Verimatrix S.A.

This conference is recorded. We are going to go through different points. First of all, we are going with Laurent to talk to you a little bit about the business and I will leave Laurent the opportunity to introduce himself because it is the first time as CEO of Verimatrix that he has the opportunity to talk to you. Then I will take over the hand to share with you the important information of the third quarter, both from a commercial point of view and from a point of view by the perspectives for 2025, for the entire year 2025. And then we will have our usual Q&A session at the end of the presentation. So I will leave the floor to Laurent, who will present himself to you now.

Laurent. Thank you, Jean-François. Good evening to all of you. I am delighted to be among you today for this call, which is dedicated to the results of the third quarter of Verimatrix. So to start, maybe a few words about my journey that you see here on this screen. So it's been over 30 years that I've been working in the world of B2B software. And before joining Verimatrix, I had the chance to evolve in several management functions where I accompanied teams in their transformation, their growth and their adaptation to a technological environment that is constantly evolving. These experiences have allowed me to have a few convictions, one of which is quite strong, which is that the sustainable success of a technological company, it rests on three essential levers. Innovation, of course, proximity with its customers, what I call the customer's obsession, and then, of course, the commitment of the teams, since a software company is indeed people at the end, than collaborators. So since I arrived at Verimatrix, I have devoted most of my time to immerse myself in the heart of our activity, to understand in depth our offers, our markets, and above all to understand what are the expectations of our customers. Dans ce cadre-là, j'ai engagé un grand nombre de rencontres avec les collaborateurs de Verimatrix à tous les niveaux de l'entreprise. J'ai également pu échanger avec nos partenaires et quelques-uns de nos clients. Obviously, these are extremely rich exchanges that allow me to measure all the assets that Verimatrix has, but also the areas on which we should improve to build a dynamic of success and a strategy that will lead us to find growth very quickly. So, the objective of this listening period, as I was saying at the moment, is really to build a success strategy. So, unfortunately or fortunately, I won't be able to give you the details of this strategy today, it would be a little early, and you would find that it is too early also after six weeks to give you all the details, but I will not miss to share more in detail our roadmap during the next call which will take place, I think, in March. Yes, on March 12th. What I can say is that, obviously, Verimatrix has a lot of assets and we will rely on these assets. This is what makes us strong today. And then we will strive to strengthen our position on the most bearable markets, probably simplify our approach and, once again, offer more value to our customers and our partners. This is still the essence of what we must aim for in a software company. Voilà, je vais repasser la parole à Jean-François. Je vous remercie encore pour votre écoute et je ne manquerai pas de revenir vers vous, bien entendu, au premier trimestre 2026. Merci.

