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.

GILES PEREZ- Many thanks, Grégory. To conclude this presentation, Let me share with you that this H1, we believe, shows that we are actively executing all the transformational actions needed to improve our long-term business and financial performance, with a particularly strong emphasis this year on execution to reap the full benefit at productivity, efficiency, and cash level as soon as 2025. Benefiting from the accelerated transformation of the group through Power24, our priorities are unchanged. We will pursue focusing on adjusting constantly our fixed cost base and cash generation potential, optimizing our current and future growth levers to also benefit from the increased agility that we will gain through our simplified and streamlined operational model. In parallel, We are clearly preparing also for the future of the company by maintaining the proper and selective level of investment on our organic growth and reallocating our resources with a strong and reinforced focus on innovation, product, and distribution, and acceleration of the key strategic initiatives, notably through the execution as planned of our strategic joint venture with Credit Agricole in France. and also a reduction in the former M&A focus of the group, which is now concentrated on much smaller transactions targeting distribution channels or technology. The implementation of this roadmap will structurally improve the group operating and financial profile with full run rate benefit to be reached as soon as 2025. We will present more in detail this ambition during an investor day to be held on November 26, 2024. Thank you very much for your attention, and I am now ready with Marc-Henri and Greg 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. From the line of Frederic Boulan from Bank of America, please go ahead.

Hi, good morning. Two questions, please. First of all, around if you can come back on what happened in June in terms of macro and consumption trends in the specific countries or segments you want to call out and the assumptions you've taken in this kind of low and high end for H2. And then On the guidance on EBITDA and free cash flow, at EBITDA level, we need to deliver about 8% EBITDA growth at the midpoint in issue on similar revenue growth. Can you discuss the key moving parts here from a cross-perspective that give you confidence to reach that? And in terms of free cash flow, you probably need about 70 million higher free cash flow in the second half versus each one. So it would be great to have a bit of key points around. Thank you.

Hello, Frédéric. I guess Greg will come back on your second question and maybe I can start with the first one. Clearly what we have seen in terms of volume evolution as Marc-Henri covered is a significant intra-semester volatility with a very different pattern dynamics between Q2 and Q1. Indeed, we saw a Constant decrease of transaction volumes from the former 4 plus MSV level that we had during Q1 to the circa 3 average in Q2 and this very low point in June. This has been observed largely across many verticals that are consumer driven that we follow. And I must say this pattern has also been largely spread over many European countries. When we've been trying to look at what was the reason for this slowdown and this volatility, a part seems, when we look at the H1 release from consumer-driven corporate organizations that have been releasing recently in July their earnings for H1, that many are, for example, talking about the very poor spring weather in Europe. It seems also that promotional activities and sometimes lack of activity in malls in particular has also been spotted. Hard to know up to what extent this is purchasing power related or linked to the weather, but clearly this volatility is somehow significant and given that we see that it can happen quarter on quarter moving circa 2% of MSV level. We took, as you understand, a more cautious stance. We don't want to bet on the H2 macro to deliver the year, and so we decided to cautiously adapt also to what we heard in terms of anticipation from these consumer-driven businesses for H2. Weather has certainly played a part, so this one may fade away. July, as we mentioned, is already significantly better than June. So that's an encouraging sign, but it is only one month. So this is clearly something that we will monitor closely, and certainly we'll have opportunity to report later on during the conferences of September and the further meeting with you guys.

And on your second question, Fred, I think there's two parts. There's the BDA part and the free cash flow part. So first of all, it's important to bear in mind that H1 is not normative with the full effect of 2023 wage inflation, maximum merchant termination impact, while only a small portion of the Power24 benefits. H2 will be the opposite. It will benefit from four main parameters. There will be less merchant termination impacts. There will be less rolling effect of the 2023 inflation on people cost. There will be a bigger impact of Power24 contribution on the cost base. and we're taking additional cost measure containment. On top of that, as we said, we're remaining cautious on the macro outlook, but we cannot exclude improvement throughout H2 to reach the top end of the guidance and deliver more EBITDA. On the free cash flow front, we are taking measures on the integration costs aside, as well as on the capex side. Strong discipline there. Also, taking strong action on the working capital, in particular on terminals inventory, but also focusing on faster onboarding and reduction of DSO as we are moving faster through the target platform. These are the two components to your answer, Fred.

Okay. Thank you, Gilles. Thank you very much.

Thank you. We will now take the next question from the line of Antonin Potri from HSBC. Please go ahead.

