Worldline Sa Ord

Good evening and thank you for standing by. Welcome to the Worldline Third Quarter 2024 Revenue Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mark Henry de Sport, Worldline Group CEO. Please go ahead.

Ladies and gentlemen, Good evening to all of you and thank you for joining WorldLand Third Quarter 2024 Revenue Conference Call. I will start by going through the highlights of the quarter with the key business and commercial dynamics for each of our business units, as well as some action points we are implementing to re-accelerate our growth. Gregory, our Group CFO, We then go through our third quarter revenue performance in greater detail before my conclusion, and finally, the Q&A session. Before I start, let me give you some color regarding our ambition over the following month to rebound and refocus our business. We online experience soft revenue over the last quarters, and we had our specific challenges in an overall less favorable market. As a management team, all our action and energy are mobilized to make this Q3 the end of the negative sequence and the point from which we will progressively rebound. And to rebound, we can rely on a solid base. On one end, when the specific and often temporary challenges are isolated and dealt with, the business is growing, and we delivered a mid-single-digit growth on the core of our merchant services business. On the other end, with Power24, we secure to have a rationalized cost base as we enter into 2025. I believe the growth of the group can and needs to be stronger, and it will come through the concentration of our investments in new distribution channels and high-evaluated products, which will enable us to fully leverage our solid fundamentals. I will come back on the associated rebound actions we have undertaken during the call. Concentrating also means refocusing through a portfolio pruning. After a decade where Worldline has actively consolidated the European payment landscape, there are some peripheral assets in our portfolios that do not enjoy many synergies with the group of our businesses and that we may look to divest. It's too early to talk about specifics at this stage. But our goal is to operate a leaner and simpler business and accelerate the rebound of the group growth. Now moving on to our quarterly and year-to-date group revenue performance. We delivered a soft third quarter as anticipated with a slight 1.1% revenue decline in organic terms in Q3. On a September year-to-date basis, revenue amounted close to 3.5 billion euros or plus 1% organic growth. As we had mentioned in September, this performance was impacted by specific challenges, particularly in Q3, and this is therefore reflected in our full year guidance. Addressing them with no taboo and right focus is the first and single step out of our current softness. I'll let Gregory give you the details in a moment, but at this stage, we fully confirm or full your guidance. Now, Merchant Services. Merchant Services is in a transition year, but maintains strong fundamentals, which are of scale or reach, in particular in Europe, and our product range. In this context, we are really happy to welcome Paul-Marie Clark, who joined a few weeks ago as our new Merchant Services leader. Paul has a strong knowledge of the payment market and particularly on the online business coming from his PayPal experience. Merchant services has been reorganized during the summer into a go-to-market approach for sales and customer services to increase our focus on client end-to-end needs. Talking about more detailed actions, we have already implemented measures to resolve the current specific challenges. In Australia, a new local management team is now in place and repricing action has been pushed through in active collaboration with our banking partner to factor in our cost increases. In the online verticals, the name of the game is to ramp up faster the new customers to benefit from their increased volumes. The dynamic end of September of big customers like Google or Turkish Airlines give us comfort to be on the right path and we will progressively benefit from the end of the impact of our merchant portfolio termination, which had started in Q3 2023. Besides, our payment orchestration product continues to deliver a solid double-digit growth and will be pushed further. As a result of our actions, both Australia and the travel and gaming online verticals should return to growth already in Q4 2024. Meanwhile, I want to boost our mid-term outlook with various initiatives. For example, we aim to expand our market reach through ISVs and for large enterprises for further product extension. We are also expanding our distribution channel with the coming soon of COLE in France, with Crédit Agricole, where our setup work is progressing in line with the plan and we are experiencing the first wins enabled by this new cooperation. We are also fully on track with CCB in Italy to onboard 60,000 new merchants between the end of this year and early next year. Another major contributor to this acceleration is embedded payments. Our partner business is already growing double-digit, but we are far from being able to address these key segments at full speed, which I am going to explain in the next page. All of these initiatives underpin our ambition to progressively re-accelerate our merchant services towards the mid to high single digit growth in H2 2025. Embedded payment, indeed, is a real leap forward for Warline, opening us the possibility to address together with our partner OPP ISVs and marketplaces all across Europe. In the era of platformization and marketplaces, OPP has developed for the European market, including UK and Switzerland, a solution able to compliantly onboard massively new sellers, individuals or merchants. We have today a base of over 28 million onboarded sellers. OPP, coupled with Worldline's payment expertise, will provide a new solution covering the full revenue ecosystem from global online acceptance to full acquiring capabilities. It's easy to use and integrate, it's flexible, it's fully compliant with the EU regulation, in particular the GDPR, and secure and highly flexible and scalable. Further developments over the next month's roadmap include advancements such as tap-on mobile and point-of-sale integration, and we will be the first one to offer such an integrated setup, particularly relevant for platforms including home delivery services. As said previously, we already had hundreds of ISVs connected, but it was each time a small project. Now we have the solution with easy-to-connect APIs to move at a very different pace. So we are really excited regarding the potential of this technology, which demonstrates our know-how and that will contribute to our future successes. Looking to our other divisions, financial services was impacted by the one of reinsourcing in the payment account segment. We are confident, however, that this division will be back to growth in the second half of 2025, driven by a very good commercial dynamic and a clear improvement in the conversion of the pipeline. Our strong position in issuing, which is now growing very well, and the rollout of the cloud-based instant payment solution will also contribute to our dynamic going forward. Finally, in METS, our product-based organization and new management team since the end of 2022 have borne fruit thanks to our innovation-led expansion. Supported by your know-how and expertise, we expect growth to continue over the coming years. For instance, by leveraging the power of AI in the customer care center, we will renew our new e-ticketing systems, which are only some examples of our innovation. I will now hand it over to Gregory, who will review the Q3 financial performance.