Parfait. Merci, Laurent. Alors, passons maintenant à Verimatrix. Donc, je rappelle rapidement, Verimatrix, aujourd'hui, c'est deux business lines. La première qu'on appelle Anti-Piracy. So, 88% of the turnover, that's only on the third quarter, on the whole year, it's rather 90%. What do we do in anti-piracy? Well, these are all the jobs of the software solutions for the protection of video content and dissemination. Broadcasting based on two technologies, what we call television by satellite and cable, the traditional PTV, but also more and more the protection of content broadcast in streaming format, what we call OTT in the language of the initiates. In this division, in this business line, we have two types of business models, so it's a bit hybrid. The first is a historical business, that of the satellite and the cable, on which the business model is very strongly oriented towards sales of perpetual licenses and 15% of associated maintenance. So that's a very non-recurrent model, what we call non-recurrent revenue at Verimatrix. And then the second component, the second business model that you have in this business line, is a much more recurrent model based on SaaS, on a SaaS offer. And this offer actually covers all the needs of our customers in the world of streaming. The second business line, which is smaller, Extended Threat Defense. What we do here is that we protect the codes and applications that are embedded on the mobiles. 12% of the turnover on Q3, 10% of the turnover at the end of the third quarter. It is a purely recurrent model, so essentially proposed in SAS mode. And there we address customers who come from the world of video, obviously, but we also try to address more and more new segments, such as banking services, for example. So, if we make a point on Q3, on the new contracts and the new events of Q3, I reminded you of two important events on the first part of the year. I remind you, Telecom Argentina, a historic client of Verimatrix in the satellite domain who wants to migrate to the SAS, he kept the solutions to Verimatrix. to continue to protect these broadcasts and its content on streaming, on the world of streaming. So very good news, it is also our capacity to keep and to satisfy customers. So a contract that is active at the time when we are talking. The second important event is a key partnership with Agile TV. who is actually a supplier of distribution infrastructure and who, in the framework of these offers, has integrated the infrastructure protection solution of Verimatrix. This is important because it is a very strategic logic for us. It is a client who is very implanted in the world of OTT and it is a client who himself is implanted in the retransmission of live sporting events. This is an important aspect of the first part of the year. On the third quarter, there are two things that we wanted to draw your attention to. The first, which is a good continuity with Agile TV, is that we signed a contract with RTL Luxembourg, which consists of deploying the Verimatrix solutions on the OTT. in order to protect the dissemination of sports content. So I am not able to tell you the name of the dealership, but overall, these are high-end car races. You see, it starts with a letter and ends with a number. So that's important. C'est un premier pas important parce qu'on est convaincu qu'il y a un enjeu de sécurité important sur ces nouveaux modes de diffusion d'événements en direct. Alors on est focalisé sur le sport, mais tout ce qui est événements en direct diffusés en streaming, si on peut arriver à limiter the risks of piracy, there is a real demand, there is a real demand on this market. And so it's important for us to take a few wins and RTL Luxembourg is a first step where we were in discussion with the owner of the content and the one who bought the content for the broadcast. And we are convinced that it is towards this axis that we must continue to develop. On the part of the protection of apps, There have not been many new contracts signed in the third quarter. We are on the part here. On the other hand, we had an important recognition. We had an award on sur le salon de la Cyber Security Breakthrough. Et ça, comme je vous l'ai déjà expliqué, c'est important parce que c'est des éléments qui permettent de faire grandir la reconnaissance de Verimatrix sur ce marché de la protection des applications sur lequel on n'est pas encore, je dirais, très visible et très reconnu. So it's an important element when you want to get new customers in new sectors, to have this type of recognition on the quality of the software and on the quality of the protection of the software that we offer. That's it for the business part. We will now move on to the business figures part. So a first focus on Q3, on the third quarter, sorry. A complicated quarter for Verimatrix. We generated a turnover of $9.8 million in total, a 31% drop compared to the third quarter of the previous year. Several elements. The first is that we continue to increase our subscription revenues. There is a 9% increase in subscription over the period compared to the previous year. So it's good, it's 9%, but it's not enough. So The trend is good. We have to be able to accelerate and re-dynamize our order taking on new subscription revenues. Why is it not enough? Because there are two elements. We suffer a lot from non-recurrent. You remember, since the beginning of the year, we've been talking about slowing down investments on the side of Latin America. That has always been confirmed over the third quarter. On avait aussi un élément l'année dernière sur le troisième trimestre, c'est qu'on avait signé un contrat important avec le deuxième opérateur indien qui s'appelle Airtel. Ce contrat pesait pour presque un million et demi de dollars. On n'a pas reproduit ce contrat sur le Q3. Donc voilà, ça crée une base de comparaison un petit peu compliquée. Mais quand même, on a moins 64% de baisse de revenus non récurrents. we suffer from the low level of perpetual