Good morning, all, welcome to the half year 2023 earnings webcast of CM.com. My name is Serge Enneman, Head of Investor Relations, I will coordinate this webcast on behalf of CM.com. As you probably are aware, we will first show a video summarizing the key highlights of the H1 of 2023, after which we will have a Q&A session. Sitting next to me here are Jeroen van Glabbeek, CEO and Co-founder of CM.com, and Jörg de Graaf, CFO of CM.com. They will present the highlights in the upcoming video and later answer the questions of the analysts present in this webcast. Before we start the video, please be reminded of the forward-looking statements in this presentation. If you choose to continue and watch the video, you are bound by these statements.
With this out of the way, I would now like to ask the operator to start the video.
Earlier today, we published our results of the H1 year of 2023. I'm pleased to present you the highlights. In the first six months of 2023, CM.com showed a good performance. As said during the full year 2020 results, the next phase in our growth strategy is to focus on the optimization of our organization and to use our full potential. Important focus points are performance management, deployment of talents through our talent program, the alignment of sales and marketing efforts, and the integration of new technologies. With this, CM.com realized an 8% growth in gross profit year-over-year. Also, our EBITDA grew very strongly as we have tightened our grip on our OPEX developments.
Looking at the markets in the H1 of 2023, the macroeconomic circumstances remained challenging. At the same time, the world clearly sees a new and exciting era emerging with the almost instant adoption of generative AI. An era where CM.com see ample opportunities as these new technological developments offer a great playing field for CM.com now and in the near future. Our clients are constantly looking for ways to engage better with their customer base. Our integration of artificial intelligence technologies is aimed at helping them achieve that improvement. As CM.com acquired several ventures in the field of AI in the past, we are excited about these developments and looking forward to stay at the forefront of bringing value-added propositions to our clients. Recently, we announced the release of newly developed generative AI applications in our Mobile Service Cloud and Conversational AI Cloud products.
A selective group of clients is now integrating it in their marketing and sales setup, and in the course of this year, we expect the first results to show how powerful this transformation will be. As said before, the world still faces tough macroeconomic developments with high inflation and the threat of a recession. This all affects the pace of growth in various markets as pricing starts to play a role in consumer appetite. Such change also impacted the priority of our clients, whose focus shifted towards client retention and cost optimization. The products and services of CM.com aim to assist our clients to achieve their goals in connecting with their customers. CM.com supports its clients in all circumstances, as our SaaS solutions cater to both economic expansion and contraction. The shift in client focus underlines the importance of partnerships.
We now also have signed a partnership with Salesforce, in addition to our partnerships with big tech companies such as Google and Microsoft. As our software is being integrated in the backbone of IT infrastructure of our clients, they can now integrate other software tools more efficiently. That means they can improve their engagement with consumers and to grow their business. To be able to stay at the forefront of all these developments, CM.com started to optimize and realign its organization in the summer of 2022. Our foundation is ready, and the next step in our growth strategy was to optimize our organization. Through the focus on profitable growth, cost control, and data-driven performance management, CM.com will be able to execute its growth strategy while safeguarding our financial base.
In the first 6 months of 2023, our number of FTE decreased to 881, which is below the FTE level a year ago. Our presence globally was also more aligned with our profitable growth focus, all to further strengthen our performance and reach our goals on the path to profitability. CM.com wants to make sure all employees are enabled to reach their full potential within our firm. That is why we continued the female leadership series. We reinstated live quarterly updates to all our employees about developments in SaaS, CPaaS, payments, and ticketing. We fully recognize the importance of the right balance between capabilities and opportunities within our workforce, independent of gender, age, or origin. Let's take a closer look at the performance in the first 6 months of 2023.
In CPaaS, the COVID-related tailwinds of 2022 show an unfavorable comparison base for 2023. CM.com managed to replace that flow with high-margin business and sees an underlying trend with improving profitability. We expect that trend to continue to support the performance in CPaaS in the remainder of the year. In SaaS, CM.com software platform is being recognized as a good added value to our clients. Our clients can swiftly implement the latest software tools to improve the engagement with their customers. The knowledge and technology in AI that CM.com possesses through the acquisition of Building Blocks and CX Company, is expected to keep CM.com at the forefront of the developments in this field going forward. In payments, we made progress in the migration of our existing client base to the new platform, and we completed the setup with Visa and Mastercard.
