Worldline Sa Ord

Ladies and gentlemen, good morning. Let me start with today's agenda and what we will cover in this presentation. After my introduction on the key highlights of 2023, I will come back specifically on the business and operational decisions we took during H2 in close coordination with our board of directors to address as fast and as efficiently as possible the short-term challenges faced by wildlife. In particular, I will give you an update on the launch of Power24, our cost reduction and transformation ambition. Marc-Henri Deporte, our Deputy CEO, will then give you an update on our business and commercial dynamics throughout the last year, while Grégory Lambertier, our Group CFO, will come back on our financial results. In my conclusion, I will share our guidance for 2024, a year of transition and accelerated transformation towards a business and financial profile. structurally improve at Worldline as early as 2025. Let's have a look now at a few highlights of the full year 2023. Definitely, 2023 is a tale of two stories for Worldline, with a very dynamic first half of the year, very much in line with MSRT2 performance, while we faced clearly unexpected challenges developing along the second semester. Overall, in 2023, we have delivered results in line with the revised guidance issued in October 2023, despite further macro deterioration during the fourth quarter. Looking at our top line, we have delivered in 2023 an organic growth of 6%, with much softer growth during H2. Our merchant services activities in particular still delivered 8.9% organic growth on a full year basis, but the second semester has been materially impacted by the macro and consumption evolutions and the merchant termination process in fast execution. Our adjusted EBDA in 23, which is the exact same aggregate than our former OMDA, reached 1.11 billion euros stable versus 22. Finally, we generated a free cash flow of 355 million euros over the year, corresponding to an adjusted EBDA conversion of 32%. But despite the headwinds we face in H2, the group could nonetheless make decisive progress on a number of strategic and development initiatives which will reinforce our growth foundation for the years to come. I would like to start by the joint venture we are setting up with Credit Agricole, which is truly a strategic initiative for both our groups. We intend to create together a new major player in the merchant services and acquiring business in the French payment market, leveraging the highly global technological performance and innovation capabilities of Worldline, combined with the commercial strengths and exceptional knowledge of the French market, of Credit Agricole and its powerful distribution network. Since the announcement in April 23, we have reached important milestones and are fully on track to close this partnership in the coming weeks, and to have a full go-live of the joint venture early 2025, as expected. Our commercial push on merchants has also led to successes and additional circa 55,000 merchants onboarded last year, in line with our multi-year ambition. We have also executed a number of large strategic partnerships, such as the one announced with Google recently, and pursued a solid dynamic in large merchant wins, that Marc-Henri will detail later on. I'm also pleased to report that we have obtained two new payment licenses from local prominent regulators in the UK and in Singapore, and seeing our offering for both local and international merchants operating through these countries. Finally, as mentioned earlier, we've been moving fast on Power24, our transformation ambition, and I will come back to it in a minute. Now let's turn to the next page to take a closer look at the second half of 23 and all the actions engaged together with the board and the management team. We need to adapt fast to this new environment that we faced in the second year and we decided to act decisively. First, we decided to accelerate our transformation with the implementation of Power24 in addition to key structural initiatives that were already in motion. We will of course continue to sharpen our risk management framework. We are in full execution mode and on track with regards to the announced merchant termination and corresponding impacts. In parallel, we reinforce our teams, our tools, and processes to ensure long-term alignment with these enhanced regulatory requirements and our own risk policy. Finally, in this uncertain macro context, we will particularly focus in 2024 our management action on what we can best control, our costs, to structurally improve operating leverage and the cash flow conversion levers. Accordingly, we have adapted management incentive schemes with free cash flow objective as one of our top metrics. Now, let me come back in detail on Power24. After our strong focus on transformational M&A over the last decade to reach the targeted strategic scale, the group is now fully focused on extracting the full benefits of its large scale. In this context, Worldline announced Power24 in October 23, enabling the acceleration of its existing post-integration transformation ambition, built upon both ongoing and new initiatives. The overarching goal is not only to bring short-term cost benefits, but in parallel to structurally increase the group operational efficiency and reinforce its long-term competitiveness, making it faster, more automated, leaner, while streamlining our global sourcing. For your information, more than 500 managers have been involved during H2 in the very detailed design of the plan. And as we start 24, the social processes are already initiated in all group entities and the granular implementation plan is already in action. Beyond having been elaborated at a very granular level, Power24 is also a fast and very secure transformation program. It leverages indeed both well-established and new group initiatives that we will bring to a higher scale quickly in 24. You will find on this slide some concrete illustrations of some of these productivity levels. For example, on the product and technology side, we have built a scalable platform that we will continue to leverage through further rationalization, improvement, and extended functionalities, such as the continuous migration of our accepted transaction into the cloud, now reaching circa 40%, while benefiting of the power of our new technology partnership with Google. The increase in our product conversions roadmap, based on our target applicative landscape, through the full decommissioning of the remaining legacy modules. Lastly, we will accelerate the development of our proprietary GeneAI tool to improve, for example, merchants onboarding performance and assisted KYCs, or to increase the quality of the user experience or international efficiency. Be aware that more than 1,000 of our developers generate already more than 10% productivity gains as we speak based on GeneAI deployments. Regarding global sourcing, which is another example, let's focus on India. We have been successfully ramping up our global competency center in 2023, with eight counts multiplied by two over the last year, reaching now 1,300 people in our Indian Global Competency Center. And with the target to have a tech team over there of more than 3,000 people by the end of 2025, with a vast array of competencies, such as program managers, architects, or developers We are now in full execution and our social processes for Power24 has been initiated, as I said, in all the relevant group countries as the program will translate into circa 8% European onshore workforce reduction in particular. We fully confirm our objective to deliver circa 200 million euros of cash cost saving in 2025. And thanks to a strong focus already during H2 on cash cost control, and attrition management. We have already secured circa 80 million euros impact for 24 as we start this year. To reach the targeted 200 million euros cash cost savings, the remaining savings will be primarily delivered in H2-24, thanks to the executive rollout that will take place post the social negotiation that will occur during H1-24. And as a reminder, We also confirmed today the circa 250 million euros cash cost implementation with the vast majority occurring in 24 and the smaller part in 25. Finally, in order to secure the execution of our transformation priorities, we have taken some important management decisions. To better reinforce operational performance and business control in merchant services, as well as the fast implementation of all the Power24 initiatives in this major division, Marc-Henri Deporte, Deputy CEO, takes the direct steer of the Merchant Services Business Unit. To ensure we properly reinforce our risk management framework in line with best-in-class standards, the group Risk Function will from now on directly report into me. To ensure the proper rollout and central steer of Power24, Lisa Coleman, Our group head of operational performance takes the full leadership of Power24 implementation and execution across the entire group. And last, to rejuvenate the commercial dynamics of the financial services business unit, Pascal Mose, former head of group sales excellence, has taken the responsibility of the financial services sales team. Now, it's my pleasure to give the floor to Marc-Henri to dig into the business and commercial dynamics.

