 16% of recurring income growth, strongly supported by subscriptions. Over the entire year, subscriptions have increased by 69% compared to the 2022 exercise, where maintenance revenues have only decreased by 7%. So why is this important? It's important because you see that little by little, the number of subscriptions is closer to the turnover of maintenance. So again, in terms of transformation, we will be able to gradually manage the structural decline of the turnover of maintenance a little better and be able to generate a permanent growth in the years to come. So we must see this recurring turnover increase significantly every year. On non-recurrents, we have a drop of 11%, once again, mainly for reasons of drop in revenue that we recorded on decoders. but we know that these non-recurrent revenues are mainly linked to the broadcast market and that the broadcast market, in any case, is a market that is gradually decreasing and which is replaced by the OTT market or the streaming market. So we accompany this evolution in the anti-piracy business style by trying to compensate more and more the drop in the broadcasting market by growth in OTT. It is a performance that we have almost reached. On 2023, the business line anti-paracy, it only drops by 1% compared to 2022. So we see this, I would say, this vast communicant between broadcasting and OTT which operates at Verimatrix. On the ARR, I have already made a comment on the 34% growth of subscriptions. If we go into a little more detail, the good news is that this subscription and its 34% growth are carried out by The new offers in anti-piracy are addressed to the OTT market and also by the cybersecurity part. So these are the two new products of Verimatrix that each carry this ARM growth. The other element of satisfaction that is important for us, we have customers who are very resilient, who are loyal to Verimatrix. continue to order us licenses. This is why you see that the decrease in non-recurrent income is relatively moderate. And when we look at maintenance RRs, we start the year 2024 with almost the same amount of RRs as in 2022. This means that we are in a situation where we should be able to reasonably manage the decrease in maintenance revenues in the future. In theory, we should even be almost stable, but we know that life is that we will have renewals that will be a little more, a little more, as we say, maybe a little more complicated in the future. But overall, this is the first time that Verimatrix is starting a new exercise with the same amount of maintenance ARR as the previous exercise. That's it for the business part, turnover. So, I told you a little bit about anti-piracy and threat defense. We thought with Amedeo that we could share a little more detailed information for you in terms of turnover. So, the anti-piracy turnover remains important, dominant in Verimatrix. It represents 93% of the turnover. This is where you have the broadcasting market, so essentially the maintenance revenues and the non-recurrent turnover. And then you have, in anti-piracy, a recurrent revenue component, which is the StreamKeeper offer, which comes in there. Plus, we actually leverage technology, that is to say that we also provide our customers video of solutions to protect their applications. So all of this, it allows us little by little to stabilize this turnover. Amedeo talked about market share, the market share gain, you have it here. A revenue that drops very slightly from 1% on antiparesis is a very, very good performance. And if we do a benchmark with the rest of the market, you will see that this performance is higher than the average of the performance of most of our competitors. So it's a matter of satisfaction for us. It is above all the validation that our new OTT offer is relevant to customers. Threat defense is 7%, Amedeo said it, it's 7%, but these 7% are essentially sitting on new verticals. So there is a strong growth, 43% growth in the turnover. It's 4.3 million on the 2023 exercise. I insist, it's a 100% recurring offer. So that's also why, beyond the growth of the turnover, we are closely monitoring the growth of ARRs that are linked to this Threat Defense activity. We also have nice signatures. Unfortunately, we are not always allowed to communicate, but I already told you previously about a signature that we made with a European bank on the SweatDefense application. We also made some nice signatures, especially in the United States in the medical sector. We also managed to to win a contract with a large company in the automotive sector. All this contributes to increasing the reputation of Verimatrix on the cybersecurity market. So we are very happy with the performance by Business Line. The geographical distribution that you have on the right is relatively stable. You see that you have about 50% of the turnover generated by the American zone, and we have already told you that we have a very strong presence in Latin America, a strong presence in our traditional video content protection jobs, but also more and more, great opportunities on the cyber security and OTT part. So it's a region that will remain very important for Verimatrix. 