Our payment processing platform now offers competitive advantages for our clients. In the first 6 months of 2023, the performance of payments improved year-over-year, which confirms our growth strategy going forward. In ticketing, we grew our business as well compared to the same period in 2022. We sold more tickets via our platform than ever before and improved our gross profit and our revenues. For several years now, CM.com has seen new clients use more of our integrated products from the start and increase the number of products they use at a faster pace. More clients embrace our vision as an integrated conversational commerce platform with multiple capabilities and solutions to address their various customer engagement needs.
This is also typically reflected in the higher margin we make on new cohorts of clients and the new products we launch in the countries we, in which we are present. For the same reasons, we added new AI and voice capabilities into our Mobile Service Cloud and into our Conversational AI Clouds. By doing so, we create a powerful and compelling offering for contact centers in which they can now combine all incoming communication channels in one SaaS-based solution. For us, the past three years since listing have been a time of tremendous growth, not only by revenue and gross profit, but also by staff numbers and our global organization as a whole. In 2023, CM.com has increased its focus on efficiency and started a transformation of revenue growth into profitable growth.
That resulted in improving margins in the first 6 months of 2023 and a decrease in OpEx as we increased our grip on costs. CM.com grew its gross profits in the H1 of 2023, despite the comparison base of 2022, where we still had the tailwinds from COVID-related activities in the Q1. We will continue to invest in profitable growth by using our strengths and improving our efficiencies, as we expect to see a further growth in gross profits, while OpEx is expected to decrease further. That is why we want to update our outlook. We now expect to be structurally EBITDA positive, not only by the end of 2023, but already over the full H2 of 2023. Now, I will hand it over to our CFO, Jörg de Graaf .
He will walk you through our financial performance over the first six months of 2023.
As mentioned by Jeroen in his opening remarks, we saw robust growth in gross profit and gross margins in the first two quarters of 2023. The focus on profitable growth led to a gross profit in the first six months of 2023 of EUR 38.2 million and a gross margin of 28%. The higher margin businesses, payments, SaaS, and ticketing, contributed more to our gross profit. At the same time, COVID-related impact on voice traffic still distorted the year-over-year comparison in CPaaS. For the first time since becoming a public company in the beginning of 2020, our operating expenses for the period came in lower than the same period of last year. Overall, we're pleased with the performance of CM.com in the first six months of 2023.
As announced by the end of last year, our financial goal is to become EBITDA and free cash flow positive. Revenue is, in that sense, only an important driver for us to the extent that it drives gross profit and value growth. The KPI development reflects this change in focus. Our profitability grew as CM.com focused on selling more products with a higher margin, which in turn led to a higher gross margin overall compared to 2022 over the same period, while our revenues remained stable. Gross margins improved 2 to 28% due to the shift in product mix and volumes. In our CPaaS business, CM.com has focused on replacing COVID-related voice business with messaging business. We not only succeeded in doing so but also protected our margins in CPaaS.
Voice minutes tend to have a higher margin, but as we focused on higher-margin messaging business, we managed to keep the total CPaaS margin stable. Overall, underlying business continued to perform well, where double-digit growth was realized among payment volumes, ARR, and ticketing volumes year-over-year in the first six months of 2023. In CPaaS, volumes in messaging remained about stable while focusing on value, and the number of voice minutes declined, impacted by the COVID comparison year-over-year. Let's take a further look into each segment's performance. First, CPaaS. Our CPaaS business empowers organizations to notify and connect with their customers through a range of communication channels.
In the first six months of 2023, revenue and gross profit were 3% lower year-over-year due to the unfavorable comparison base caused by COVID, while margins remained stable following our focus on profitable growth. Revenues were EUR 111.2 million, while gross profit reached EUR 17.3 million. Our focus on profitable growth meant we replaced higher margins voice business by messaging volumes towards routes with better margins. Underlying as a mass, gross profit increased by more than 20% year-over-year, nearly fully compensating the impact of the fading out of COVID-related voice traffic, as the focus on generating volumes on more profitable routes started to bear fruit. Our net dollar retention rate remained stable at 100%, where customer churn remained low at 5%.