Thank you, Gilles, and good morning to all. I would like to start today with an update on the decision that we had announced to the market in Q3 regarding our merchant termination process following a German regulatory audit and the implementation of a reinforced risk control framework for the entire online portfolio. After evaluating at that time a maximum risk of €130 million run rate revenues, we would like to update you on the processes and figures. Our final assessment of 130 million is fully confirmed as a maximum. Second, the termination of the German portion representing 40 million run rate revenues has been completed entirely in 2023. Third, the termination process regarding the merchant outside of Germany is fully on track with more than half already executed and we have a confirmed objective to end the remaining part by the end of H1 this year. We continue to raise the bar and to sharpen our risk management framework, ensuring perfect alignment with enhanced regulatory requirements and our own risk policies. Now, regarding our MSV indicator, we observed that it was overall at circa 7% in 2023 versus 2022. reaching 480 billion euros. The three most important points to flag here are the following. First, after a solid start of 2023, benefiting from some catch-ups in specific verticals, such as travel, we have seen a normalization in MSD growth in Q2 and Q3, as Zen said. Second, when we published our third quarter at the end of October, we reduced our failure expectations given the volume slowdown leading to a revised Q4 forecast. You can see the narrowing of the curve gap between 2022 and 2023 materializing in November and even more end of December, and it's reflected in our Q4 performance. Third, for the beginning of 2024, Here, we can see that the trend observed end of 2023 continues, with MSV growth more on the low single-digit side. This pattern is fully factored in our guidance that Gilles will later detail in this presentation. Beyond macroeconomic context, Worldline continues to be very dynamic in its commercial activity with several wins, both on SMB and large merchants, both in-store and online, that I will dig in in the next two slides. Now, deep diving on MS Dynamics with merchant KPIs. In 2023, we have increased our base of merchants with a net additional 55,000 new merchants, pushing our merchant base at the end of 2023 at 1.4 million merchants. Since 2021, we have grown our merchant base by 135,000 merchants and a net monthly average growth of 6,000 merchants. Given the context, we are satisfied by this growth versus 2022 because first it is in line with our trajectory ambition and also because it shows that we continue to develop actively our franchise in our core markets and in particular in new markets such as Italy and Greece. During 2023, we continue to win new customers a lot of big names, as you can see on this slide. and we continue to extend the use of our solutions to existing customers, to offer new products, and to conclude key partnerships. I will start with the Omnichannel. In this domain, the whole lot of Alacart offerings in several quarters continue to be a strong differentiator, allowing us recently to extend our business with Vervodé, a renowned French clothes brand for kids. With them, we have developed a local and global payment gateway with multiple acquiring solutions, improving massively their conversion rate. On the hospitality vertical, our omni-channel experience has been key for Boscolo using wall-line payment services from pre-booking to checkout. One of the levers for this win is related to the partnerships we have with Sabre and Oracle, both being fully connected to our solutions. On the online cross-border or global expansion approach to offer direct access to local payment means through domestic corridors continue to be a key growth accelerator for our clients. And on that specific offering, we signed recently open, particularly for the access to the Thai customer, Thailand, and obviously Google, but I will come back on it later. Last, on the travel and airline vertical, being already strong in the paying solutions, we continue to enrich our value proposition, adding a significant payout layer with the signing of a new virtual card deal with Visa and B2B for online travel agencies. It will support them to pay their suppliers through easier integration, more standard, and with faster funding. With all these examples, you can see our commercial dynamic is strongly driven by our product portfolio with dedicated verticalization approach. It remains a key success and differentiating factor that we will develop further through a continuous investment in innovation and R&D. Now, in addition to new customer logos, I want to deep dive on the partnership side, which are a key pillar of Forfait to Growth. On this subject, I'd like to come back on the strategic agreements that we signed with Google. In collaboration with Google Cloud, Worldline is ushering in a new era of fintech excellence. Worldline selects Google Cloud technology to boost its digital transformation while streamlining its operation. As part of the expanded partnership, Worldline will also serve as one of Google's key payment providers in Europe and across multiple geographies for Google's own B2C solutions. We will provide to Google customers more advanced payment options, support for payment networks, improve cross-border conversion, et cetera. We will also collaborate together to develop new innovative solutions in digital payments and customer experience improvements. Regarding the other partnerships, on the distribution side, I can mention Datalogic, a global technology leader in automatic data capture and automation solutions. The new generation of our mobile computers will enable payments with wall-line soft posts. Through the partnership, wall-line solutions will be promoted to the data logic ISV and distribution network, allowing us to open a new distribution channel in the larger tech ecosystem. And on the solution side, the innovative partnership with SV365 and Sodexo aims to create an exceptional learning experience, revolutionizing the concept of self-service kiosks. The technological highlights include Android terminals accepting all payments with corresponding apps and services. This partnership are some proof points of our own capabilities in terms of breakthrough innovation to be embedded in the ecosystem and enlarging our outreach. Our innovation is at the heart of our priorities and 2023 has been a year of investment and new product launch on the in-store space We successfully roll out our tap-to-pay product, leveraging our soft-post solution, with now more than 150 partners connected. On the innovation acceptance, we have developed a suite of products enriching user experience, such as a universal QR code automatically displayed on the post screen without requiring any merchant handling and managing automatically the payment process. And on the account-to-account, all the account-to-account pay button, with more than 3,000 connections to banks. Regarding the mobility and travel market, we have developed our open payment solution. We start to use allowing travelers to pay with their Apple Pay Wallet without need to use their face or touch ID. Our payment orchestration growth channels continue to develop significantly with 355 partners connection available and offering an agnostic payment management software. Last, on the domestic corridors, we have pursued our expansion with the development of four geographies with local acquirer partnership, enabling our local payment means to large e-commerce merchants while increasing their conversion rates. We will pursue our investment efforts in product enrichments going forward as it remains a strong growth enabler for us, bringing value to our merchants. To end this presentation, I will comment on the financial services and METS commercial dynamics. During the fourth quarter, on the commercial front, financial services signed an agreement with Volksbank for the emission of payment cards in Italy underlying the strength of Warland's solution for the issuing value chain. Within the issuing business, numerous contracts extensions were also signed, notably in Belgium with BNP Paribas Fortis Bank and KBC Bank. Business was also strong in Asia-Pacific, a key region in Warland development, with the extension of five-year contracts with East-West Banks and Baiduri Bank. Regarding mobility and e-transaction services, commercial activity has been solid, notably extending business with ISP and the renewal of INCV in the domain of holiday vouchers, supporting the dematerialization of vouchers used by millions of French people. Now, let me hand over to Gregory to walk you through our detailed financial results.

