Quadient Sa

Good evening and welcome to Quadient's Alfeur 2025 results presentation. I am Anne-Sophie Jujan, Quadient's Head of Investor Relations. Today's presentation will be hosted by Geoffrey Godet, CEO, and Laurent Dupassage, CFO. The agenda for today's call is on slide three. As usual, there will be an opportunity to ask questions at the end of the presentation. You can submit your questions in writing through the web or ask questions live by dialing into the conference call. Thank you very much. And with that, over to you, Geoffrey.

Thank you, Anne-Sophie. Good evening. The first half of 2025 showed a solid performance from our two growth engines, digital and lockers, with a double-digit growth in recurring revenue. Both solutions are firmly on a strong and predictable revenue growth trajectory. From a profitability standpoint, Locker's EBITDA margin also confirmed its fast improving trend. And both solutions are expected to deliver EBITDA margin increase for the full year 2025 and also for 2026. The end of the U.S. postal decertification program that we mentioned last time impacted our mail hardware sales in the U.S., leading to a temporary lower revenue in the period for our mail solution. All players in the industry have experienced similar declines. More importantly, we managed to protect the profitability of our mail solution thanks to the cross-selling between our solution and also the contribution from the recent integration of the Framart acquisition that we did more than a year ago. As a result, for the first half of 2025, we delivered 517 million euros in revenue, which represents a 3% organic decline compared to the same period last year. Despite the decline in mail revenue, current EBIT for the period was stable at 60 million euros. So, let's now turn to the details of our H1 result with Laure.

Thank you, Geoffrey. Overall, Quadion delivered 517 million euros in total revenue in the first half of 2025, representing a 3% organic decline compared to last year. This reflects a 13.4% organic drop in non-current revenue affected by the lower male product placements in the US compared to last year, this certification period. Mail performance was very much in line with Q1 and also consistent with overall market trends. That said, our subscription-retreat revenue continued to grow and now stands at €384 million, representing 74% of total revenue, up from 72% last year. From a geographical perspective, North America has been declining by €10 million compared to last year, resulting from a €19 million decline in mail, while our other solutions continue to grow. Europe performance in H1 is in line with previous year, with a notable exception, UK and Ireland, overperforming the rest of Europe, as it benefits from strong dynamics in both lockers and digital. International has also been overperforming thanks to large locker deals. Let's now turn to the revenue bridge by solution on the next slide. This bridge clearly highlights the strong and continued momentum in both digital and locker solutions, while mail experienced a sharper decline of €31 million in the middle. Out of this €31 million, €16 million are coming from the lower US hardware placements. Just as in Q1, lockers delivered double-digit growth and digital grew above 7%, while mail declined by around 8% year-over-year. The scope effect added 9 million euros on the left, mainly coming from the acquisition of Paquet Concierge in December 2024 and to a lesser extent from the Cerenzi acquisition in June 2025. On the right hand side, you can see the 10 million euro negative currency effect entirely coming from Q2 due to US dollar. Moving now to the next slide on current EBIT. So, slide 9. Despite higher decline in mail, Quadrant delivered a stable current EBIT thanks to a slight growth of EBITDA in digital, a limited decline in mail thanks to our cost adjustments, as well as significant improvement in lockers, which is up by €5 million year-over-year. The reported current EBIT for H1 2025 stands at €60 million. It's nearly unchanged compared to the 61 from last year, with a slight positive organic growth, 0.1%, offset by the currency effect of €1.7 million on the right-hand side compared to last year. So now we'll move into the details of the performance by solution. Over to you, Geoffrey.