Yes, good morning, everyone, and thank you for taking my questions, too, if I may. My first question is about long-term trends on what you see in European payments. Compared to before, we now see a lower consumption to have an impact on merchant services, and we see some reinsourcing of some contracts in issuance rather than outsourcing. I just wanted to know if this trend in both businesses was temporary in your view, unrelated to current environment, or if there was something more structural there as penetration of digital payments versus cash in Europe is higher, and banks may have changed their strategy on issuing. And my second question is on Power24, you announced an increase of economy targeted by 10% to 220 million euros. Is there any additional cost related to that? And when do you expect to cash out this cost? Thank you.

Sure. Hello Antoine. Thanks for the question. Maybe Marc-Henri and myself will take the first one and I will let Gregory do the short take on the second one. No, there will be no additional cost. This one we can already deal with. It is just the fact that we are in advance in the way we execute the plan and we feel comfortable to actually increase the target. We see the efficiency of the measures which are very closely monitored and tracked. So that's where the uptick of 10% comes from. The first question, the long-term perspective. They are still good, we believe, for payment activities. Just it's true, and I will give the floor to Marc-Henri, For the time being, the macro environment is showing unexpected volatility. To be fair with European consumers, the sequence in which we've been having since the start of the war in Ukraine, which has generated an hyperinflation which is at a level which is unprecedented for decades, has clearly been having a massive impact on purchasing power of tens of millions of low-income households in Europe, and maybe also to a certain extent on middle class with interest rates raising and so on. So we should acknowledge altogether that the macro environment is absolutely not normative and that hopefully moving forward with the progressive timing of inflation, interest rate coming back to long-term guidance by the regulators and the ECB, we should have a more traditional pattern for payment in which cashless momentum will go on and with less volatility in terms of consumer spending patterns These days, we want to acknowledge that this volatility is still there. We don't want to take extra risk versus the initial guidance. That's the only thing we do today. All the rest is under control. We still believe these businesses have strong medium to long-term growth potential and certainly cash and cost efficiency. I give now the floor to Marc-Henri for more vertical colors on the where we see the market evolving, both MS and EFE.

Indeed, I would really share the view that what we observe in H1 is certainly not the reflect of any change of long-term perspective, but more a specific consumption momentum that was a bit soft, and in particular in June, as we mentioned. It's good to see a different trend in July, but it's true that Q2 was a disappointment that we saw. Now, if there are some long terms in payment, it's more around the emergence of diversity of payment means, which we like to cover with our different offer and solution. And we see a growth of alternative payment methods on our platform, which is in the range of 50%. And so it's a very, very important growth. As a provider serving a vast number of merchants, as we shared on previous calls, on this new payment method, we are able to have pricing models that are very similar with what we had with previous payment models. So it's not a negative change, it's rather something which rebalances a bit the ability to manage complexity and to deliver more value in or part of the value chain. And another long-term momentum, is the fact that payments move from being something a bit isolated, a payment device receiving only one data of payment instruction from electronic cash, to something much more integrated in a value chain, a deep integration with EV charging stations, as I mentioned, or with other software layers, allowing our ability to combine this value and to grow this value in the service we deliver. So from that point of view, we see in this integration and this technology dimension of the payment market evolution a potential for us as a company with deep technology roots and strong products capabilities. So it's something on which we are working and we'll be glad to share some important progress at our coming CMD, in particular in the field of market share and embedded payments. where we signed a lot of partnerships. I think typically our soft-post solution to get payment on Android tablets or iOS iPhones has now signed up to 200 partners. And it's more and more a deep integration and our ability to have this integration and these APIs, which is making the difference. So for me, that's a long-term trend that's a driving force on this market. On the reinsourcing, you mentioned the point. Issuing, we have a solid and close to double-digit growth in this activity, so we don't feel a pressure or a trend of insourcing. It's more in the field of account payments that we see less potential in this dimension. But you see a lot of banks. A good thing, Europe has 3,000 banks, tier 2, 3, 3 banks where there is a potential to serve them and they don't want to insource these capabilities and the instant payment solution we mentioned in the call is typically tailored for this kind of banks who will never insource their solutions.