Important to point out here as well, is that our net dollar retention rate for messaging, so excluding the voice minutes, was at 115%. When we look at our volumes in CPaaS, we see a rather stable level in messaging volumes and a decline in voice minutes year-over-year. That decline is a result of COVID-related tailwinds fading out by the end of the Q1 in 2022. All in all, our business in CPaaS developed as expected, with the focus on profitable growth showing good results. Turning to SaaS, we saw a consistent performance where both revenues and gross profits grew by 19% year-over-year, and our ARR continues to grow further to EUR 30.9 million. Our gross profit came in at EUR 12.5 million and our revenue at EUR 14 million.
SaaS is the core to our portfolio lineup, and we expect SaaS to contribute further to the improvement in gross profit to create a better balance with CPaaS. In the first 6 months of 2023, we aligned our SaaS proposition with the markets we operate in and developed new value-adding applications. Recently, we launched a new set of tools, which includes generative AI in our Mobile Service Cloud and Conversational AI Cloud applications. That new development is now being implemented with a selective group of clients, and the first results of that are expected in the H2 of 2023. As our SaaS proposition caters to both economic growth and contraction, we see that momentum in SaaS remains good, although sales cycles tend to remain longer than in the past.
CM.com is adapting to this new situation to assure our profitability continues to improve. Our annual recurring SaaS revenue increased to EUR 30.9 million in the first six months of 2023, up 12% year-over-year. Although macroeconomic conditions remain challenging and longer sales cycles are still a fact, CM.com is adapting to further continued growth. As stated before, SaaS is expected to play a bigger role in the growth of our gross profits in the future. In payments, we saw a revenue increase of 22% to EUR 7.4 million, while gross profit went up 12% to EUR 4 million. Processed payments rose by 28% year-over-year to just over EUR 1 billion in 2023 so far.
This increase was driven by the onboarding of high-volume customers, including the payment services we provide to the Dutch government that are now fully live. In the H2, we also witnessed a pickup in credit card business, which is typically a higher margin business for us. Furthermore, the increase of venue and event ticket sales, for which we also process payments, have added to the growth in this segment, following the lifting of COVID restrictions. In the first six months of 2023, CM.com completed the building and certification of the new acquiring platform and began migrating customers onto it. We expect this to positively impact the customer experience and our take rate. As the payments platform is integrated with other segments within CM.com, we see that this adds to the growth of our payments volumes processed.
Going forward, we will continue to focus on the integration of the payments platform with the other segments within CM.com, cross-sell our payment suite to existing customers, and at the same time focus on generating profitable growth with new labels. In ticketing, CM.com managed to sell a record number of tickets, resulting in a 31% growth in gross profits year-over-year to EUR 4.3 million and a 35% growth in revenues to EUR 4.7 million. This growth is a mix of a weak comparison base in Q1 2022, when COVID restrictions were still in place, and a strong comparison base in Q2, when everything opened up again. In the H2 of this year, we do see early signs of a consumer holding back on spending, with lower average attendance of events as a result.
The landmark deal with Amnesia Ibiza in Ibiza is now underway. As we continue to receive interest from other event organizations around the world, CM.com remains committed to a further international expansion of our ticketing business. Our integrated offering with ticketing, payments, and customer engagement solutions in one makes us very competitive in this space. In line with previous guidance, CM.com is optimizing its organization and cost base. As we continue to execute on our path to profitability, we focused on profitable growth through improving margins and at the same time reducing our operating cost. As a result, our headcount decline from its peak in Q3 2022 is continuing to accelerate, with current FTEs at 881 being already at a lower level than our FTEs of 888 in June last year.
As we are pressing on with our efficiency roadmap based on performance and return on investment data, we expect headcount to come down further in the H2 of the year. Even though we aim to realize the decline as much as possible through natural attrition, a level of involuntary departures is unavoidable. We've also decided to close our offices in Kenya and Mexico, with more offices under review. Those offices no longer met our benchmark requirements, therefore, we've taken an initial restructuring provision in H1. For H2, we expect to add to that provision in order to achieve the cost level that will bring us to sustainable positive EBITDA and cash flow. In 2022, CM.com finalized the investments in tooling, licenses, and educational initiatives for our workforce to operate efficiently at the current scale.
