Worldline Sa Ord

Ladies and gentlemen, good morning. Thank you for attending today's Worldline Conf Call on our first semester 2024 results. As usual, I'm with Marc-Henri Deporte, our Deputy CEO, and Gregory Lamberti, our Group CFO. This morning, we have issued our earning press release announcing a good H1 performance despite a visible domestic consumption slowdown in many core EU markets of the Group during Q2 after a more positive Q1. Briefly, our first semester revenue increased by 2.1%, of which 6.2% underlying growth at merchant services. Our adjusted EBITDA amounted to 414 million euros, broadly stable compared to 2023, as anticipated, and free cash flow was 82 million euros, i.e. 16% cash conversion of adjusted EBITDA. In that still volatile macro context, we have set three very clear priorities for the management and the group for 2024. The focus on our 2024 roadmap execution and our group transformation, the focus on reinforcing our structural growth potential, and the focus on the strict management of our costs and free cash flow generation. First, we achieved important milestones on our Power24 roadmap this semester, that will structurally improve our line operating model and cost efficiency. I report happily that all social processes are now fully completed. I'll come back to that in a minute. In parallel, we have pursued the development of our future growth engines, notably with the operational setup of Coal, our joint venture with Credit Agricole in France, and we confirmed its goal life targeted early 2025. We've been very active with the launch of new products and partnerships, expanding worldwide value proposition and distribution partner network. Finally, we give an absolute priority in 24 to free cash flow generation. On top of the structural transformation linked to Power24, we continuously work on our cash cost base while improving operational cash generation levers. Gregory will come back in more details on our additional cost and cash actions that we have decided to put in place. As you know, 2024 is a critical transition year for our group towards a more streamlined, agile, and efficient organization that will be benefiting powerfully from Power24 as soon as 2025. And it will be having a much stronger operating leverage and free cash flow conversion in the medium term. thanks to progress done on power 24 we confirm that we are fully on track in this accelerated transformation plan last regarding governance with the full support of our shareholders during our last agm let me remind that we have now a new board in place with mr wilfried appointed chairman of the board Now, let me dig into our 2024 focus in terms of execution starting with Power24. We are now in full speed in the rollout of our plan. During the first semester, management has put a strong focus on Power24 stringent execution with key milestones achieved during this H1 in line or ahead of plan, such as the full completion of the Works Council process, all the social negotiations are also completed regarding severance conditions and the new operating model design is live from August 2024 and hundreds of exits are already notified and start to be executed and will be executed all along H2. In parallel, We continued to successfully accelerate the ramp-up of our global competency centers in India, Romania, and Poland during the first half, with headcounts reaching now above 5,300 people. And we confirm our objective to reach a third of our total headcount by 2025, in line with the transformation roadmap. based on these achievements developing as planned and supported by a strong mobilization across the entire organization we now expect to deliver circa 220 million run rate cash cost savings by 2025 or 10 increase of the envelope versus our initially communicated target of circa 200 million euros last in the current context and as said sooner we'll keep a very strong focus on cost and cash protection measures and we have decided to implement additional measures for example to closely manage hirings, replacements, subcos and non-personal costs in line with the close monitoring of the H2 macro evolution to fully secure the delivery of our cash objectives in all cases. During the semester We also pursued the development of our future growth engines. After the antitrust approval, our joint venture and brand call is now fully launched and work actively on its regulatory processes, sales strategy, product development, and recruitment plans to be in full operation as early as 2025 and to allow Worldline to access the very important French acquiring market. In parallel, Worldline continued its geographic expansion during the first half of the year, particularly in Italy on merchant services activities. You remember the CCB organic partnership that we