And in general just to add one word here is that regulation will still drive the FS business but of course it is depending on the regulation innovation so Of course, in the next five years, for example, the digital euro implementation may represent for the FS vertical in Europe a significant opportunity to support banks in implementing the potential future digital euro, both at the EU level, but also in each and every bank. And the same, of course, for new payment solutions that may be encouraged by the regulators. Marc-Henri mentioned instant payment, of course. but the payment service directive number three is in the making and may come also with further novelties for the banks. Some will be mandatory, some will be optional, but in any case, this is also part of the things that are driving the demand and our capacity to serve. Thank you.

Thank you. We will now take the next question from the line of Orson Hood from Barclays. Please go ahead.

Hi, Austin here from Barclays. Thanks for taking my question. First one for me is just on Turkey, which was again called out on the call as a key strength. I was wondering if you could disclose how big the exposure is there now and how far Turkey is growing because, of course, inflation there is still very high, above 60%. I was wondering how much is that sort of inflation dynamic in turkey adding to the merchant services organic growth that's the first one and then the second one is just to come back on the financial services division um and i'm wondering if you could give a bit more color on sort of the shape of recovery because i think you mentioned on the call that you're expecting now earlier than expected reinsourcing Does this imply we should also expect earlier than expected recovery, and how should we think about sort of the rebound of financial services into 2025? Thank you.

Thanks. On Turkey, no, it's not a very sizable business for us. It's really a small share of the overall MS. It's a business in which we have a very differentiating technology solution with a very strong integration into all the specific fiscal requirements of the Turkish government. So it's a good place for growth, but it's not... a big contributor to the overall MS share. What I can add is that, and maybe you will give a call to Gregory, but what I can add is the fact that we invested to have specific integration for this market, which is very big in terms of number of inhabitants and dynamism, was particularly interesting for Google in our partnership and to sell the online flows with the highest authorization rates versus the competition. And it's there that we start the partnership with Google to serve the Turkish consumers in their ability to perform online payments to access Google services.

And just to give you a sense, Turkey is less than 2% of overall group sales. And given the hyperinflation you rightly called out, it creates an impact in the financial result of the group, which is that. which is limited to the tune of 10 million or thereabouts. Now, on your second point, which is when is the EFS rebound expected, what we see is a back-to-growth during 2025 with major opportunities that Gilles alluded to in the previous answer within the banking sector, like mandatory instant payment implementation by year-end 2025 or the EPI launch in participating countries or the digital euro. So that's the That's the curve with a slow H2 and improving throughout 2025.

OK, helpful. Thank you.

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. I have a couple of questions. Basically kept the low end of the free cash flow guidance. Maybe you can talk about the one-off implementation cost of Power24. What do you expect for the second half, given the previous guidance was like 150 to 170 million? And then can you explain us how you will achieve merchant services to accelerate or to maintain its growth, its organic growth? And the backdrop of MSV, do you plan to push for price increases, or is there different parts within merchant services which drives the growth here? And then maybe just last thing is, what caused the reason to upgrade the RCF, given it seems like a little bit of a lower cadence of growth of M&A activity going forward? Thank you.

I'll take the first and the last one, and I guess Marconi will take the second one. On your first one, as we mentioned previously, and given the 42 million spent in H1, we expect the spent in H2 to be around 100 million euros thereabouts. So that's the first point, so still consistent there. And in terms of the RCF, it's really about maintaining the overall liquidity of the group. It's marginally increased. As you may remember, we had two RCFs previously. one for $600 million, the other for $450 million. It was really a matter of an optimum in terms of supply, demand, and pricing here.

Yeah, coming to MS in terms of acceleration, clearly our guidance this year is not relying on a strong acceleration on the underlying MS. You have a mechanical acceleration linked to to a less impact of comparison impact of the merchant termination portfolio as we have started it middle of last year. So that being said, then MS will of course accelerate further in 2025 based on our work. So price increase Not significant, and it's more business as usual in our activity now. There are a couple of geographies, I would say faraway geographies, not European geographies, where we did not fully pass the impact of Scheme fee increase. So this will be a catch-up to PERFORM that will provide a small contribution to this overall organic growth. But overall, no, it's not the price increase that will drive the evolution of MS organic growth. It will be rather through the launch of new products, the development of our online activity, the delivery of contracts we signed over the last years, and that takes time to ramp up with big customers. I'm thinking in particular about big airlines or big technology partners that are still in their ramp-up phase. And overall, an across-the-board work on partnership and digital onboarding to accelerate the intake of customers on our target platforms, which are extremely cost-competitive and price-competitive and help us to make a difference as we speak.