In 2023, these costs are behind us, while we are reaping the benefits of the investments made in the past. As a result, OPEX, corrected for one-offs, fell below prior year levels to EUR 41.9 million before restructuring costs, a major departure from OPEX developments each year since our listing early 2020. The pace by which the OPEX declines year-over-year is expected to accelerate in the remainder of 2023, reaching more than 10% decline for full year as we continue to lower our number of FTEs and other costs significantly. As a result of continued gross profit growth with lower operating expenses, normalized EBITDA came in at EUR -3.7 million for the H1 of 2023.
That is in line with the guidance we gave during the Q1 trading update of EUR -3 million to EUR -5 million, and a substantial improvement compared to 2022. After years of investing in our global organization, product offering, and team, we believe that we've built the organization that can shoulder more profitable growth with lower cost. This brings us to our outlook, for which I'd like to hand back to our CEO, Jeroen van Glabbeek.
Since listing, CM.com has managed to generate significant growth as we executed our growth strategy. In 2023 so far, CM.com managed to keep revenue stable and grow gross profits and gross margins, while OpEx decreased. 2023 marks a year of transition, where we keep focusing on becoming structurally profitable and laying the foundation for further profitable growth in the future. The market conditions, in combination with the worldwide end of the pandemic, underlined the importance to be flexible and to adapt our organization to the new world. A world that is now changing again due to the introduction of generative artificial intelligence. These are challenging and exciting developments that underlines why our path to profitability is so important.
By deploying the capabilities of our organization more efficiently and keeping a tight control on our cost base, we expect to be able to accelerate our growth again in the future. Our OPEX is decreasing, and our past acquisitions strengthen our ability to grow our pipelines and increase our conversion rate. Our pipeline is built well, and we are converting leads into client wins. That is why CM.com is convinced of being on the right track. Looking further ahead, we will continue to strengthen our market leadership and innovative strength in conversational commerce. Overseeing the targets, as set out in our path to profitability, CM.com expects normalized EBITDA before restructuring costs to be positive in the H2 of 2023. Previously, this was structurally positive by the end of 2023. OPEX to decrease by at least 10% for the full year-over-year, excluding restructuring costs.
Three, to be cash flow positive in the course of the H2 of 2024. Previously, this was by the end of 2024. CM.com is here to help organizations around the world to improve their communication with their clients and to understand their needs. We want to make every conversation count for our clients and their consumers. Helping our clients to retain their consumers might be more relevant now than ever before. Thank you for your attention. I would now like to hand it over to the operator for the Q&A session with the analysts. We look forward to your questions.
We now start with our Q&A session. If you have a question, this is for the analysts. If you have a question, please raise your hand in the RaiseBar. I see the first question is by ING. Thymen, please go ahead.
Sure. Thank you. Good morning, all. Thanks for taking my questions. Let me start off with my first question, and then I have another one after that. The first one is around growth. I know you guys no longer provide top-line growth, but zooming in on gross profit growth. In the Q1 this year, we saw around 6% gross profit growth year-over-year, but adjusted for COVID-related business, the underlying growth should be higher, much closer to 20%. In the H2, gross profit grew by 10% year-over-year. When you compare it to the Q1, it's a little bit lower. Do you see quarter two gross profit growth as a run rate for the rest of the year?
In short, do you expect this underlying trend to continue for the rest of the year? I know that you saw some macroeconomic headwinds as well, got more cost-focused customers. How should we look at it for Q3 and Q4? Thanks.
Jeroen, would you like to take this question?
Yes, it's also rather financial, of course. Yep. We see growth continuing for the next half year. Sure, especially the gross profit growth indeed. We are less focusing now on revenue growth. We still had a slightly revenue growth, of course, in the H1 year. The focus indeed lies around gross profit growth. Last quarter, it was 11% up. It was higher than the Q1, where it was 8% up. I think that that's a trend, is that the gross profit will go up, and that's important, of course, in our path to profitability.
I don't know if you have any more details to share about this,
yeah? I think the H2 was sort of the first real normalized, year-over-year comparison base. Our gross profit growth is, for us, obviously, a very important, KPI right now. I think, what we've seen in the H2 is a well, let's say a reasonable proxy for our expected run rate.