Thank you, Marc-Henri. And good morning, everyone. Before I dive into detailed 23 numbers, Let me share with you an overview of finance actions in the last few months, both in terms of financial policy and regarding the metrics we will share with you going forward. On the debt and liquidity management front first, we sought to secure ample liquidity for Worldline through active debt management while taking advantage of the inverted yield curve throughout 23 to lengthen our average maturities and to meaningfully increase our interest income. As a result, our financial policy and liquidity remains strong. In parallel, we've designed a detailed reporting framework ensuring a tight financial control to support the execution and tracking of Power24 and secure our trajectory of operating leverage improvement while reinforcing our focus on free cash flow delivery. On the reporting front, let me also present a couple of new metrics reflecting feedback from our shareholders, investors, and analysts over the last quarter and introduced to ensure more clarity and comparability with peers. First, we'll now disclose net net revenue information, excluding schemes and partners fees, therefore showing growth and margin levels on an NNR basis as is customary in our sector. Second, we're introducing EBDA, which is equal to the former OMDA minus the integration and rationalization costs. This is a new metric, and more importantly, It is the metric upon which 500 top managers will be incentivized, reflecting our enhanced focus on free cash flow generation. We'll of course continue to provide adjusted EBITDA, i.e. EBITDA before those integration costs, which is strictly equal to our former OMDA, to ensure continuity of performance tracking for our investors and analysts. The conciliation tables are available in appendix, as well as in the press release. Now, looking back on 2023, we reached our revised guidance on all three counts with revenues of 4.6 billion, representing growth of 6% or 3.9% on a net net revenue basis. On profitability, adjusted EBITDA reached 1.1 billion euros or 24.1% of revenues, meaning 29.4% on an NNR basis. Pre-cash flow stood at €355 million, reflecting a conversion ratio close to 32%. Normalized net income group share reached €521 million, while reported net income group share was minus €817 million, reflecting a non-cash impairment of €1.1 billion related to the decrease in the carrying value of the MS business line. Normalized diluted EPS stands at €1.85 per share versus 1.88 in 2022. Moving on, revenue performance by business line. Our fourth quarter came in at 1.2 billion euros, i.e. organic growth of 1.3% versus 4.8% in Q3. This slowdown was anticipated to some extent in October 23 and factored in the revised guidance. Looking at it by business line, organic growth in Q4 was impacted by a number of headwinds. Merchant services grew 3.1% organically, or 2.7% on an NNR basis, reflecting first a slowdown of digital consumption growth across our core geographies, as well as the impact of merchant terminations impacting our performance by around 2%. Financial services was down 4.4%, mostly impacted by slow commercial dynamics versus a very strong Q4-22, where we signed a landmark contract with ING. Last, METS came in flat during the quarter. For the four-year, organic growth is at 6%, or 3.9% on an NNR basis. MS is up 8.9%, or 6.7% on an NNR basis. FS was down 1.3%, and METS was up 0.1%. Let me quickly walk you through the H1-H2 dynamics for 23. As it's clear on the slide, 23 saw a very contrasted performance between the first and the second half. A 6% foliar organic growth is made of 9.3% growth in H1 at group level, with MS growing at 13%. While in H2, group growth slowed to 3% and 5.3% for MS. on the back of the changes I just outlined in the previous slide, mainly impacting the fourth quarter. Now, moving on to the next slide regarding adjusted EBITDA performance. During 2023, Worldline's adjusted EBITDA reached 1.1 billion euros, representing a 24.1% margin, 140 basis points down from 22, in line with our revised guidance. On an NNR basis, adjusted EBDA margin was down 110 basis points at 29.4%. By business lines, the main highlights are as follows. On MS, adjusted EBDA reached 847 million euros, or 25.5% margin, or 33.8% on an NNR basis, down 200 basis points versus 2022, both in net and net-net revenue terms. Financial services adjusted to BDA came in at 275 million euros, or 29.1%, a drop of 50 basis points. METS profitability is up 70 basis points to 14.1%, benefiting from cost control measures put in place early 23. Finally, corporate costs were kept under control at 59 million euros, slightly down versus 22 in absolute terms. Now let's look at H1 versus H2. The bridge shows well how trading conditions impacted MS margins. I'll be brief regarding FS and METS since margin developments have been broadly similar from one semester to another, reflecting for FS the impact of slower top line developments and for METS