signed in Q1 and that will bring additional MSV by circa 6 billion euros and circa 60,000 new merchants that we will start to migrate on Worldline platform in the course of the second semester. I want to highlight here that our Italian merchant services platform Worldline Italy has become in three years a remarkable growth and profitability engine of our group, running in very strong double digits. Reminding also some key H1 achievements, our group was also very successful in executing its partnership and product development strategy. Among others, on the cross-border online, we announced a strategic partnership with Lidio to offer direct access to local Turkish payment means This is now live. On the distribution front, Worldline reinforces its footprint in the fast food industry with Tabesto partnership, order-taking and payment specialist. The ISV partnership will take place in 36 countries and will promote soft-box Worldline tap-on mobile technology. In terms of new product leases, Worldline partners with Visa to launch a virtual card issuing solution for online travel agencies. that will see first transaction taking place in H2. Last, on the new distribution channels, our combined payment solution for marketplaces and platforms with OPP is live and is now counting 165 partners. Lastly, illustrating the relevance of our soft-pass solution, again, we have now more than 6,300 micro-merchants onboarded with a continued recruitment growth dynamic. As illustrated with these concrete examples, we are absolutely focused on reinforcing our growth potential and also to increase our competitive profile and making us very confident about our potential for strong growth reacceleration as soon as 2025. Now, let me come to have a view on the current macroeconomic environment in Europe and what it means for the rest of the year at Worldlight. After good MSV volumes over Q1, we saw a much softer consumer spending environment during Q2 in our core European markets, and a particularly weak June, impacting negatively MSV dynamics all along the quarter, as Marc-Henri will comment in a minute. What we saw in this slowing MSV dynamic in Q2 is clearly reflecting the reduced sales activity recently reported in their H1 earnings by many large consumer-driven companies operating in Europe, which have also adopted a more cautious stance for the rest of the year, as the speed and amplitude of a potential sales recovery after the Q2 weakness remains today uncertain. Looking at the reasons to be more optimistic, we can flag the first visible recovery of our own MSV during the first three weeks of July after the very low point of June. At this point, we can only acknowledge that there is a still significant level of uncertainty regarding H2 macro and consumption scenarios, and we decided correspondingly to cautiously adapt our full year 2024 guidance while giving priority to a strict control of our costs and to maintain our free cash flow objectives. Consequently, reflecting this overall uncertainty, we now expect for the full year an organic growth of circa 2 to circa 3%, an adjusted EBITDA of circa 1,130,000,000 euros to circa 1,170,000,000 euros, and a free cash flow maintained at circa 230,000,000 euros. The low range of this full-year 24 updated guidance factors a muted macro and European domestic consumption environment in H2 as seen in H1, resulting in an MSV growth in the range of low to mid-single digit in H2. It would drive our merchant services underlying growth at circa 6% in H2 24 and on the full year. The high range, which is similar to the low side of our initial three-year guidance, factors the sequential improvements in macro that would translate into an MSV growth in the range of mid to high single-digit during H2. It will imply an underlying growth of our merchant services at 7% or above. In both scenarios, we will pursue acting strongly on our cost base to mitigate this potential revenue impact on our profitability. The most important point here is that whatever the scenario, as from the start of the year, the strong management priority will remain focused on our cash cost actions, allowing us to maintain in any case a free cash flow of circa 230 million euros. To conclude this first part, let me remind you that thanks to the full benefit of Power24 in 2025 at ABDA and cash level, Thanks to the ramp-up of our new growth initiatives and the continuous reduction of our integration and cash costs, this will structurally reinforce Worldline to be in a position to deliver a mid to high single-digit organic growth, improve continuously our adjusted EBITDA, and accelerate the free cash flow conversion towards circa 50% in the medium term. It's my pleasure now to hand over to Marc-Henri on the business and commercial dynamics of our activities.