Thank you. I have a question on gross margins. We've seen gross margin expansion, of course, due to the non-CPaaS business growing faster than CPaaS. Also looking at the segments individually, we particularly see some good margin recovery, again, in CPaaS and SaaS, on the back of price increases, I believe, at the start of the year as well. Payments gross margin is still a bit down year-over-year. I know you guys have the in-house processing platform that should lead to higher margins later this year. Could you elaborate a bit more on the gross margin trends that you expect to see per business unit going forward? A quick one, just around the restructuring costs. That's something new, I believe.
Just to clarify, you mentioned it also in your presentation, is it just purely shutting down those two offices in Kenya and Mexico, or is it also some more FTE cuts in other locations in the world? Then to what extent do you expect more restructuring in the year, in the rest of the year to get to your -10% OPEX growth for full year 2023? Thank you.
Okay. Would you like to take this one, please?
Yes, sure. Our gross margin development has indeed been in, well, pretty positive, as we expected. It's a combination of basically a few deliberate strategies that we pursue. Strategy one, which we basically already have in place for quite a while, is that we are focusing on more balancing the mix of our portfolio between the different pillars of our group, where the non-CPaaS parts are generating higher margins. As they become, deliver a larger contribution to our gross profit, we also expect them to drive our gross margin up for the company as total. That's one effect that is going to continue; that's a deliberate strategy that we have.
At the same time, within CPaaS, right now, we have a very strong focus on profitability. Growth, mostly, due to routes that are performing better in terms of gross margin and gross profit. We've been quite successful in basically offsetting the impact of losing all of the high-margin voice traffic, that the deal ones that we had of replacing that with SMS business. I think I also mentioned in the video that underlying we see, on SMS, we see about 20% gross profit increase, year-over-year, so that's pretty good. We're focusing a lot there on value over volume.
At a point in time, obviously, that mix comes back where, yeah, we're just going to grow that volume also again, but at a, yeah, higher margin than, you know, maybe certainly in Q4 last year. In that sense, we believe that, in CPaaS, we have gone a long way in improving the margins on SMS. As a result, you see a little bit of a drop-off in volumes. Yeah, that's really the effect of value management instead of growth management, just for the sake of growth. The other items, the other group segments that we have, SaaS margins, we do not expect to change them because they're just very high. They're 90% plus margin, that's gonna stay that way.
Payments, we expect improvements in margins. We've taken a little bit of a margin squeeze there by the onboarding of a couple of customers where we do different types of business, but also preempting already our new acquiring platform. As we're implementing that now, we are expecting that to have a positive impact on our gross margins in payments going forward. Our ticketing business is also pretty stable, high-margin business. Yeah, so we expect those margins also to remain approximately as is. In the mix of everything, yeah, we continue to push towards the 30% in the midterm. That's one on the gross margin. On the...
Your question on the restructuring cost, those include the costs that we are taking for restructurings are related to, indeed, decisions that we make on certain countries, and the costs that are related to that. But also, yeah, if we decide to part ways with employees, whether it be performance-related or efficiency-related, we just want to do that in a nice way, in a good way, and that sometimes comes with, yeah, with a termination, cost.
That's, those are included in the restructuring costs, so it's both personnel and the offices. Yes, we also expect some more restructuring costs in the H2 of the year, yeah, we're not quantifying that right now.
All right. Perfect. That's very helpful. Thank you. I'll go back in line for now.
Okay, thank you very much for your question, Thymen. Next question is for ABN AMRO, Wim Gille. Please go ahead, Wim.
Yes, a very good morning. First, a few questions on the payment business. Can you give us a bit of an indication or split the revenues between the software versus the TPV-related revenues, or alternatively, give us a bit of the take rate and how that is developing in the business? Also, you have converted or you have launched the new platform. Are all the clients now moved to the new platform, or is this still work in progress, and are you gradually churning through that process, feedback from clients on the new platform? You've shown a bit of growth in the H1, but how should we look at the H2 and even moving into 2024?
Do you expect that growth to accelerate now that the new platform is live? Last question around the payment business. The volumes that you're now processing through the PayPlaza software, how much is that today? And which portion has been migrated to your own payments platform, and which part of the volume is still processed by other merchant acquirers? That would be my first set of questions on the payment side.
All right. Shall I answer those questions, Wim, about the payments?