the effect of cost mitigations already mentioned. So focusing on MS, As a reminder, in H1, MS margin increased 100 basis points, supported by 13.1% revenue growth, coupled with a good operating leverage above 35%. Turning to H2, the contraction in profitability was mainly driven by four factors that accelerated in Q4. Number one, slower payment volume growth from 10% in H1 to 6% in H2, driven by lower consumer spending. Number two, mixed effects. the direct impact on the contribution margin. Number three, the impact of merchant terminations for 30 million euros. And four, the accumulated impact of inflation, in particular wage increases from 22 and 23, that we were not able to fully compensate by repricing actions and cost-saving plans. We expect operating leverage to rebound above 40% in 2024, driven by progressive growth reacceleration throughout the year and progressive Power24 ramp-up. Now moving from adjusted EBITDA to other elements of the income statement. The largest impact on the P&L is clearly the 1.1 billion euros goodwill impairment, which impacts our reported numbers. As a result, we report an operating loss of 870 million euros. Regarding the impairment test, a detailed slide is in appendix. And the main points to bear in mind are on the business plan front, we took into account conservative view versus the ambition we have forward line in the medium term. And in terms of technical factors and depending the IFRS valuation exercise, we also applied some extra buffers versus the intrinsic parameters calculated by external valuers. This is, of course, a non-cash effect that reflects the accounting adjustment of the fair value of the assets in our book as of December 23. Now one more operation in the P&L. First, integration and rationalization costs. We discussed it with a number of you and clearly we committed to meaningful reduction. Excluding strategic projects accelerated in Q4, those costs are already down 8% to 176 million euros. Our EBITDA therefore reached 905 million euros. As mentioned earlier, This new metric will be a key driver of management incentive for around 500 managers in the group. Excluding Power24, integration and rationalization costs were reduced by 30% in 24, with the view to continue to reduce them drastically in the coming years. Our net finance costs are broadly stable at 48 million euros. The tax charge was 40 million euros with a normalized effective rate of 18% in 2023 versus 23.5% in 2022. Going forward, we expect an effective tax rate between 23% and 24%. Last, on non-controlling interests, the positive €141 million contribution is impacted by the goodwill impairment allocation to the different MS entities that are not fully owned. Excluding this effect, the amount of non-controlling interest impact is equivalent to 2022. Now, on the cash flow statement, we generated €355 million of free cash flows in 2023, or 32% of our adjusted EBITDA. The main parameters of our free cash flows are, in terms of capital intensity, we started to decrease CAPEX as a percentage of revenue down from 7.4% in 2022 to 7.2% this year for a total capex of 333 million euros. In terms of capitalized production, we spent 4% of revenue, stable versus 22. Working capital was a slight negative at minus 18 million euros. And for 2024, we expect a slight negative contribution with working cap becoming cash neutral in the medium term. Mirroring the P&L trend and excluding Power24, our integration and rationalization cash costs are down 14% to 166 million and will continue to go down going forward. Overall, the full year free cash flow before strategic investments stood at 384 million euros or close to 35% cash conversion. After strategic investments, reported free cash flow came in at 355 or 32% cash conversion. Going forward, we're committed to materially increase free cash flow conversion by reducing the capital intensity of the model, meaning capex should broadly remain constant in absolute value. We also intend to reduce integration and rationalization costs well below 1%. Working capital should become neutral, and all this will be leading to north of 50% free cash flow conversion in the medium term. Finally, during the year, we delevered by 391 million euros, mainly driven by the 355 million free cash flow we just mentioned. Our net debt, therefore, stands at 1.8 billion euros, which equates to 1.6 times adjusted EBITDA. Important elements to mention on the debt and liquidity side for 23 are we've increased our average debt maturity through short-term bond buyback and active management of mid-term maturities. On top, we've already secured the remaining part of our September 24 maturity through a bond issue in September 23 at attractive costs. And last, we kept a strong liquidity profile, qualified as exceptional by S&P with 1.9 billion euros. in gross cash at the end of 2023. This active management is a strong support to investment grade rating we're committed to. Now, let me hand over to Gilles to conclude.