Thank you. Thank you. We will now take the next question. from the line of from CIC Market Solutions. Please go ahead.

Yes, good morning. Thank you for taking my questions. First one is, if you can come back on the charge you are taking for Power24, am I correct in saying that for the full year you are considering 250, so you have taken already 70 of it in non-cash, and only 30% remains for H2, and then that would stop there, or do you think there could be some continuation after H2? 2024. And on the cash portion of it, I mean, it looks like that's 25%, you know, which is booked as cash restructuring in H1. Is this ratio going to stay over time or for how long? So this 42 million, you know, euro cash charge related to it. And the second question is, in terms of new way of payment, I mean, there were some new way of payment that were highlighted, I mean, in Specialist Press and recently in France with some big retailer regarding paying, you know, with your hand, with a poem. I was wondering, are you involved in those projects, for example, with Carrefour? Or what do you think about this way of payment? Thank you.

So just to clarify on your first question, the charge on Power24, so in terms of P&L, we booked the full cost of personnel exits for the plan in H1 this year. So within the 174 million, you have 132 million, which is the full cost of the exits for this year and next year. But there is also transversal cost and there is also amounts that we spent in 2023. So just to remind you the sequence over 23, 24, 25. We spent 23 million last year towards Q4 for implementation costs in cash. We're spending 42 million euros in H1, and we'll spend north of 100 million in H2. And we have a stub of 60 to 80 million euros in H1, Q1, 2025. That's the sequencing of the overall 250 million implementation costs.

For the new ways of payments, yes, it's typically the kind of things we do. We have this technology background, so we explore a bit all the new shapes and ways, and the Palm Veil payments is something we had in our innovation center for a couple of years now. So I'm not allowed to comment on specific cases, but what I can say is we work on the technology chain to do these kind of things, and big players indeed like to get our help to make it happen. I don't know if people will love PalmVM payments. Don't take bets that one will be much more successful than another in one line. We tend to prefer covering the full shapes and forms. Be very open-minded and see what are the most successful ones. If I can give a very simple example, many believe the QR code-based payments were something a bit beyond the curve and not to be successful or reserved to Asia, for example. And when we see the success of TWIT, which is a very strong partner of us in Switzerland, it has got to a huge market share and people got used to these QR code payments and like it in one of the most digitally advanced European geographies. So I think there is no preconceived ideas about what way of paying will be successful or less successful. We are technologically able to support and help all players to deliver this kind of things.

Thank you. That's a very clear answer. Thank you.

But it connects to a previous point of Marc-Henri. Payment will constantly get to become more complex. It's true for the form factors. It's true from the authentication system. It is true also for the payment rails. card, non-card, instant, deferred, prepaid, and so on. And one of the real value proposition of large-scale payment specialists like ourselves is this possibility to make what is very complex in terms of diversity simple when it comes to be integrated for a given merchant or bank at point of sale. So that is really a very important long-term driver. The more complex the ecosystem, the stronger we are by making it simple for the merchants and ultimately for the end users.

Thank you.

Thank you. We will now take the next question from the line of George Levin from Autonomous Research. Please go ahead.

Good morning. I think there's a concern among investors that merchant services may be losing market share. I know you had that slide about merchant ads, We don't know anything about the size of those merchants. How would you address the concern about losing share? Any specific data points you can provide? That's the first question. Thank you.

Right. Yeah. Now, on this specific dimension, what we, in particular, when we saw the MSV evolution throughout the semester, and we wanted to confront a bit of data points, we look also at the issuing data, because we are an issuer. As an issuer, we know how much people use their card and what is the MSV evolution from the issuing side or the transaction number evolution from the issuing side. And when we compare the market we operate and we adapt the geomix on the market where we operate, we see that our evolution is very, very much correlated or MSV evolution or acquiring evolution. MSV evolution is very much correlated to the issuing market. So it's not something where I would say across the board on the world and geography you have a disconnection. This being said, we have different geographies inside the world and scope. So we have geographies where we have a very high market share. We are more in a market share defense mode and areas where we are more a challenger where we can really play the the game of our new products, new approach, new distribution models, and where we are growing much faster. Typically, we mentioned the case of Italy. I think in Germany, if I look at the results of each one, we are also having a growth which was clearly above and very close to the double digit of the underlying revenues of MS. And so globally, very good momentum in these markets, for example. So it's what I can highlight on this specific topic.