14% in Asia, mainly in India. we have a very loyal client who has been very important for the performance of Verimatrix in 2023. In India, Amadeo mentioned it, it's Reliance. But a relatively stable geographical distribution of one exercise over the other. So, there is not only the turnover in life, there is also the EBITDA. So, let's move on to profitability. Very good hold of the gross margin. We are at 70.4%, compared to 71.4% on the previous exercise. So, like that, we can think that the gross margin in percentage is decreasing. Yes, but the only reason why this gross margin is decreasing is the increase in the amount of amortization related to the development of the new offers that we have made in the past. In other words, the gross margin before the amortization of these past R&D CAPEX, in percentage, increases between 2022 and 2023. This is what we are looking at with Amedeo and with all the teams. because it shows us that the new activities that are SASS for which we manage additional services for our customers, they are very contributing to the margin. And in parallel with that, we always have this work to optimize organizations and to ensure that we adapt the resources related to the broadcasting activity, which is mature, to be able to invest and support our new customers a little better than we manage in the cloud, through our SaaS offers. So we have a very good hold of the gross margin. In terms of operational spending structures, so OPEX, you see that OPEX has increased, but they have increased in a targeted way. In fact, they have increased in sales and marketing, which are the two departments on which we chose to invest at the beginning. Why? Because to develop offers on new segments, it was necessary to strengthen sales teams and strengthen the go-to-market. Why? Because to increase the reputation of Verimatrix in the field of cybersecurity, we increased our presence, our marketing animation around what we could offer on this market. By the way, I take this opportunity to make a small parenthesis, there is a webinar on esports which is on the sport transmitted by En Streaming, which will be animated by Verimatrix next week. You have the link to sign up and I invite you to sign up. You will have specialists at Verimatrix who will explain to you in what our offers are relevant, also to protect the content and sports programs broadcast on En Streaming live to a number of users So, we invested in sales and marketing in an important way, 11% increase, but you see that, on the other hand, the increase in OPEX is only 1%. Why? Because, on the other hand, we have optimized our expenses, our R&D expenses, which are optimized because the bulk of the R&D effort has been made in the past, so we have adapted the structure as a consequence, and then also the expenses that we could call back-office, the administrative expenses, which are the object of permanent optimization. So, thanks to these programs, thanks to the dynamic of transformation of the business record, that we have explained to you, we are beginning to show that growth in turnover at Verimatrix translates into EBITDA, so we are beginning to generate permanent growth and profitable growth at Verimatrix. A slightly lower financial loss and then a slight increase in income tax. Income tax is essentially income tax. with holding tax that are applicable in Latin America. We can maybe move on to the next slide. So, on cash flows, we have a treasury that remains important, 22.6 million. So, there are several events that took place over the year. We made a refund, a refund towards a branch unit that is part of the debt for 2 million. I told you about R&D investments earlier. We invested 2.5 million this year. We have CAPEX, total of 2.8. In these 2.8, you have 2.5 million which have been devoted to the improvement of the products that we launched on the cybersecurity and OTT part. Overall, this cash slide is very detailed, but if you look, you have an improvement of the EBITDA, an improvement of the working capital, and investments for 2.8 million. The improvement of working capital is something that is becoming structural at Verimatrix. Why? Because as we change the business model and we go towards recurring and we have a model where, overall, we bill customers at the beginning of the period, we generate different income, important at the level of the balance sheet. We also have a good job that is done at the level of customer creation, but we are building a structure of balance sheet that gives us a working capital that will continue to improve with the acceleration of revenues and offers at SAS. So I take again, increase in EBITDA, improvement of the working cap, All this is largely financed by the 2.8 million investments that we made in 2023. So we have a positive cash on these elements of 3.3 million dollars. And finally, when you look at it, if you exclude all the operations, I would say, of financing between a part of the debt reimbursement and the interest that we pay on the debt, the cash burn, the consumption of operational cash of Verimatrix, it is very limited, it is barely 2 million dollars on the exercise. So we have a healthy situation. We do not have a short-term repayment deadline, as you know, since the first maturity that we have is in February 2026. we limit the consumption of cash and we are strengthening our capacity to generate a permanent growth in the future. So here is a rather very healthy treasury situation. On the debt part, we can perhaps pass the balance sheet. So the net debt has slightly increased. On the debt part, we are in the process of renegotiating for the implementation of new agreements with one of our branch units. which is a negotiation that is going very well, which should end by the end of next month. So it's a normal process that we started with them. We had renegotiated for the first time a set of covenants for the 18 to 24 months to come and we are now entering the end of this phase and we redefine the covenants and they can be applied until maturity, until February, February 2026. These covenants, they are obviously in the process of adaptation given the evolution and the business model of Verimatrix.