Many thanks, Gregory. And indeed, to conclude this presentation, let me re-emphasize how we are, board and management, actively executing since the third quarter all the necessary transformation actions to strengthen Worldline's business and financial perspective during this year 24. It will be, indeed, a year of transformation and transition, with the heavy focus of myself and my team on stringent execution, and in particular with a reinforced central steer on all our core immediate priorities. First, Power24 execution is in full motion. It will deeply adapt our operating model to the fast-changing environment, but more importantly, it will also structurally improve with very quick benefits our operating leverage for the mid-term. Secondly, we are ramping up future growth engine initiatives. I mentioned the credit agriculture venture addressing the French acquiring market with a go-live confirmed in 2025, as well as a continuous enrichment of world line value proposition through new products and partnership launch. So our efforts and priorities are definitely focused on improving our free cash flow generation supported notably by the fast plan reduction of integration costs and other evolutions. Regarding the governance, the board will continue to adapt it as committed. After the sudden passing of our chairman, Mr. Bernard Bourigeaud, in December 23, the Board has immediately initiated the search for a new chairman early January. The process driven by the nomination and governance committee on behalf of the Board is progressing actively and a new chair should be selected before the end of March 24. Regarding the evolution of the Board composition itself, the Board of Directors is working on a partial renewal of its composition. to bring it down to a maximum of 17 members, excluding the two employee directors, while new profiles could join the board. As already mentioned, this year will be a transition year for our group. With a strong focus on the execution of the transformation plan in a macro environment, we expect to remain challenging in our main markets in Europe. Consequently, we expect to deliver in 2024 a top-line organic growth of at least 3%, This guidance assumes an unchanged microenvironment along the year in our core geographies with softer growth in H1 in the low single digit area mainly due to the merchant termination impact and the progressive growth reacceleration in H2 towards a more normative comparison basis. On the adjusted BDA level, we expect to achieve at least 1.17 billion euros of adjusted EBITDA with a modest improvement in adjusted EBITDA in H1, while H2 will benefit from merchant services growth re-acceleration and from Power24 on up. Finally, we expect a free cash flow of at least 230 million euros, mainly impacted this year by the Power24 one-off implementation costs. And to conclude, let's take a quick step back. Over the last 10 years, we have built a true payment leader at SCARE. After its necessary transition in 2024, we will definitely enter a new strategic phase, rebalanced toward extracting the full benefit of our remarkable combination of SCARE and advanced technology in European payments and beyond. Looking at growth and growth potential, the combination of our leading positions in Europe still benefiting from natural payment market tailwinds coupled with our powerful distribution network will be a key success factor in the rollout of our existing innovative products as well as the launch of new growth engine. It will be also supported by the scalability of our transformed platform, accelerating our go-to-market while reducing the marginal cost of our solutions. On the operating leverage side, as soon as 2025, we will have the full benefit of the Power24 transformation plan, increasing worldwide operational efficiency, agility, and reinforcing our competitiveness by a more agile and linear organization. Both growth and operating leverage will translate into a free cash flow generation, coming back to a more normative level in the midterm, benefiting as well from the fast reduction, as Greg said, of our integration and transformation costs. because the vast majority of Power24 cash-out and past M&A integration efforts will be largely behind us. Lastly, always to reinforce our value proposition, we will of course pursue some M&A, but much more focused on bolt-on acquisitions, including products and technologies, while still keeping a low leverage and solid balance sheet. All in all, with all our assets and current course of actions, we will deliver in the the top line organic growth in the mid to high single digit, the continuous operating leverage and adjusted EBITDA improvement from 2024 onwards, and the free cash flow conversion in fast progression towards circa 50% or above. We will, of course, provide further details during the capital market day, which we intend to host in the second half of 2024. I thank you very much for your attention so far. And I am now ready with Marc-Henri and Grégory to take your questions.

