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.