Let's move now to our H1 2025 accomplishment and our digital automation platform. Our leadership was further reaffirmed in Q2 of 25 with top position in both CCM and CXM Aspire leaderboards. But I'm also proud to share that Quadient earned the highest score in both AI Vision and Roadmap, as well as the AI Maturity. This leads to be recognized by QKS as the most valuable pioneer in the CCM AI Maturity metrics. This recognition proves that at Quadient, AI is not a buzzword. We're not experimenting, we're scaling AI in ways that set higher standards for the industry. The real challenge with AI, as you know, is to deliver measurable value and such at scale. Too often, AI in business today gets reduced to hype, pilots, or sometimes even disconnected use cases. At Quadient, we focus not on what AI could do someday, but on what it does today to create sustainable value and accelerate customer success. Our investments in AI position Quadient ahead of the competitors and show the direction for the whole industry. We also advanced strongly in the account payable AP metrics compared to 2024, especially in technology excellence, where we're now firmly also amongst the leaders of the industry. And finally, I wanted to highlight that Quadion received also the IDC SaaS award for customer satisfaction in the account receivable automation segment. And that's based on the highest scores across 32 customer metrics from product value and usage implementation and customer relationship. So if we step back, taken together, these recognitions show one thing very clearly. Gradient Digital is delivering innovation, customer value, and market leadership across every segment we play in. Our go-to-market approach, as you know, has been built on two strong pillars, acquisition and expansion. On the acquisition side, Gradient Digital delivered strong momentum in the first half of 2025. We added this time 1,100 new customers, new logos, right, with strong dynamics from large accounts, and also on the mid-segment, over 30% growth that is coming from the cross-selling from our ML customers into our digital platform. We also secured some several new large enterprise logo, and that includes two large enterprise deals that are each worth more than a million of dollars. In particular, one deal that I want to mention to you was a Spanish bank, which is quite interesting, because once it will be fully implemented, they will be one of the largest users of our digital platform, hoping to generate more than 15 billion, I just want to stress that, 15 billion communications annually. If we move on the second pillar, on the expansion side, we continue to build value with our more than 16,000 existing digital customers. Following the acquisition on another note, sorry, following the acquisition of the invoicing platform that we did of Cerenzia in June of this year, the positive momentum is accelerating. First, Cerenzia has successfully passed the French tax authority invoicing platform test. It was in July. And since July, it is now an accredited platform. And as such, it has already been selected by major accounts and wide-label resellers as their accredited platform and such ahead of the invoicing compliance date for next year. Now, what it means for Quadion is that we're already guaranteed now to manage over 200 million of invoices annually in 2026. And moving forward, securing at least over 10% of the addressable market in terms of numbers of invoice that will be managed annually. In terms of upsell, I also wanted to share with you another strong example of the benefit of the approach of Quadrant having a best of suite approach. This customer story has everything that we could wish for. It's a competitor takeout and it's also a multi-product, multi-module sell. We signed a deal in H1 with a leading cloud-based electronic healthcare record provider. in North America with a full platform bundle. And that included our account payable module, our account receivable module, our hybrid mail distribution module, our CCM module.

Over to you, Laurent. As in Q1, we continued to deliver double-digit organic growth. in subscription-related revenue for digital business with particularly strong performance in North America and the UK. Our annual recurring revenue, or ARR, has increased to €241 million, representing an organic growth of over 10% on a 12-month basis compared to the January 2025 mark. EBITDA, on the right-hand side for H1 2025, remains stable year-over-year despite the integration of Serendia and higher commercial expense tied to strong bookings. Looking ahead, we expect profitability to increase for the full year, higher than the 17.5% margin reported for 2024. In summary, equation's focus on recurring revenue streams and successful integration of new acquisition are driving the sustainable growth and supporting our long-term profitability targets. Turning now to Mayle on slide 14. Thank you, Laurent.

Mayle had a difficult H1 caused by special circumstances in the US. and the U.S. is our main and most resilient market traditionally. The root cause of the H1 decline came primarily from the earlier than expected end of the U.S. decertification program, and with all male market players experiencing a similar level of both hardware and or total revenue decline in H1. to get a little bit more details and be more precise, the US decertification program officially ended in Q1 2025. But the initial deceleration in terms of opportunities came as early as the end of last year, the first semester of last year in 2024. So that was roughly six months earlier than we had anticipated. With over 50% of the competitive base, generally speaking, the entire market, right, that has been updated in the last two years as a result of that program, the resulting factor is a lower number of bounties to sign or to renew deals in H1 2025. This is the primary driver of the decline in mail hardware sales in H1 that you can see in this graph, with North America accounting for more than 80% of the drop in mail product placements. Moving forward, we can anticipate that hardware sales performance is going to improve and is going to improve in the coming quarters as the echo effect of the post-COVID rebound five years later will create higher opportunities for equipment renewals. The fundamentals of our mail market remain the same. The usage volume and the usage on the machine in each one are unchanged. Our forecast for mid-term mail volume usage globally is also confirmed. So naturally and consequently, we foresee a rebound in US hardware sales in H2 and in 2026. And we'll see a return to a more muted revenue decline for mail solution over the medium term. And this is what allows us to confirm our 2030 guidance on mail revenue of around 600 million euro.