Thank you, Gilles, and good morning to all. I would like to start today with an update on MSV indicator reaching 230 billion euros in H1 2024. The key takeaway regarding the MSV indicator is the following. After our first quarter in line with the end of last year, we observed a further deterioration in payment volumes along the quarter, particularly in June. Household consumption in Europe during the second quarter was not dynamic, decelerating versus Q1. It has also been corroborated by the schemes. The trend is slightly better at the beginning of July, probably helped by better weather conditions, but still remaining soft compared to a normalized trend across all the verticals. Overall, MSV growth in H1 reached circa 4% compared to H1 2023 and circa 3% in Q2 compared to the same quarter last year. On merchant services dynamic with merchant KPIs, despite a contrasted semester in terms of MSV growth, as I commented, we have increased our merchant base with a net addition of 30,000 new merchants, pushing our merchant base at the end of the semester at 1.43 million merchants. Given the macro context, we are satisfied with this growth in H124 because it is in line with our trajectory. Our merchant base will as well continue to develop during the second half of the year, and we are going to start the migration of CCB customers on the Worldline platform. Let's turn now to our usual business activity slide. We had a dynamic quarter in Q2. Before presenting the quarter's new commercial successes, I'd like to take a closer look at the EV charging vertical, a market in which Worldline is a major player. driven by the growing sales of electric cars and new government incentives with the new European Directive. EV charging market is an innovative market full of opportunities with a number of charging stations set to grow by 2030. In this industry, a verticalized approach with a dedicated expert sales team and a full-service approach at European level has been key differentiating factors. We already signed large deals with several major heavy-charging manufacturers, such as Alpictronic, enabling us to capture a market share in the region of 25% in this segment. In Q2, we signed EnerCharge, an Austrian vehicle charging station manufacturer, and we reached an agreement with Ampeco, a global EV charging software provider, to create a unified payment solution. As you can see, we have expanded strong commercial dynamics. This trend will continue fueled by the privileged relationship we have now with all the major manufacturers of chargers for electric vehicles and a product tailored for market needs. For the other activities, many contracts were also signed in both online and in-store verticals. On the digital commerce side, we continue to strengthen our position in the airlines and travel vertical with the signing of Luxair, Luxembourg's national airlines. Once again, our reputation as a reliable partner in the market coupled with our unique full-service solution offering were key factors in our success. Beyond airlines, we also had wins with the Worldline payment orchestration platforms, and I can name recharge.com or IWG. In the vending sector, we sign an agreement with Nord Consulting that will use our self-service accept and connected with local acquirers. Lastly, we also sign an extended long-standing service partnership with leading e-commerce brand C-Discount focused on providing a seamless payment experience and optimizing performance and costs through a smart routing approach with local European acquirers. To end this presentation, I will comment on the financial services and METS commercial dynamics During the second quarter, on the commercial front, financial services signed a significant contract with Bank Raiffeisen, the first client on Worldline's cloud-based instant payment solution. Using Worldline's modern cloud infrastructure, notably thanks to the partnership signed with Google at the beginning of the year, Worldline will provide the bank with the means to send and receive instant payment as mandated by the EU Instant Payment Regulation. It's an offer we intend to continue pushing to Tier 2 and Tier 3 banks, and we have a solid fight in this area. On the acquiring and issuing processing side, Financial Services Division signed several contracts, first with Sonnet to manage the entire processing of acquisition transactions. In Italy, we signed MarketPay and Atono. And lastly, we signed a partnership with RiskQuest to create an open banking based credit analysis, thanks to our Credit Insights solutions. Regarding mobility and transactional services, commercial activity, it has been solid, notably thanks to a wall-line SecureSafe solution, which has been key in the renewal of the contract with PMU. This product offers secure service to online gaming operators operating in France. We have as well deployed or integrated ticketing and payment solutions, signing a contract renewal with a major leader in ticketing for shows and sporting events. And finally, we signed an agreement with a major energy company to renew the maintenance and evolution contract for its payment and loyalty applications. 