license sales associated with that we have a deployment of decoders which is less important so we have the rewards that we perceive from the part of decoder manufacturers which is also in decline which is part of the non-recurrent revenues and then the last the last element which is which is complicated for Verimatrix in the third quarter, is that maintenance revenues are in decline because the less you sell perpetual licenses, the less you generate new recurring revenues, so the 15% of license value that you increase for future maintenance. So, opposite winds that are a little strong in the third quarter, and I would say a level of growth of the subscriptions which is not yet sufficient to start the turnover of Verimatrix up. On the third slide, At the end of the third quarter, what does it give? The revenue is down 19%, 36.3 million for 2025. You see that the non-recurrent suffers a lot, minus 42%. I remind you, the Latin American region is one of the most important regions historically for Verimatrix. So this slowing down of investments on the part of our traditional customers weighs very heavily on the performance of the non-recurrent. The subscription is still at 9% growth and maintenance is decreasing by 13%. This is part of the axes on which we work in an important way. There is a typo, indeed, the revenue is decreasing by 19% and not more than 19% as you can see on this slide. Now we will move on to ARRs. You understood it, our strategy is to increase the subscription portfolio and finally to perpetuate the growth of Verimatrix through subscription revenues. So ARR, subscriptions have a growth of 4% compared to the end of the third quarter of last year. Once again, this performance is positive, but it is not sufficient. with regard to revenue losses elsewhere. You can see that on maintenance, we have two elements. We have a low level of perpetual license sales, which means that we do not feed enough maintenance revenues. After maintenance ARR, we know that they are structurally declining, since we are converting more and more maintenance contracts towards good-life contracts. Let's focus a little on the evolution per quarter. So it's been two consecutive quarters where we've had a hard time generating growth in subscription revenues. So, for a better understanding, we focused on the third quarter by business line, because in fact, within ARR, When we look at the performance between anti-piracy and the cybersecurity protection of applications, we have two different dynamics. We continue every quarter to increase our annualized subscription revenues on the anti-piracy part, on the video part. We talked about Telecom Argentina, I told you about RTL Luxembourg, there are also two or three contracts that have signed, so there we have a good signal, we are at 8% growth on the anti-piracy part. On the other hand, on the application part, we have difficulties in looking for new customers on the new segments. We have benefited in the past from a good dynamic on cross-selling, so the additional sale of active solutions to our traditional customers. On the other hand, on the bank side, we do not accelerate this growth enough. We have a hard time winning new customers. So again, this is an element that must be addressed. We also had a few cancellations of orders from customers in these sectors. So for us, it's a point of vigilance on which we work. The subscription revenues have dropped by 9%. So once again, there are two dynamics. Effectively, we have a 5% drop on the total ARR. We have a 4.1% growth on subscriptions. And on subscriptions, there is 8% growth on the anti-piracy business line and 9% drop on the growth of application protection. So I'm going to finish this presentation with the 2025 prospects. So we revised our 2025 prospects for a pretty simple reason. We have three quarters, three quarters, including a third quarter that weighs quite heavily on performance. So Globally, we do not change our strategic direction. We are still pushing subscription revenues. Contrary winds related to non-recurrence are stronger than anticipated. So we will start with a confirmation. Our objective was to have two-thirds of recurring revenues by the end of the year. We will achieve this objective. We had a very important and key objective for us. is the growth of the annualized revenue of subscriptions. The goal was to have a growth of at least 10%. Given what we have in the portfolio, with the projects we have on the dynamic of the fourth quarter that we see, we will achieve this goal. We are confident, we are able to achieve a growth of two figures on subscriptions. Unfortunately, for those who know a little about the subscription mechanics, these subscriptions will arrive in Q4, last quarter, So there will be no significant benefits related to the revenue of the fourth, finally on the fourth quarter. In terms of revenue, it would have been necessary to have this dynamic a little earlier, a little earlier in the year. But once again, the fund that is important is that it will be our landing point of annualized revenue, sorry, of subscriptions by the end of December, since that is what will condition our performance, a part of our performance over the next year. What we have revised is the EBITDA, so we wanted a progression of EBITDA, but given the decrease in the turnover at the end of Q3, we will not be able to keep this objective and we will have an EBITDA that will be in decline compared to last year. but once again with an acceleration of the transition towards models much more recurrent and based on subscriptions, on a duration longer than that of maintenance that we have today. That's what we wanted to share with you today. An important element, as Laurence said, We will publish our performance over the entire year 2025 with the financial results on March 12 after the closing of the market, and then we will take the opportunity to give you a little bit of a strategic orientation on Verimatrix for 2026 and a little bit beyond. Okay?