Thank you. On slide 15 now, as we announced, the Q2 trends were very similar to those in Q1. So for H1, male hardware sales declined by 17.5%, primarily driven by a strong comparison base in the US, as explained by Geoffrey, due to last year's desertification, which ended in Q1 2025. Despite these headwinds, Mela BDA margin improved by 0.8 points compared to H1-24. This was supported by the successful integration of Frama, which delivered the expected benefits, the enhanced commercial productivity with digital and a mixed effect from lower hardware placements with limited impact from US tariffs. Overall, while top-line trends reflect the current market challenges, our focus on operational efficiency and integration synergies has enabled us to maintain strong profitability in the mail segment. Now moving back to Lockers with Geoffrey.

Expansion of our Lockers platform accelerated in H1 as well, both in terms of the size of the network and in terms of its usage. Our overall installed base now is reaching 26,600 lockers globally, as we added naturally, I think, more than 1,100 lockers in H1 alone. In the UK, the deployment of our network has continued to focus on premium location, and we have signed new partnerships with Shell petrol stations, but also a retailer chain, The Range, so that they could install our lockers. In H1, we also saw further initiatives that drives the volume in our lockers. So if we take another example in Japan, we extended our partnership with JR East Smart Logistics. So now users are going to be able to both receive and send parcels through the lockers installed in the train station themselves. Moving to slide 17, if we look at the European networks, we can clearly see the benefit of having an at-scale network as a key driver for the growth and usage. The graph on the left highlights the steady acceleration in local installations across Europe, in particular for open networks since January 2024. Over the past 18 months, the installed base has tripled, with mostly premium locations, as I just mentioned to you with some of those new partners. Now, let's look at the graph on the right side, because that's a clear demonstration, I think, of the successful J-curve of developing and how it develops for our open networks. From the three-fold growth in installation, we have been able to generate a 13-fold increase. So just let me repeat, a 13-fold increase in volumes over the same period of time as now users and carriers and consumers are increasing the usage of our lockers. With that, I'll now hand it over to Laurent.