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 numbers for H1, let me share with you the headline numbers. In H1, we boast $2.3 billion in revenues, representing a growth of 2.1%, or 4.2% excluding merchant terminations. On profitability, adjusted EBITDA reached 514 million euros, representing 22.5% of our revenues. Based on NNR, our adjusted EBITDA margin is 27.7%. Pre-cash flow stands at 82 million euros, with a conversion rate of 16%. Normalized net income group share reached 211 million euros, representing 9.2% of revenue, while reported net income group share equates to a loss of 29 million euros, impacted by the 174 million non-cash provision related to Power24 implementation. Normalized diluted EPS stands at 75 cents per share. On the next slide, you have the illustration of the strong cost control put in place and over-delivering in a number of key areas we wanted to highlight. First, on the P&L, in H1, by rigorously monitoring our personal costs, we managed to absorb the rolling impact of the 5% salary increase from 2023, both through the first impact of Power24 and through a meaningful reduction of our high-cost country subcontractors. In H2, as wage inflation normalizes and Power24 ramps up, this reduction should be even more visible. Second, on free cash flow. As previously discussed with a number of you, we remain very disciplined on two key lines of the free cash flow statement, CapEx and rationalization and integration costs. On CapEx, in absolute terms, because of the accelerated transformation being implemented in 24, we've already decreased by 9% compared with H123. And CapEx intensity is down to 7%. Second, regarding integration and rationalization costs, excluding Power24, we are doing exactly what we said we would by reducing those by 41% year-on-year, reflecting finalization of the integration of past acquisitions and ahead of plan in that regard. Overall, we are set on reducing cash costs and structurally improve free cash flow generation. Moving on to revenue performance by business line on the next slide, our second quarter came in at 1.2 billion euros, i.e. organic growth of 1.7%. This slowdown versus Q1 was anticipated mainly due to the full effect of merchant termination. Looking at it by business line, the main highlights for Q2 are MS at 2.6% of 5.9% excluding merchant termination, which effect is strongest this quarter. And despite a resilient performance, particularly in Italy, or in verticals such as travel and gaming, performance was impacted by the macro environment with less consumer spending in Europe and the termination of our online merchants. Looking forward, and depending on the macro evolution, we consider that MS will deliver a minimum of 36% underlying growth. FS is down 1.5% despite continued good dynamics in acquiring and issuing processing. more than fully offset by the impact of the earlier-than-planned re-insourcing of certain contracts. As a result, FS should slow down in the second half and reach low single-digit decrease for the full year. Last, METS is up 1.3%, mainly driven by good momentum in trusted services. Looking forward, METS growth is expected to improve throughout 2024. For H1, organic growth is at 2.1%, or 1.4 on an NNR basis, with METS up 3.2%, i.e. 2.5% on an NNR basis, which means, excluding merchant termination, an underlying growth of 6.2% over the semester, thanks to strong commercial dynamics and good traction on select verticals, as I just mentioned. FS is down 1.5% throughout the semester, and overall, METS is up 1%. Moving on to EBITDA. Adjusted EBITDA reached 514 million euros, or a 22.5% margin, 67 basis points down from H123. On an NNR basis, adjusted EBITDA margin stands five points higher at 27.6%. Looking at margin evolution by GBL, you have MS adjusted EBITDA reaching 386 million euros, or 23.3%. percent margin, down 161 basis points versus 2023, or 31.3 percent on an NNR basis. Financial services adjusted EBITDA came in at 126 million euros, or 27.7 percent. And METS profitability is up 334 basis points to 17.1 percent. Finally, corporate costs are under control at 28 million euros compared to 30 million in 2023. In terms of business dynamics and margin, for MS, adjusted EBITDA margin has been mainly impacted by the macro softness all along the second quarter, as well as by the merchant termination. FS, adjusted EBITDA improvement, is mainly related to the first benefits of cost actions implemented at the end of 2023. METS was driven by the strong improvement in workforce management as well as the rationalization of our infrastructure costs. Finally, on corporate costs, strong control is implemented for some time now. Now, from the P&L, looking at operational items, the largest impact in the P&L is clearly the €174 million non-cash Power24 people restructuring provision. On integration and rationalization costs, as we already mentioned, They're down circa 40% to 57 million. EBITDA therefore reached 282 million euros. Net finance costs increased by 25 million to 35 million euros, mainly impacted by negative effect impact and hyperinflation. Income tax expense was positive by 13 million euros due to a loss before tax of 51 million euros. The annualized effective tax rate was 24.7% compared to 23.8% for the first semester in 2020. As a result, net income group share stands at minus 29 million euros and normalized net income group share at 211 million euros. Looking at free cash flow statement on the next slide, we generated 82 million euros of free cash flow in 2023. or 16% of our adjusted EBITDA. Main elements of note in our free cash flow are the change in working capital, which is an outflow of 42 million euros, in line with expectations, the capex, which we are reducing in euro terms, as mentioned earlier, and mirroring the P&L trend and excluding Power24, our integration and rationalization costs, down by circa 40 million euros. Overall, H1 free cash flow before Power24 stood at 124 million euros or close to 24% cash conversion. After a deduction of Power24 cash costs, a reported free cash flow came in at 82 million euros or 16% conversion. One final comment. Free cash flow focus will remain in H2, allowing us to maintain our free cash flow ambition of 230 million euros. Finally, in terms of net debt, at the end of H1, our net debt stands at 1.7 billion euros, or 1.5 times adjusted EBD on an LTM basis. On the debt and liquidity management front, we've been very active by refinancing and securing a new RCF and signing the new 1.125 RCF with a maturity extended to July 2029 with a two-year extension at the lender's discretion. The RCEF replaces and upsizes former facilities and is supported by a pool of 17 international banks, including new lenders. This is part of the global financing strategy of Worldline to actively manage our debt maturity profile and further strengthen our financial liquidity. Now, let me hand over to Gilles to conclude.