And just to add to that, Josh, good morning. A comment that is fairly obvious here, which is complementary to what Marc-Henri said and to your question, the 30,000 net merchant ad is typically mass market merchants, as you can guess, just of all size. And the current situation is not that we don't onboard new merchants. It's the fact that what we've been seeing for a few quarters, but particularly during Q2, is that each and every merchant in average is just transacting less than in Q1. Once that will be behind us in terms of macro uncertainties and evolution, all this machinery will start transacting more moving forward, and it will also be an important structural support to the long-term growth of the business. It's why we will never give up and pursue our sales activity, marketing activity, digital onboarding, going for the micro-merchants. It is clearly for us an important area of investment and I can only invite you and I hope that you will be available for the 26th of November, Josh, with your colleagues, so that you can have a much more detailed view of all the products, distribution, strategy, connection to ISV that we've been growing over the last years to exactly adapt to the next new normal of the payment ecosystem in Europe.

That's helpful, thank you. Just one more, if I might. Worldline had a very brief outage in the UK in July. Is there going to be any impact from that?

No, it was indeed, as you said, very brief. Number of customer impact are pretty limited. We handle it very professionally, keeping a very good engagement with our customers. impact is limited and outages unfortunately in our industry it happens from time to time even to the biggest ones in the tech industry you may have noticed it as well.

Of course. Thank you very much.

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

Good morning. Can you hear me? Very well. Thanks very much for squeezing me in despite technical difficulties. There are a couple of things, if I may. One is just to follow up on an earlier question around that softness in consumption you've seen over the course of a quarter. Could you comment a little bit by channel? Because PayPal, for instance, was quite constructive on the Econ channel in Europe. wondering if you've seen any differences worth calling out between in-store and e-com. And my second point, if you could comment a little bit on the revenue content by, you know, depending on your mix between domestic and international schemes, because it feels like international schemes keep raising their fees, and maybe more broadly how you see domestic schemes fighting back on the innovation front. I think that Carte Bancaire came up with their own version of tokenization recently. So any thoughts there could be very helpful. Thank you.

Maybe I will answer your question. For sure, in-store and online are differentiated momentum in H1, in particular in Q2. In-store was, in terms of volumes, good. Double digit. So probably And we don't have a demonstration, so we don't come with any of that. But it could maybe correlate with the fact that this weather condition, in particular, explains the super weak months of June. But yes, there is a differentiation around channels and ambiguities there. In-store was, sorry, online was less impacted in H1 and was, online, I said, yeah, was less impacted in H1 and progressing well. In-store, much more impacted.

So just to clarify indeed, in-store was more impacted. We believe it may be correlated to weather. Online was doing better because less exposed to weather conditions. That's one of the explanations maybe.

Okay. And regarding international schemes, it's clear that in terms of MSV evolution, it's much closer to double-digit evolution on the international scheme. So we are getting market share all across the European geographies. It's not deniable, but you have differentiated momentum. And you mentioned CardBanker. CardBanker is doing very well, benefit from a strong support from the French banking community, push innovation. We work, by the way, a lot for them to support this innovation and this specific way of paying. It's a very cost-effective way of paying for retailers and as a consequence for us as well. And so they are able to defend their market share from that point of view. we see different situations. Typically in Italy, as we speak, the banks are really on a very strong trend of issuing only international scheme branded cards, and the domestic scheme is losing a lot of market share, as we speak, which indeed creates an additional pressure. That being said, In these geographies, like in many others, we are massively on the pricing model, which is interchange++. So we are in a position to adapt to this evolution. And we are pleased to work with international schemes that have a strong firepower to innovate, to develop new products, new solutions. So in an ecosystem like ours, it's very important. to work with all partners, all solutions, adapt to all market evolutions that are not fully under our control.

And to expand on that remark, it is, as I mentioned sooner, from a strategy standpoint, we want to encourage diversity and competition in the payment schemes, that the interest ultimately of the acquirers, that there is always multiple routes for a given transaction, and so as to allow the merchant to get the best possible rate, as ourselves. This is also why, as you know, we also are a strong supporter to RERO, the European Payment Initiative, that we believe in the long run will take a fair share also of cross-border transactions in Europe, whether it is in-store or online. And we will also pursue advocating for any significant domestic initiative that needs to be supported, or to work with non-European payment schemes that want also to gain access to the merchant point of sale, like we do with the Alipay, WeChat Pay, now the Indian scheme RuPay and so on and so on. It's part of our playbook also from a strategist standpoint to make sure that there is diversity at point of sale and that there is never one monopoly route that is going to impose its condition on the entire ecosystem. That's very clear. Thanks very much.