Thank you. On slide 18, let me start with just showing you the longer-term track record of our Locker business. On this slide, we have shown the evolution of the key financials and operational metrics for our Locker business over the past three and a half years. The quarterly revenue evolution emphasizes strong revenue momentum, as Locker already is a 100 million euro revenue business on a 12-month basis. An increase in the share of subscription-related revenue with four consecutive quarters of strong double-digit organic growth. Now moving to the other graph, let's review the EBITDA evolution. It shows a low point in 2022, which was impacted, if you remember, by adverse transportation costs impacted at the time. Most importantly, EBITDA break-even was achieved in fiscal year 2024, last year. With a regular and strong increase of EBITDA margins since 2023, the H2-25 is expected to be both sequentially and above year-on-year, and we are well on track to reach the above 10% EBITDA margin by 2026. Moving now to slide 19, we continue to deliver that strong momentum in both revenue and profitability in H1. Reported growth reached 30%, including the positive impact from package concierge acquisition, which contributed 8 million euros. Organic Growth continues to be double-digit in Q2 like it was in Q1, and despite the software hardware performance in North America in Q2. We also achieved a double-digit organic growth in subscription-related revenue, driven by the outstanding volume ramp-up in open networks across UK and France, as well as continued momentum in the US residential segment. On the right-hand side, our EBITDA has significantly improved. I mean, for the first half compared to last year, it's up by 5 million euros. It's more than 10 points better than last year. And this was fueled by rising recurring revenue and increased usage, as well as their creative contribution from package concierge. On slide 20, moving now to equation financials. In this slide, you have just a summary of the different metrics we did review, summing up to the €517 million published revenue, or 21% EBITDA, and the €60 million current EBIT at the bottom. Moving now to slide 22, where you see the P&L. Income before tax is particularly improved. In H125, it's 50% more than last year, thanks to lower optimization expenses than last year, which I remind you included an IT project write-off and some office optimization. we have also a stable financial expense h125 income tax is normalized while h1 last year included the 15 million tax benefit we even have a negative cost in tax last year it results in a net income at 21 million euro for this period compared to the 24 million euro last year let's move now to slide 23 and the free cash flow The cash flow stands at minus 8 million euros, despite the seasonality that we know of our working capital, and the debt interest payment, and tax one-offs. We had two one-offs this semester. Lower mail hardware placement has benefited to the cash flow, on the other hand, thanks to the least portfolio decline, and lower capex for mail, which we'll review in more detail on the next slide. On the acquisition side, you can see the impact of Rama acquisition last year, NH1, and Serentia this year. Moving now to the next slide to see details on CAPEX. The evolution of CAPEX presented here excluding IFR16 CAPEX moving forward, as in fact IFR16 is not reflecting as such a cash out. This evolution reflects the dynamic buy solution we explained before, a stabilization or sustained investment in digital, which is mostly related to R&D, the 12 million. Increase in lockers for the benefit of our open network rollout, notably in the UK, increased to 14 million. And last but not least, the reduction in mail capex due to the lower placement in fronking machines tied to the end of the certification and the reduced activity. Moving now to slide 25 on net debt and leverage. As of the first half of 25, our net debt declines to 712 million euros. It's clearly favorably impacted by the USD, weakening against euro. The leverage ratios are down. It's at 2.9 including leasing and 1.6 excluding leasing from the 3.0 and 1.7 respectively at the end of January. This improvement reflects the resilience of our IBDA with a continued discipline on the balance sheet. Over the past 18 months, if you look at the figures, we have seen that the leverage was kept stable or declining. And this despite the 45 million euro of acquisitions we made over the period. Our leverage ratios continue to stand well below our maximum covenant levels, ensuring long-term financial stability for Quotient. Moving now to slide 26, during the first half of 2025, we raised 50 million euros in new facilities, a US private placement issued in July, thanks to the shelf facility signed earlier this year. We also completed the repayment of our 2025 bond and through Shine in February. Our liquidity position remains strong with 123 million euros in cash at the end of July and 300 million euros on joint credit facility, which has been extended to 2030. The customer leasing portfolio stands at 556 million euros. It stands by 67 million euros, which in fact is due for 43 million euros to Forex. And we see the maturity at the bottom well spread over the coming years. Back to you now, Geoffrey, for the conclusion. Thank you, Laurent.

This H1 2025 performance, I think, demonstrated clearly the solid dynamics of our two growth engines, digital and lockers, offsetting the temporary U.S. software mail impact that we described today with a stable current EBIT. The second half of the year, we expect gradient revenue to increase compared to H1, and this will be supported by a few things. The first thing is the continued sustained strong momentum in digital and also in the lockers. It will also be supported by a rebound in US mail for us, also tougher than initially expected. We also expect a further increase in profitability in H2 versus H1 this year. How is this going to be supported? We're going to have a strong increase in digital and also the locus contribution in H2. And male EBITDA margin is going to remain at a high level as well, thanks to the continued cost adaptation and despite the impact from the U.S. tariff in particular. So consequently, and taking into account the global macroeconomic uncertainties that we all have experienced, we are updating our full-year 2025 guidance. We now expect the full-year revenue to decline by a low single-digit on an organic basis and the full-year current EBIT to come in a range from stable to low single-digit decline on an organic basis. If we look at the mid-term guidance, We are confirming all our 2030 guidance and we are also confirming the full year 2026 EBITDA margin targets and such for our three solutions. So with EBITDA margin expected to be above 20% for digital, above 25% for male and above 10% for the lockers. Based on the 2024 result and on the revised guidance for 2025, we're currently suspending all other elements of the guidance forming part of the previous 23-26 trajectory. So, thank you. And with that, we're ready to take your question, as usual, for the Q&A. Anne-Sophie.