Thank you. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. We will now take the first question. One moment, please. First question is from the line of Frederic Poulin from Bank of America. Please go ahead.

Hey, good morning. Thanks a lot for taking the question. Firstly, just a question on the commercial dynamics in the business. So in H2, we saw 15,000 wins in store merchants. The online base was stable. So it's a pretty sharp deceleration. This is what we saw before. So when we look at the volume, Can you explain a little bit what's going on there in terms of commercial traction? Are you seeing more competition in some of the segments? So that would be a first point. And then secondly, when we look at the operating leverage. So can you come back a little bit on what happened in the second half? We had, you know, in the MS segment, 5% revenue growth, but about 50 million EBITDA decline. So when we look at 24, you're guiding for, at the group level, 50 to 100 bps margin expansion, if I look at your minimum EBITDA commitment. So can you explain a little bit what you think will change and give you that confidence in guiding, considering the pretty big compression we saw in the business in 2023? Thank you.

Good morning, Frédéric. I'll give maybe the floor for Marc-Henri to the first question and for Greg to the second one.

Regarding the commercial dynamics, this profile of merchant winds that are stronger in H1 than in H2 is something we observed on the previous year. If you may remember, it was already the case in 2022. So this year is not very different in terms of overall profile. As I said, the momentum remains good. The macroeconomic context is somehow deteriorated, but I can't tell that we have a significant impact on merchant disruption from that point of view. So overall, it's rather a profile we observed in 2022 and we are observing again in 2023. So no significant change here.

And on your second question, 2023 has been impacted mainly in H223 in MS by three points. First, the decision to terminate merchants, which clearly impacted the margin. Second, the overall macro softness across all geography, as well as some mixed effects, which we alluded to in Q3. And slightly less repricing actions in Q4 versus initial expectations due to the economic environment at the end of 23 and lower volumes. Those three elements are the main drivers of the margin rate decrease in H223. In 24, we're keeping a cautious stance on macro. and where termination impacts will impact H1. We should continue to see an improvement in ABDA margin recovering throughout H2 benefiting from less merchant termination effect and a more favorable comparison basis as well as operating leverage benefit. All in all, we expect 40% operating leverage in 2024 thanks to those two effects and of merchant termination Power24 and POP. Thank you.

Thank you. We will now take the next question from the line of Mohamed Mawala from Goldman Sachs. Please go ahead.

Great. Thank you. Hi, Gilles. Hi, Mark Henry. Hi, Gregory. Two from me. Obviously, 2024 is going to be a year of internal focus, as you sort of flagged on the call and in the release. I just want to kind of better understand that from a commercial standpoint, what are you doing to kind of safeguard against any sort of impact on the external side, whether it's both handling a more challenged macro but potentially risk of kind of market share losses, as the organization is much more inward focused around driving the earnings quality, executing on the transformation program. And then secondly, we hear a lot more around platforms from a lot of the next-gen players and increasing traction there. You obviously got a sizable exposure to SMBs in Europe. I'm just curious to better understand your strategy around platforms And is there a risk that as you're a bit more internally focused that you don't sort of fall behind? I know it's interesting to hear your comments, Gilles, that M&A, looking at M&A going forward, is going to be more technology-focused. So curious to get a better understanding around your strategy on platforms and how you kind of take advantage of that or protect against future kind of competitive threats there. Thank you so much.

Good morning, Mo. And maybe I will start, and of course... Marc-Henri can elaborate then. What I mentioned during the call was precisely to strike the right balance between this internal focus that is necessary to adapt to the current situation and the headwinds we face, notably to make sure that we do the proper fixed cost extraction at the requested speed, and at the same time to maintain our very permanent and long-term established focus on growth and development. So from that standpoint, I flagged during the call that we've been elaborating the Power24 initiative, mobilizing circa 500 top managers of the group in all service lines. It was precisely to make sure that we were adequately targeting all the necessary action on all fronts, make sure we can extract the relevant productivity gains, implement fast certain existing actions. And from that standpoint, I want to really clearly state here that, as I said, it's much more than the cost reduction program only. It is an actual improvement of the company. It will allow us to accelerate many technology initiatives to reinforce our technology capabilities as we flag, for example, in our global competency center in India that will give us meaningful additional means to pursue developing features, technology progress on our platform and support to our customers too for their own needs and features. So it is exactly the point we have been looking at very carefully, is to make it a transformation program, bringing simultaneously benefit to our internal efficiency, but also to our customers through more efficiency, agility, and also brainpower to pursue developing and enriching the platforms. This is why I've been a bit long presenting all the levers that are standing behind Power24. The easy way would have been to say we just quote across the board X percent of the staff. It's not the way we think. We care for the long-term growth, development, and the quality of the technology of this firm. This WorldPower24 has been such a granular effort in terms of design and now is moving to implementation. With that framework, I give the floor to Marc-Henri to elaborate a bit more on the technology side.