Thank you, Marc-Henri, and good evening, everyone. Let me first start with an overview of our Q3 revenue performance. Q3 revenue came in at about €1.2 billion, down 1.1% organically. GBL by GBL performance is as follows. MS is broadly stable organically, or down 2.7% on an NNR basis, with the gap mainly due to more cross-border transactions in our very dynamic southern European geographies, as well as lower volumes on online verticals that have more zero-scheme payment fee methods. More domestic consumption at Christmas, we expect this gap to narrow significantly in Q4. Excluding specific issues which I'll detail in the next slide, underlying growth in MS stood at circa 5% based on 3% MSV development as shown in the appendices. Financial services was down 8.3%, impacted by the re-insourcing process in the account payment division. And finally, METS revenue was up circa 5%, mainly driven by increased activity in France. Year-to-date September, organic growth stands at 1%, or broadly stable on an NR basis, with MS up 2.2%, FS down 3.7%, and METS up 2.2%. Looking at MS Q3 revenue in more detail, here are the main points to highlight. First, three specific challenges we faced in Q3, which cost us 4% in organic growth. Number one, merchant terminations are behind us since Q1, but still weighing on organic growth by approximately 2%. Then we have two topics costing 1% each in organic growth, first in APAC, negative growth stemmed from the slower than expected migration that is being finalized as we speak, and historical limitations on our ability to pass cost increases to large enterprise customers. The active repricing campaign engaged by a new local leadership and backed by a banking partner will allow us to be back to accretive MS underlying growth as soon as Q4. Second, the slowdown of our online vertical is due to both a challenging macro and economic environment impacting the travel and gaming segments, as well as a slippage in the onboarding of certain customers. As mentioned by Marc-Henri, a specific action plan has been implemented to address this issue, and with the ramp-up of already onboarded merchants, we expect to be back to growth, excluding merchant terminations in Q4 in online. As for underlying growth, it stands at 5% in the third quarter, primarily driven by a strong momentum in the Italian and Greek markets, where we are growing in the 20% range and gaining market share. In Central Europe, we continue to record good commercial momentum, particularly in Germany, which is growing high single-digit, excluding merchant terminations. In Northern Europe, business momentum started soft this year but is improving, in particular in Scandinavia, and with new product release in Q4, we expect improvements in these geographies. Finally, regarding MS commercial activity, in the quarter, we signed good logos, in particular online, just to name a few. Abarth City, the leading apart hotel provider in France, selected our full-service offer encompassing acquiring, digital currency conversion, and a gateway integrated into their property management system. And in airlines, We recorded share of wallet gains with Emirates for digital wallet acceptance, as well as with Air Transat. Moving on to FS, revenues reached 211 million, down 8.3%, largely due to the already mentioned M&A driven re-insourcing process at one of our largest customers in May this year. This earlier than anticipated impact drove a one-off negative performance Excluding this impact, FS grew, benefiting from increased volumes across all the countries and new projects in the issuing business, as well as good wins in instant payment. On the commercial front, Worldline is registering a number of successes, three of which are on the slide, Bank of China, British Petroleum, maybe one to call out, Anadolu Bank, which is one contract in a series of five this year on our cloud solution and instant payment, for which we are seeing good momentum. Given the meaningful increase of the pipeline and the absence of major renegotiations ahead, the growth profile of the division will improve from Q2 2025 onwards. Now on METS, revenues reached €259 million year-to-date, accelerating throughout the year, mainly driven first by good volumes in trusted services, particularly in our e-education and e-health in France and Germany, and second by strong growth in omni-channel interaction segments on the back of good volumes and good delivery of projects. In terms of business developments, two large companies have extended their partnership with Worldline's contact solution, BNP Paribas Group, and DIOSACI, so good commercial activity overall as well. Finally, A word on our cash focus as well as financial policy. During the quarter, we have maintained a strong attention on executing Power24 so as to optimize Worldline's operating model and right-size our cost base. Implementation cash costs will remain unchanged at 250 million, and we confirmed the minimum 220 million euros run rate of cash cost savings by 2025. In parallel, structural actions are being implemented To improve cash generation, we're committed to containing CapEx in the low 300 million in 2024 and beyond. As planned in our guidance, working capital will be a 50 to 60 million euro outflow in 2024, trending towards zero in the following years. And rationalization and integration costs will continue to decrease in 2024 and beyond, trending towards 1% of revenues. we are committed to maintaining a solid financial structure with A, strong liquidity, and B, targeted leverage under our new definition, which includes IFRS 16, of circa 1.5 times adjusted EBITDA, which we expect to reach by end 2025 in a BAU mode. To conclude my presentation, we confirm our full year of 24 guidance as follows. Organic growth of circa 1%, adjusted EBITDA of circa 1.1 billion euros, and a free cash flow maintained at circa 0.2 billion euros. Thank you very much for your attention. Now, let me hand it over to Marc-Henri for his closing remarks.