Yes, please.
Yeah, payments is a very attractive space to be in. All business in the world use payments to receive money and to pay money, and this we see increasingly migrating this to online payments, of point-of-sale payments, away from cash payments. Yeah, we see a lot of opportunity to grow there also, together with the other products like SaaS, ticketing, and also messaging. And this combination offers a very sometimes even unique proposition for our clients in terms of efficiency. We see growth in payments and also expect growth for the future.
Indeed, we have a mix in income in payments between, yeah, the take rate we have on the transactions that we process, on the volume there, and the software on the other side. Especially for point-of-sale devices, PIN terminals, in which our clients pay a monthly SLA fee to maintain those fees, and that's also an interesting business. Indeed, the margin we make in payments is a combination of take rate and SLA-based fees. That leads to a margin of now 54 to 55% in the H1 year.
At this moment, we don't disclose take rates exactly, but what we've seen in terms of take rate is that we were anticipating for a while already on new volumes and better and lower costs by introducing our own in-house developed payment processing platform and our own direct acquiring licenses. The acquiring licenses, we have already received for a while now from both Visa as Mastercard, but we want to run those acquiring license on our own processing platform. This has a lot of advantage for our clients: better quality, better price. I feel you have a question or... No?
No, no. Okay, sorry.
Conversational commerce, where we combine messaging and payments, there's a lot of new things to do there. Having our own direct, we own the channel, so to say, but with having our own processing platform, is quite unique. Not that many companies have that in Europe. Will give us a very good advantage in the market. Now, did we already move clients to the new payment system? Yes, we did, but only a few. If you look at the margin uptake we expect from this is to be expected to materialize in the next half year, and it did, didn't influence the last half year that much.
Because the platform is running, the first clients are live, we now observing how everything goes, and if everything goes well, and then ramping up the migration as we speak. Not many clients moved yet, but we're on the verge of migrating there. There was also a question about the opportunities we have with PayPlaza and their volumes. When we acquired PayPlaza a few years ago already, they had thousands and thousands of terminals live in the field, payment terminals. PayPlaza was not a payment service provider. All the payments on the terminals PayPlaza sold in the last decade were connected to other banks and acquirers.
That's a huge opportunity because there's a lot of volume in terms of money going through those terminals, which now go to other banks and acquirers. We indeed, we have the plans to migrate this traffic towards CM. We started it already a year ago. We have a small portion of volume, but it's, yeah, in the single-digit %, I think, of the volume already migrated to CM platform, and it goes very well. It is very attractive for us, but also for our clients. Our clients have now one connection of one supplier for both the terminals, online, offline payments, and also the payment processing.
That's a very attractive, compelling proposition for our clients, but we are just starting to migrate this volume, and this will give a lot of growth as we expect in the upcoming near future. We have already this money flows through our technology, and now we have to also migrate to our payment system. We see the same also with ticketing. With ticketing, we also process a lot of money on behalf of our clients, but not all that money is goes to our payment service provider yet. There, also there, we have room to grow with money we already have in our system, but not in our books yet. There's, we see a lot of opportunity there for further growth of payments in the, in the, let's say, a year or years to come.
Very good. As a bit of a follow-up question, I know that the benefit of having your own kind of processing in place can add about 20 pips to the credit card volume that you're doing, in terms of gross profit margin. What % of your total TPV is now credit cards versus iDEAL? That we can calculate what the added benefit is going into the H2.
Yes. Yeah, at the moment, we are not disclosing all those details. We are strong in the Netherlands with payments, and there you see also a decent market share of iDEAL as a payment method. In the Netherlands, the iDEAL is the first payment method, and credit cards are smaller if you look at the markets. If you look at all the older European countries where we also are, have some activities in payments, like in Spain and in Belgium, we see that credit cards are the vast majority of the traffic. Then we have, of course, our client base, where we also have like international clients, like the museums we have, like in Amsterdam, where we sell the tickets.
If we migrate more clients there to our own payment service provider, then we will have also more international credit card traffic there. It's a growing number, and there's a lot of opportunity there. 20 basis points can be the uptake of margin because that's a standard fee we pay to banks at the moment to process our payments for us. I actually expect the uptake will be a bit bigger even than 20 basis points, because we're also like a few hidden fees with some banks, which we also get rid of.