Thank you, Geoffrey. If you wish to register for a question, please dial pound key 5 on your telephone keypad. Once again, it's pound key five on your telephone keypad. There are no audio questions at this time, so I hand the conference back to the speakers for any questions sent via the webcast. Thank you.

Thank you. So we have a first written question. So the question is, why did you suspend your guidance for lockers and digital on the revenue side for the 2023-2026 period?

It's a good question, and I don't feel free to comment. It's just it's too early to give the full guidance of 26, so it's likely something we will share with you and we'll get to March 2026 after the full year presentation. The real things that made us suspend the guidance is really related to the US male performance that we have this year and the level of uncertainty that we still have as it relates to the pace of the rebound that we'll get in the US mail market for H2 and for the pace, obviously, at the beginning of 2026 in particular. All the other elements of our business, including the performance that we have in the mail in Europe, that is at the same level as we expected in the previous years. The performance on our digital activity as well as our local activities are in line with our expectation and this is why also we're able from a profitability or margin perspective to be able to ahead of time to confirm the trajectory. That being said, we live in a world with quite a lot of uncertainties, so it will be good for us to be able to wait until March to be able to precise the revenue trajectory or solution once we get there.

Thank you. So the next question is on digital. So could you please provide further details on the decline of EBITDA in the digital segment? What are the expectations for the second half of the year?

So I'll take this one, Geoffrey. So EBITDA for digital is growing, so it's plus 1 million compared to last year. That's what we saw in the bridge. And yes, we still have some growth and scale. I think you're referring maybe to the EBITDA margin that is slightly down. You have this dilutive slight impact from Sereza and the integration cost as well. That is a factor. And the second factor is obviously some strong bookings that have impacted the commission side. We are very confident on the second half. We still have a growth in recurring revenue that is highly contributive. And we have a level of OPEX that is not expected to significantly increase in H2. As you remember, we have usually payroll increases at the beginning of the fiscal year so it should really benefit to the digital segment and will end up higher than the 17.5% that we had in the full year last year.

Thank you Laurent. So the next question is on US tariffs. So regarding the tariffs, are you more impacted than your pit neighbors competitor as being a non-US provider?

It's a good question and it's difficult to know because we haven't looked at the information if Pitnebos has actually shared the amount. They have more volume than us in terms of equipment being a larger player so they may have been more impacted in absolute value and it depends obviously on how and where they source the production and the manufacturing and reassembly of the activities. I think They are not producing in the US, so they are likely to be subject to tariff like any of the other players, like FP and ourselves. That being said, the rate could vary from the one that could be potentially manufacturing in Europe, like some of our competitors, or in Mexico, which I think may be the case for Pitnebo's, and Asia, like it could be for us. So I hope that answered your question.

Thank you, Geoffrey. The next question is, at which leverage would you consider resuming your share buyback program?

When we had the capital market day last year, we mentioned it would be below the 1.5 leverage, excluding leasing by the end of 2026. We are still at 1.6, so clearly it's about forecasting and projecting what will be this evolution across the coming quarters. So, so far we have, you have seen, we still have capex notably in lockers and the rollout obviously of the network, but clearly it's something we continue to monitor and continue to arbitrate with that trajectory and how much, you know, security or guarantee we have to reach that 1.5 that we want to meet at the end of next year.

Thank you, Laurent. So the next question, is there outstanding earn out on your latest acquisitions?

No. That was a straight answer.

No. So moving on to the next question, have you completed the office optimization process?

Yes. Yes, we have mostly completed the program completely. We may have always, we're always looking at potentially when we renew lease and have opportunities to adapt to the scale of the business. In some cases, we have a little bit more people that we have hired. In other cases, people that took the benefit of the flexibility and the program that we provide them to let them work from home. So sometimes we adjust down. So there could be some more savings coming.