Voilà.

Alors, on va passer sur les perspectives. Donc, vous l'avez compris, deux business lines, anti-piracy, threat defense, Two different dynamics in anti-piracy, you have the broadcasting on which we will continue to protect these revenues, even if we know that the trend is a downward trend on this turnover. On the other hand, in parallel, thanks to the increase in our ARR and thanks to the important commercial activity that we will have in 2024, we will be able to partially or completely compensate this drop in broadcasting by increasing the OTT turnover. So we will have a significant growth in recurring revenue. On Threat Defense, we expect an important growth thanks to the new offers, thanks to the dynamics that we are seeing with the new verticals. So we have a particularly strong commercial activity. We also have, as you know, changed a lot of people in the commercial team to have more and more specialized people who know how to talk to these new segments segments of the market. So our driver is always the same, we must have ARR growth and ARR growth linked to subscriptions. And so we will look for more than 20% ARR growth next year. All this will bring us, with the work that we have done on the cost structure, which continues to optimise our investments and our expenses, we will continue to improve our profitability and our EBITDA level. So why should we invest in Verimatrix? Well, you got it. We are on dynamic markets that are growing. On the cybersecurity side and on the OTT side, which concerns anti-piracy. We continue to innovate. Two and a half million R&D investments. This is to continue to innovate, to integrate more and more artificial intelligence, machine learning into monitoring tools. We have a transformation that is more and more visible. I believe that the marker was finally the performance of Verimatrix's turnover on the exercise, with the increase in recurring revenues. And we see that this transformation is no longer at the expense of the profitability of Verimatrix. It is contributing and strongly contributing to Verimatrix. And then we also have, in terms of strategy and transformation, a very important support from our shareholders, from our historical shareholders. That's it, maybe we can move on. That's it, we're done. So now we can open the session for questions.

s'il y a des questions. C'est moi qui vais sur le chat.

So, we have a question that was asked online about the churn rate of Verimetrics. So, you're right, it's an important element, because obviously, when we enter a new business model of transformation and SaaS offerings, we obviously have new contracts and then we have churn. The churn is actually quite low. We are about a little less than 10% of churn today on SaaS activities, which are rather contracts that are quite old at Verimatrix. So not necessarily contracts that are on on the new StreamKeeper or Application Protection products. But we are monitoring. We were also at about 10% last year, on 2022, sorry.

Excuse me, Jean-François. As you said, we have to say that In the industry, 10% of churn is considered normal in the SASS world, but we had 10% especially on a product that was a product developed in 2014 and that is no longer used much. The real churn is about 5% on the activity that we started in 2020, 2021 that we have. With XDD, there are not many churns. The churn is really on an old product. Excuse me, but it's because sometimes to see what the churn number looks like, you have to look at the inside of the number. OK.

Very well.

I'm sorry, Amedeo, I'm looking at the questions.

I don't see the questions.

No, I'm the one who sees them. I'm going to ask you questions. For once, Amedeo, I'm the one asking you questions. That's not bad. In the press release, we indicate a shift in the time of 2025's ambitions. What is it about? Is it about the 70% of the turnover of recurring income or the achievement of the turnover?

Do you want me to answer, Amadeo, or do you want me to answer? No, no, the answer is, we did an Investor Day in 2021, It was in March 2022, right? Because, as Jean-François said, we launched the new products in the first quarter of 2022. And we did the Investor Day and we set ourselves the goal of 70% of the recurrence for 2025. and the 70% of recurrence for 2025 is still there and the goal has not changed. It is the turnover that has changed a bit because we had indicated, we were there because we had just made 96 million in 2020 We made 72 million in 2021 when we decided to change the model and the transformation of the company did not happen in a year. It happened between 2021 and 2023. It took a while, not too late, because everyone told me that I was too ambitious, thinking that I could change the model in a year. But it took practically three years to make this change. And with the indication of the turnover in 2025 of 100 million, it was very ambitious. That's why We will not be able to reach 100 million, but I mean, the trend, the increase in ARR, the increase in subscription contracts, the increase in the entire cybersecurity sector, the reception that our anti-piracy offer has had has been very, very good. And you will also see in 2024, there will be a significant increase in profitability, an increase in business figures, and an increase in ARR, as Jean-François announced. That is to say that the direction is good, but it is true that the day we announced that we had a new offer, Perhaps we were a bit optimistic about reaching 61 million to 100 million in three years. But all the factors are positive and are going in the right direction. That's what I think is important. And as Jean-François has said many times, it is the sustainability of the company that is no longer in question. There has been a great transformation in the video market, as in all markets of cybersecurity and data protection. But the effort we have made has put the company in security. That is to say that the company has a sustainability, a growth, of profitability and stability, which is undeniable. Undeniable. Excuse me for my French. How do you say undeniable? Undeniable. Undeniable. Okay. Thank you. I don't know if you want to add something, but... No, no, no.