No more. I think you have a very right question. It's core on this market to have the right platform and the right connections, which is something on which we invested a lot. We have, as we said, our target platform is live. We are extending its connections towards all the markets. The domestic corridor I'm referring to is indeed enabling more markets, more access to remote geography. We've optimized authorization rates and better authorization rates than the competition. And the connection to new distribution models to be outward focus, new distribution partnerships is a key focus of the team. Both in 23, even more so in 24, and that leverage a lot of the technology. I mentioned SoftPos and the 150 partners we signed in one year on a technology that allows to take payment on any Android device and now as well on Apple device. I think it's a very good example on how we were able to onboard an element, a piece of technology, connect it to our core platform, and make it scalable in signing and onboarding new partners. And this logic, this strategic momentum we have to boost this partnership is really the key of the story around the core platform. Estée, the joint venture with Crédit Agricole, is another typical example. It's structured and based on our target platforms. It's leveraging their distribution partnerships. It's encompassing the full technology stack. So there's clearly no deviation from that. You could see we have a very clear discipline and dynamic on the investment fronts for the years to come, but it is not a disruption bringing the investment level extremely low versus what we are doing. We are not giving up on the platform investment. We are not giving up on the technology. And we are certainly not giving up on the commercial front. Like Gilles said, over 24 is there to optimize cost, primarily through automation, where we can get this benefit. Clearly, we bring it, but we don't touch the sales front. We don't touch what is at the core for growth. because we know we have to bring this dynamic back versus what we experienced at the end of this year.

Thank you.

Thank you. One moment, please. We will now take the next question, which is from the line of Josh Levine from Autonomous Research. Please go ahead.

Good morning. Two questions for me. Gilles, you made a brief comment about M&A, and I wanted to ask for some clarification. The Worldline story for many years was about consolidating the fragmented European payments landscape. To what extent is that still the Worldline story? Do you still intend to try to consolidate Europe? And then the second question is about the impairment charge in merchant services. The press release says the impairment was based on conservative assumptions reflecting the change in the valuation paradigm in the payments industry. Does that mean the impairment was driven by lower peer group valuation multiples or because you're forecasting lower cash flows in merchant services than you were previously? Thank you.

I'm just happy to hear from you and I trust you are well, personally. And so, clearly, we believe that this mandate that we were given at the IPO and supported by the shareholders community to consolidate Europe has been largely executed. We came to a strategic scale that we believe is largely in line to anchor this leadership position in Europe and from now on also to develop beyond Europe. They say that M&A will still happen in Europe. We believe it will be less transformative than in the past because obviously there are much less targets available outside just to set the values. And of course, because we see now new types of M&A related opportunities where we believe also the balance sheet can be less decisive than it was in the past years. If you look at the credit agriculture venture, it is a perfect example of still a very meaningful combination of strengths between ourselves and the French, and in this case, the French leading bank. but which is basically not set up, strictly speaking, as an acquisition, but much more as a combination in kind that will generate fantastic benefit for the group in the medium term. This type of discussion with banks, we have further ongoing in Europe as we speak. Some may imply some balance sheet related cash out. Some may be set up much more like a partnership. So it's why definitely this is a pivotal moment. We believe that there will still be some consolidation, but it will be of a different nature than the fast scale game that has been happening over the last years, clearly. So it's why also we are so comfortable thinking that it is also a right moment for us to harvest all the benefits of this scale. Notably, the quality of our technology at scale is one of the key factors that is attracting to us some leading banks. They don't choose us because of the check we put on the table. They choose us for the quality of our products and technology. I can tell you it has been duly assessed over the recent transaction we announced by our banking partners. And so it's why we believe we will pursue expanding our partnership and distribution network. But at the same time, it will still allow us to have much less effort to do in terms of heavy integration, heavy lifting as we had to do over the past years. While also we foresee a very steady acceleration of the free cash flow generation in the coming years because M&A will help us on the product and technology side of distribution side to pursue improving our lines. But at the same time, it will be from the core platform we have been building that will just get more scale thanks to this extended distribution. I hope I am giving you where we see the market going and where we want to drive well.

And regarding the impairment charge, Josh, looking at the 2023 accounts, we felt this was the right time to be conservative, of course. The multiples have been divided by two to three sectors, and those sector valuation levels are also reflected in the parameters we took into account to articulate our valuation. And second, this was also your question, in terms of business plan assumptions. As I mentioned earlier, we also took a conservative view by taking a business plan that is below the one we have in mind for our ambition for the medium term inward line. That we'll share in detail at the Capital Markets Day.

Thank you. Thank you. We will now take the next question from the line of Alexandre Faure from BNP Paribas. Please go ahead.

Good morning. Thank you very much for letting me on. Just a couple of things from me, if I may. Firstly, a clarification on the 2024 Free Cash Flow Guide. Could you please remind us what's included in the guide when it comes to the setting up of the Credit Agricole Joint Venture and perhaps the first CapEx asset relating to that JV? And the second question is following up on previous questions on the M&A strategy. I think, Gilles, thanks for highlighting the nature of those partnerships you could strike with banks in the future, being a bit less capital intensive. I think you also talked about using M&A to improve product and

and distribution so where do you see gaps at the moment in worldline's portfolio or go to market thank you very much so on your first question alex good morning on the 2024 free cash flow for the credit agriculture venture we're talking about around about 20 million euros as i mentioned we're pretty comfortable in improving the free cash flow going forward uh first of all because We intend to increase the BDA, reduce the integration and rationalization costs, make sure that capital intensity is lower with constant capex going forward, working cap flat. Therefore, we expect to reach a midterm ambition of above 50% after more than 40% in 2025.