Voilà, j'en ai terminé. Alors, on va venir aux questions.

So, a first question, news concerning the refinancing of the debt. So, the refinancing of the debt, yes, news, it is still in progress, mainly with Apera. and with other carriers, so it's a discussion that's moving forward and we hope to be able to share with you information on the publication of the year 2025, but the discussions are moving forward well.

I can't tell you more at this stage. Excuse me, we have to have a new setup.

So, the contracts have not been signed. Second question, sorry. So, a question about the shift in contracts, because I explained to you that, in fact, we were seeing a cycle of sales that had lengthened. A lot of attention from our clients. So, the unregistered contracts, they are still there. Do we have a clear visibility on the moment when these contracts will be signed? No. What we can already share with you today is that we do not expect, on the fourth quarter, to have a return to a better fortune on this aspect. So, today, the vision we have, it's a third quarter. in the fourth quarter, which will be in line with what we have generated so far in the first three quarters. I don't think investments will be stopped. On the other hand, they will certainly be shifted in time. So, a question about profitability. Will 2026 be the year of return to profitability? It's a tricky question. So we're already going to finish the year 2025. As I told you, we are focused on our ability to increase subscription revenues. We will certainly have a better visibility on 2026 and on what may happen. A certain number of action plans have been put in place since the arrival of Laurent. So I would say 2026 will have to be a little patient. And we will be able to share with you our ambitions for next year, in March, when we will publish our accounts in 2025.

Alors, y a-t-il une nouvelle question? You post? Je ne vois pas de nouvelles questions. Si. There is a shift, excuse us, we are in the Paris region, so it's a little complicated. So a question about the percentage of maintenance.

So why is the percentage of maintenance 15% while the norm is rather 20%?

Laurent, it's a very good question that I asked myself in the different discussions that I had, as I said in the introduction with Verimatrix's collaborators. I quite agree, the standard would be around 20%. Then there is always a fair balance between the price of the license and the price of maintenance. But it's something we're going to review in the context of our investigations and the action plan we have for 2026. That's for sure. And it will help us anyway. So it's a subject we're currently discussing. I agree. The norm is rather around 20.

Yes, absolutely. The question has never been asked in the past, so the person who asked the question is the first. Bravo. It is a historical rate on Verimatrix, so it does not mean that it is immutable. It is more or less the rate that is practiced among our main competitors. So there is also this aspect that comes into account. But indeed, once again, it is part of the recurring revenues of Verimatrix today. These are revenues that remain very important. So yes, it is also part of the points of attention to protect these maintenance revenues as best as possible.

So, a new question maybe? Refresh? No? No? On va attendre un peu de temps, encore un peu, s'il n'y a pas de nouvelles questions.

C'est toujours la première qui est la plus difficile. Donc là, on a eu quatre questions, il devrait y en avoir d'autres.

Pour revenir à la question sur la rentabilité, il est bien évident que It is part of my roadmap to return to a more scalable profitability, as they say, as quickly as possible. So 2026, we are still working on it, but in any case, it is obviously part of the objectives that I have set myself, that I have set myself and that we will set ourselves.

Question about the treasury.

Question about the treasury on Q3. We do not disclose the financial elements in the third quarter. I will just make a little comment. I explained to you at the end of the second quarter that we still have a cyclicality in our working capital. In general, we have a need for a rolling stock that deteriorates over the first part of the year, which reconstitutes itself at the end of the year. This means that we have a drop in the need for a rolling stock at the end of the year, which helps a little with the production of cash flows. I'm not giving you any numbers. At the end of Q3, we observed an improvement, or at least a drop, of the working capital, it was in an increase on the first part of the year, it went back down. So that means that the production of operational cash flows has found a certain dynamic. We are still in control, in full control of our expenses. And we have investment needs that are stabilized around 2 million dollars a year. We are still on this roadmap. You will have more details on the publication of the draft in March 2026.

Thank you.

Well, listen, so no new questions coming in. We have to thank you for this exchange. Once again, we give you an appointment on March 12 after the closing of the stock market for the publication of the complete financial results and sales figures and results of 2025. And then on our ambitions for 2026. Voilà. Merci beaucoup. Très bonne soirée. Et puis à très bientôt. Au revoir.