I think that, once again, the markers of transformation are there. As Amedeo said, it was important for us to validate that our options were the right ones. And we are today on the same options, at least dynamic, than the ones we shared with you at the beginning of 2022. After that, clearly, looking for new verticals, that also led us to change the organization a lot. a lot of the go-to-market, and that takes time. But today, once again, the fact of signing, of having a few nice names who are now clients of Verimatrix, it's something important for us. Once again, there is always a frustration of not being able to communicate too much on these names, but in a confidential way, we can sometimes change them and it helps us a lot to build the future. So I had a technical question which was, there are people who know how to count online, that's good, which was to say 34% ARR growth compared to 40%, you are missing $ 750,000 of ARR. So far, everything is fine. Do we think we will catch up with them on Q1? Well, listen, I told you earlier that it did not question our 2024 trajectory, our 2024 objectives, and that indeed it was a technical shift. Technical, that does not mean that it is put back to Q4, the signature is put back to Q4 2024. Technical, it is that there are a few days that make that, I would not want to criticize the people who review the contracts, the jurists at our clients, but sometimes there are administrative slowness. with which we must compose. So the answer is yes, we are in a position where this shift will not impact the trajectory of Verimatrix in 2024 because these contracts will be signed and they are in the course of signing.

I'm looking for the most difficult questions for you Amedeo, it's normal.

Could you tell us some data about the collaboration with AWS? I can take this one if you want, Medeo. So, in fact, AWS is a very important partnership for Verimatrix. mainly because our solutions are housed at AWS, so that's why we renewed partnership agreements with AWS. So there is no business figures relationship with AWS. On the other hand, it is an important element, it is an important part of the Verimatrix offer. So we have encrypted data that is rather a return price for us, that is to say that we have a cost linked to the hosting of our customers' solutions at AWS. But we have a very, very good collaboration with AWS, so I'm not going to reveal the costs, but I can just tell you that One of the reasons why our gross margin before amortization of R&D projects is improving is also because the profitability of our cloud and SaaS activities is important. And then, of course, AWS is an important partner, it is a reference on the market. It also allows us, when we go to see banking institutions, financial services actors, and we offer them solutions in the cloud, to have an important partnership with AWS. It puts us in a rather favorable position, since it is always reassuring to have a partner of this dimension. So we have a question about how many sales figures are we aiming for in 2025 and EBITDA? We are already going to do 2024 by continuing to increase our ARR, our recurring revenues, to increase the success of Verimatrix in cybersecurity and on the OTT market. So we haven't decided yet with with Amedeo on the moment when we would communicate on a new plan, but at this stage, we do not communicate any indication on a turnover or EBITDA in 2025. EBITDA and turnover, you have more and more recurring trends and an EBITDA, a cost structure that can integrate increases in turnover in the state. So an increase in libido to be expected. So libido will continue to increase in 2024, but we can expect libido to continue to increase then again in 2025.

And more strongly in 2025, because we will reach a scale for which Because fixed costs, we can always improve fixed costs, but as soon as we increase our activity, our turnover, there are optimizations that will happen, making sure that as soon as we increase the turnover, EBITDA will have a major acceleration.

Then, question for you, Amedeo. Does your current financial structure challenge your ambitions for external growth? M&E.