Thank you, Greg. Alex, thanks for your question. And of course, I don't want here to be ahead of ourselves by entering too much into the details we intend to share with you guys and the community at our capital market there, where we give, of course, where we will give much more detail, but where we want to drive the business, the offerings, the products range of Worldline. But let me flag here that if I look at today's tech stack of Worldline, both in terms of quality of features, and fit to market value proposition. We don't miss things in the current situation. One of the reasons to do the transaction, you remember, with Ingenico was precisely to increase our online capability portfolio. Here we are. We've been recently making specific targeted acquisition in particular niches of the market. You remember that we made an investment on the marketplace payment features with OPP, Online Payment Platform. We are extremely satisfied with the way we work with this entity, which is leveraging the market reach of Worldline with a very specific value proposition for marketplaces, which are actually booming, as you know. So this was a typical example of a product and technology that we wanted to acquire to have this capacity to leverage it. Mark Henry was very clear about the soft pass evolution that is allowing to engage on two more micro merchant segments on one hand, but also to provide some large retailers relatively light touch payment acceptance capabilities in-store. Now, expanding a little bit beyond that, we today have what we need, no doubt. What we want to pursue doing is to see where we could bring one line in terms of value chain positioning. Here, M&M may help to help us to add to our existing market positioning the possibility to expand within the payment value chain, either vertically or horizontally. As you know, the boundaries in the world of payment acquiring and acceptance are not engraved in the marble. We have 1.4 million merchant touch. What else can we sell or upsell to a merchant base of that size? It is a strategic topic for us and we have many initiatives ongoing. With pilots, we test things with partners. It may go into the direction of more integrated software. It may go into added functionalities. for payout for merchants, not only doing the paying, for example, or moving into card issuing or type of activities. Don't want to elaborate too long here, but just for you to know, guys, we are constantly looking also beyond our geographic reach into the depth of the offerings of Worldline. It is there that M&A can help to accelerate and to expand, leveraging the franchise, the merchant connections, the bank connections, and our partner reach also.

Just to give you a bit of color in terms of numbers, for 2024, when we're looking at our partner's growth, what we're looking at is growth that is in the north of 20%. So this is a channel that is exciting and that is a good ROI.

So, of course, much more on that topic, Alex, and many thanks for your question at the Capital Market Day.

Great, thank you very much.

Thank you. We will now take the next question. From the line of Hans Leitner from Jefferies, please go ahead.

Yes, good morning. Thank you for letting me on. We have a couple of questions. The first one is around, is to Marco Ri. You are replacing Nicolas Sanchi. Could you maybe comment around his departure and then also how you want to split your responsibility and is this leading the merchant services just a temporary solution until you find a new head? And then the second one is on the Power24. You have updated in a press statement that it's around 8% of headcount. Maybe you can talk about the split between the different segments and geographies. And then what is the expected headcount by end of this year? You talked about offshoring. So is there actually the net amount of headcount to be increased? Thank you.

Hello, Enes. Good morning. Maybe I will start here because, of course, as you rightly pinpointed, it is one of our important management decisions we announced today. I wanted Marc-Henri to take the direct steer of the most important division of the group because we want tighter execution of our current group's strategic priorities. clearly to reinforce the performance delivery, to strengthen the business and risk control implementation, and more importantly, or as importantly, to ensure a full and swift Power24 implementation into the largest division of the group. And of course, this is also taking the lessons from the past months, and particularly what we've been experiencing in the MS division over the past months after the Q3, clearly. And then, of course, we will reorganize ourselves. I take over the risk myself also. That was important so far to Marc-Henri, to letting also some more bandwidth to MS, and we will do some other adjustments in our ways of working.

Yeah, and maybe just to come back on the speed of my time, you know that we have also upgraded recently the management of the two of our business lines with Carol Nézékel in METS and Alexandre Barony in FS. I think they have... reorganize their team, put in place everything that was needed, defined their Power24 plan. So I think it will need much less of my bandwidth. MS was already under my management's responsibility and I will focus much more time with this team that I already know well. And I think we have all the assets and the quality of people now to to ramp up in terms of gains of performance of Power24 execution and, of course, in terms of growth. Coming back to also your point in terms of Power24 split, it's clearly well balanced between all the key European geographies where we have significant workforce, being France, Germany, Belgium, Switzerland, Sweden. with all these countries are involved. And in terms of overall aid counts, you should see a decline as the decrease in onshore will be more than the increase in offshore. Okay. Thank you so much.

Thank you, NS. Look forward to interacting with you guys. We are already largely above the hour, conscious that this is busy times also for you and for us all. So really, I would like to thank you for being with us this morning, looking forward to further interaction in coming roadshows. My message here is that we are, with the board, fully focused on executing our current short-term and medium-term priorities. And I really look forward to further interaction and, of course, look forward to Capital Market Day to give you a full refresh on Worldline after these fantastic 10 years to build this company. and how we are going to pursue developing the franchise in the coming years into this new environment that we are going in terms of challenges clearly to overcome quickly thanks to our initiative. But more importantly, I want to flag that the fundamentals of this sector, the fundamentals of Worldline are certainly as strong as they've been in the past years, and they will be even better after the accelerated transformation of Power24. Thank you, and look forward to interacting with you.