Thank you. We will now take the last question. From the line of Antonella Frangillo from Intesa Sao Paulo, please go ahead.

Good morning, everyone. Two questions from the side. The first one is on follow-up on your comment on July. Could you give us more color on that in terms of speed of the deceleration compared to June, countries, channels, and so on? So just to understand that. if there is a further deterioration in July and where compared to June, or if it's a similar trend, just to have this update. And the second question is on competition. I have seen the announcement of BNP Paribas in the payment division, in particular, their ambition to become a leading player Not only in France, but also outside France, in particular Italy and Belgium. Could you comment on that?

Sure, Antonella. Good morning. Well, what we saw in July, basically, is a significant recovery versus June. But June was clearly probably not a normative level of MSV volume. So we are basically trending back toward what we were having, a bit below what we were having in Q1. Basically a significant improvement, let's say 70-80% more in relative growth rate versus June. So we've been moving now circa to what we're having in Q1. Still not exceptional, but I think much better than June. So that's only one month. And the fact that we want to stay cautious for what it may mean for the rest of the year, I think as always, Vacation is one specific period, the summer, let's say, July and August, where people are not in their domestic countries for a number of millions of people. And of course, in parallel to that, what will be the next four months when September will start. And in the end, Q4 dynamics with the typical very intense commercial activities around the Black Fridays, the Cyber Mondays, the Christmas preparation period, et cetera, et cetera. quite some uncertainties moving forward. It's also why, in that context, even we are happy to see July being really clearly recovering, which gives us hope that we can absolutely also get to the upper end of our updated guidance on all parameters. And I hope that we convey this message clearly this morning. We are focused on the transformation of the group to make it much stronger for 2025. And for 2024, our absolute focus will be to deliver the free cash flow we wanted to deliver at the start of the year, whatever. This is allowed by the fact that we progress extremely well on all fronts when it comes to cash generation. The progression, of course, is also the very deep progression we do on the platform convergence that is progressively less cost consuming, the integration effort that we execute very well. And of course, the attention we pay in everything we do in the company for cash generation. We acknowledge uncertainties at the top line level, but the costs are extremely well managed and the cash even more so. So companies well on track to deliver a very powerful transformation that will pay very quickly as soon as 2025 and even more so if macro wants to be a little bit favorable. And regarding BPC and BNPP, at least BPC as you, sorry, BNPP as you mentioned, Yes, clearly. We see that they have some ambition in payments. They are an important player in the French market. But from 2025, of course, they will have in front of them a call, our GV with Credit Agricole, which is said to be a very, very strong performer in the French market. And I can tell you that with our friends at Credit Agricole, we are saving no effort to make sure that we will have a winner here. And the market, as you know, is open and competitive everywhere. The debate on competition, to be frank, has not been that much between Worldline or Nexi and banks over the last years. Banks, structurally, have a role to play in the value chain. We recognize banks are extremely powerful distribution organizations, and so we respect all competitors If they do the right things on the product, on the technology, on the partnership strategy, on their ability to expand their value proposition, there is no reason a bank cannot be good in payments. In reality, it is quite a journey to create a scale player in Europe, and there are only a very limited number of banks that can claim to reach the level that is expected in the coming years to be a high performer in European payments. Maybe a few will play very well their cards. I just observed that most of the banks have also recognized that strategic partnerships with companies like ourselves is the way to go. And we are absolutely convinced it is indeed the winning formula, associating superior products, phenomenal reach, plus the power of the banking distribution network and the trusted brand they do represent in a given country. And this is exactly what we've been building for years.

Thank you. I would now like to turn the conference back to Gilles Grappinet for closing remarks.

Yes. Many thanks. Just expanding from what I shared with you and bouncing back on Dandonella's question, the company is absolutely engaged relentlessly on its transformation. Everything has been progressing as per plan or better. The transformation of Brownline is delivered will be further delivered in H2, where we will start to see much more P&L benefits from the hundreds of levers that will actually take place in our H2, contributing to a much more normative financial profile as soon as 2025, both at margin and cash level. In between, we will deliver the target we have set to ourselves for the cash during 2024, whatever, And we will, of course, update you on the macroevolution that is still uncertain as we speak today. But we will get clarity on that moving forward into H2. Thank you very much for having been with us today, and looking forward to our nearest interaction, guys.