We still have an ambition for external growth because there are opportunities today, with all the market changes, We have good opportunities and there are companies that would like to merge with us. But I mean, there are good targets. Today, the financial world still has very, very high interest rates that prevent us from making really important acquisitions. and I would like to do. But I see, I feel that the banking world has started to lower its resistance to risk a little and we are planning a decrease in interest rates that will allow us to make acquisitions. But I don't know if we can do it this year. But today we are focused on, you saw the results for 2023, but we are focused on improving all the parameters and all the Obviously, the turnover increases to give much more credibility to our company and ensure that financial institutions are available to give us debt to make acquisitions. But I don't think we're going to make acquisitions this year. The market still has difficult interest rates for our company. But we always have the dream, we always want And we have identified targets, but we don't yet have the means to do so from a debt point of view. Financial institutions are quite reluctant to see a company that has dropped. They want to make sure that we have really made the transformation and that the curve is going up. but in a stable way, every quarter, during six or seven quarters. It is necessary to demonstrate that the company is now really in the right direction to access the debt market.

So then we have a question always on the size of Verimatrix and the profitability Is it a break to sign important contracts with large accounts?

No, today we have credibility, and you saw the list, if you look at the list of our clients, they are really large accounts. we have credibility and we demonstrate our sustainability, which ensures that the big companies trust us. As we said, we signed a big contract, because the Reliance contract last year gave us a very good contribution for 2023, but it's a five-year contract. That is to say, the contract with Reliance is very big, And in addition, it is attracting other customers who say, well, you signed with Reliance, it means that you have a good product because Reliance I don't know if everyone knows her, but being the second telecom operator in the world after China Telecom in China, she also has a reputation for being a very aggressive company, very hard in negotiations, but very advanced in their solutions. They bought the OTT part from us and their migration to streaming. There are many other operators who are come to our house to look for us to see if they can work with us. Our size limits us. In the stock market, you always have to show that you are profitable and you can't increase the resources. It is true that there are opportunities for which to follow. We could increase the turnover much more quickly. But we must keep all the parameters of the company. And always for me, I have a responsibility, I say this word two or three times, but it is the sustainability of the company. I don't want to put the company at risk. but we are solid, we have a good reputation. From a technological point of view, we are very well known, whether it is Insight Secure. You know, Insight Secure was a startup that came out of Gemplus. When I was president of Gemplus, I left Gemplus at the end of 2004. No, 2004, 1994, excuse me. Yacek Kovacs, the founder of Insecure, came out in 1995, but he was a bit of a security guru on the chip for chip cards. We have all this history, we have great credibility, a very strong relationship with the clientele, which is very solid, we are not limited by customer contracts.

Very well, there was a comment on the remuneration of the available cash. So yes, indeed, we have financial products on accounts. remunerated deposits because we don't need to have all this cash available at the moment. So we have a remuneration of the order of, I think it's not far from 5%. And I think we have a comment. So I don't see any more new questions. On the other hand, I think there is a question by phone, is that Sandra?

So, we're going to... Yes, hello? Yes, good evening. Good evening to you. Good evening. So, I am a private carrier. So, in fact, the shift to Q1 2024, finally, what I understand is that it was the online bank you were talking about in Q3 2024? No?

No, not at all.

It seems to me that there must have been, during the last conf call, it seems to me that you were talking about a contract with an online bank.

Yes, yes. No, not at all. The Q3 call, since at the end of Q3 we had not signed this contract, at the end of September technically. On the other hand, this contract with this online bank, it was signed at the beginning of the fourth quarter. That's why I told you about it when we communicated in October on the third quarter. I told you about it, I did not tell you to give the name, I know that everyone would like to have the name, unfortunately we do not have the authorization for the moment to talk about it. On the other hand, this is not the shift, because this contract is activated at the end of Q4, so it is in our subscription ARR and it will begin to generate income from January 1st. I'm talking about a shift in the order taking over the last quarter that we were waiting for, that we were waiting for and that could potentially be activated in ARR at the end of December, which will be activated in the first quarter. But this is not the online bank that you mentioned. These are other additional contracts. OK, very good. The online bank, once again, the online bank, the contract is at the time when we talk to each other. the contract began to generate revenue in January and February. It is an activated contract, so it is in the ARR and it will be in the turnover of the first quarter of 2024.