Absolutely. And just to complete one thing, Geoffrey, when we do acquisitions, obviously, we are seeking sometimes to make sure that we merge some offices. So that might be additional, I would say, optimizations. But for existing offices, I would say we did really the bulk of the work at this stage.

Thank you, Laurent. So the next question is, Quadrant is a key player in the CCM market. What is your view on the recent acquisition of smart communications by Sievent this summer?

It's a good question. So to be specific, our understanding is that the current or the previous owner of one of our competitors, Smart Communication, sold a controlling interest, so not the entire company, to another private equity, Sinven. for a valuation that I believe is estimated at 1.8 billion for the entire business, for a company that is much smaller than Quadient Digital today, from what we know. This means it implies a high multiple on this transaction. And it shows that this company was highly valuable. So the first thing is congratulations for this transaction. But the best news is that I see that as a win for Quadient and Quadient Digital because it shows that the segment that Quadient Digital has decided to play and focus strategically in. So among them, obviously, we have our CCM activities, the one we're discussing now, but also, as you know, some of the financial automation segment, the hybrid mail, the account payable, the e-invoicing with the acquisition of Cerenzia, all those segments obviously highly sought for segments with investors willing to pay high valuation because it shows the value that those segments provide. So that means that all the segments of credit, we've seen some previous transaction I think more recently in the last six months transaction from Bridgepoint on Esker, but also the transaction in the US around Avid Exchange. So it shows, it continues to show that those segments are quite valuable for us. So that's the first thing. The second thing is that I see also that as a win for Quadion because we're still recognized by some of the industry analysts that I mentioned to you as the leader and we continue to show the win in the industry. So I'm quite happy that this segment is recognized and we have the opportunity to lead the segment naturally in this environment. So overall, it's a great news for the market and for Codient Digital and for the player.

Thank you, Geoffrey. So moving on to lockers for the last question. What would be the current locker usage in France and UK? What would be the target for the average full year 2025?

Yeah, so first, we don't go into that level of detail because we have a lot of metrics that will be communicated. I think what's important to recall is the volume and absolute value, which is, I think, a key metric for us. Because, in fact, the more you will roll out lockers, obviously, you have a rent-back for each locker. So looking just at the average of the utilization rate of all the rolled-out lockers is not necessarily the right metric, I would say, because basically, if you just expanded for let's say 200 just in the past months, then you will drop basically your overall decision rate. So I think we need to focus also on the total volume of parcels that Geoffrey commented earlier. And I think, yes, we still have some room in the existing lockers, but the usage rate is ahead of our plan, so very satisfactory to us. And we see a good traction of existing carriers that are committing or increasing their capacity requirements.

I think I could even add with certain level of confidence is that the usage that we currently see with the usage trend and past that we see in the UK is actually above the trend and the level that we're seeing in Japan. So this way, as we know, we have a quite profitable base today in Japan. So we're quite excited about the prospect of having such a usage trend evolution in the UK in particular.

And we have one last question. What are the EBITDA margin prospects for male? Could the 2025 EBITDA margin for male be flat compared to 2024?

So as you could see in H1, clearly we had an improvement in the BDM margin despite the decline in top line and we mentioned the several factors out of which obviously our ability to scale the OPEX is not the only reason but that's one of the reasons. Also there is a bit of a mixed effect. H2 ABDA will be higher than H1 ABDA. So we have clearly room in H2 to generate a significant amount of ABDA and continue to be maintaining the level above the 25% by next year, which is the commitment we took last year and will maintain. Will, you know, the H2 compared to H2 last year, yes, there will be an impact from the tariffs. I mean, we know that. The ability of pushing that impact to the customer is something where basically we need to assess and view. So we would not, and we don't go into detail of FBDA by solution by semester, obviously, but you can be sure that it's going up compared to H1 and that will maintain a 25% mark as a minimum for this year and for next year.

Thank you, Laurent. So we have no further questions at this time, so we can close the call. Thank you very much for attending this presentation and for your questions. Our next call will be on the 2nd of December for our Q3 2025 sales release. In the meantime, we look forward to meeting some of you in the coming days during our web shows. Thank you and have a good evening.

Thank you. Thank you.