I had another question about the partners. So here it's the same, I think it was elements that were in progress and in the course of augmentation. It was to find out where it was. I know that, for example, for HBL, you had made a statement, a priori, it had gone through associated risks. It was to get an idea of contracts that are signed by partners of Verimatrix.

Distributors, I don't know, Amédéo, if you want to answer or I can...

This quarter, for example, I was with this company today in Italy, with Kirei. Kirei is an IT consulting company, an integrator in Italy with more than 1,000 employees. We signed with them a partnership contract in which they will promote our products in public administration and in the financial world. But the contracts with partners. We put this program in the form of the second part of last year. They have not yet generated 6 business figures, that is to say that the partners must integrate our cybersecurity party in their offer of solutions vis-à-vis of their large clients in several countries and also the person in charge of this partnership has joined us a few months ago, and the strategy is there. But until today, almost all of our business was taken directly from us. to sell all the cybersecurity part through partners, because there is a possibility of multiplication of the system integrators and IT consulting companies. They have a lot of trade on the ground. They will follow the insurance market, health, banking, public administration. There is a possibility to multiply the turnover through this company. But that's not how you sign and that's it. You have to educate, train salespeople and employees the integrator and to have a return to the stock market. It's something strategic rather than tactical, that is to say, it will have a return in time. It's not one day that... For the moment, we continue in our direct sales strategy and we are creating this infrastructure of system integrators and IT Consulting Company to ensure a stable and growing business base. I am convinced because when I look around the world, there are several companies in cyber, there are companies that only do with partners. They manage to make good business growth. And we, with our cybersecurity part, because the video protection part, we don't really need partners. Customers want to buy directly from the source, from us. It is the cybersecurity part that, with partners, can find a very high growth rate. We are at the beginning of this process. It will take a little more time. to really see the business figures and the benefits of this activity.

Thank you. One last question or remark. As an investor, I also look at the valuation of the company and there is nothing to be disappointed about. a question that I ask myself, that I had already asked previously, but that I ask again, is why there is no purchase of shares and in particular of purchases also from the part of the current investors of the board of directors, whether it is you or whether it is Palladio, for example, or BPI or EP. In any case,

people who are where the purchases are then declared at the AMF and on which I personally have already bought you know from my personal pocket I invested a million three hundred thousand euros and not often you find CEOs who put their hands in their pockets and put the money in the business. I do it. I have a average purchase price. I can tell you that it's 1.50 euros. And I'm still going to put money in the business. I really believe a lot in our business and in the value of the business. But the market, you know very well, the war in Ukraine, inflation, All the exogenous political effects, they made sure that a lot of investors, and you should know, because if you have associated sanctions, you do that, the institutional investors focused on the big companies, which make more than a billion in valuation. And the companies, the microcaps, They have been a little mistreated by this international economic and political history. Valuation is very weak, I know. The value of the company is very low, but it will change, it will improve. But institutions must also start again invest in micro-cap or small-cap companies.

Yes, thank you, thank you. Otherwise, fortunately, there was no problem.

That's it for me. Thank you. Perfect. Well, listen, I think we've covered the main questions. If that's not the case, anyway, we'll be able to answer them. I'll just maybe make a little reminder of a few important events to come. So I told you earlier, there is a webinar on Counterspy. Counterspy is what Amedeo explained, that is to say the cybersecurity technology that is applied to media and video actors. A product that we are very happy with. in terms of quality, development and functionality. So there is a webinar, you can sign up on the press release, you have a link, you can sign up and you will have experts from Counterspy who will explain to you how this solution is relevant, particularly to fight against direct sport piracy. That's the right expression. There will be a number of dates that are retained that you have in the presentation that will be put online on the site. So, on March 26, there will be an investor meeting. We will participate in Investor Access on April 4 and 5 with Amedeo and we will publish our revenue from the first quarter. on April 17th. So it's going to come, it's going to come, it's going to come pretty, pretty, pretty soon. And the date of the assembly is June 13th, 2000, 2024. There you go. You have all these dates on the last page of the presentation. So there you go. Amedeo, if you want to make a very small conclusion.

I am very happy. I see that there is many people who participated in this call for the results of 2023. And my remark is that we are here, we believe in it, and we will deliver the expectations that we have given to our investors and our management, because the Verimatrix company is very strong, very competent and well positioned in the industry. Thank you everyone and goodbye.