I think the opportunity there to increase our margin is certainly there, and it's also substantial, but we have to wait and see a little bit to see how it materialize in our figures in the next quarters.
I'd like to add a few follow-up questions, if I may, and that is on the SaaS revenues. We've seen EUR 14 million in revenues in the H1 of 2023. That's only up EUR 500,000 versus the H2 of 2022. In addition to that, we see the ARR being relatively stable, also hardly moving. What drives the confidence that SaaS will continue to increase its contribution in the gross profit growth in the H2 of this year and beyond? A question on the ticketing side as well. If we look at the price per ticket, it's EUR 0.55 in the H1, which is pretty stable compared to the H1.
Can you give a bit of a view on, yeah, how you are looking at ticket pricing going forward?
Yes, sure. Shall I take these questions? Yeah, yeah, it's nice that we have this different business units. They have all their own dynamics and although in the minds of our clients, they are really intertwined. I think this is for our payments, for our, yeah, financial figures, nice to have separate discussions, and that we just discuss payments now to SaaS. Yeah, we saw a modest growth there in the last 6 to 6 months compared to a half year before. I think that's still a good achievement if you look at the global markets for SaaS software.
We are obviously in the business-to-business software as a service market, and we've seen all over the world that, yeah, that companies, clients all over the world were very specific in the costs over the last half year. A lot of CFOs were looking at... Also our CFO, I could say, "How can we reduce costs for SaaS players?" In that term, we're still able to grow, and I think that's a great achievement and also very promising looking forward. I think this is behind us now, as so we've seen that our software is so important and vital for our customers that they have to keep it and to continue it and stay with us. That, I think that's great. Then there's a good base going forward.
Going forward, we see a lot of opportunities with everything what is now possible with generative AI, which wasn't possible, let's say, a half year or even one year ago. A lot of new possibilities there, a lot of traction with our clients, a nice conversations going on, live pilots going on, also good traction, nice pipeline. We feel very, yeah, bullish a bit about our SaaS possibilities for the next future. That's also driven not only by the possibilities we now have with generative AI, but also with the real need in the market. Our clients, let's say you have a call center or a contact center nowadays, it's very hard to find all these people to man your contact center.
It's not only that our clients want to buy our new technology, but also they more or less need to buy our technology in order to retain their customers, to answer all the questions, to understand the questions, to understand the consumer, but also generate the right answers. Yeah, we see a lot of opportunities to grow our ARR further over the next next quarters to come. It's a great opportunity and yeah. Okay, I witnessed that the growth for the last half year was not the highest it has been sometimes in the past, but I think without any acquisitions in this time, it was a great accomplishment, if certainly if you look at the broader markets.
Then for ticketing, yeah, ticketing, of course, was the business which had a real impact from COVID, huh? Closed a lot of theaters, events. It was all closed during the lockdowns, and reopened and rebounded last year with everybody wanting to go out and buying all the tickets available for every possible concert or event, at least it felt that way. This year, also, consumers, of course, feel a little bit in their wallet, that they cannot buy everything, and they cannot go to every restaurant and every museum and every concert anymore. They are a bit more precise in which ticket they buy and which not. That's stabilizing a little bit at the moment.
Also there, we had a tremendous growth, of course, in ticketing, if you see how that, how the market as a whole, worked, functioned, in the last half year. We have a growing base of customers there. There's a lot of... Yeah, we have a great product and a lot of organizers and so specifically, museums, events, attraction parks want to buy our software, and it's, actually, it's more... Yeah, there's so much growth for as possible there. It's more a question of delivering the features their clients want than it's a question if the market is there. The market is there, and we are growing, again, growing very fast there.
Also, I think if you look at margins, they are quite okay, around 90%, gross margin. It's a, it's a good business to be in.
Thank you very much, Jeroen. Thank you for your questions, Wim. We move on now to Kepler Cheuvreux. Tim Eilers. Tim, please go ahead.
Yes, good morning, everyone. Thanks for taking my questions. One question regarding your working capital, and your free cash flow development in general. Could you maybe elaborate a bit on the drivers behind your working capital? We've seen that, the payables, decreased quite a bit, while receivables also decreased. There's some offsetting effects. What can we expect going forward, there?
Yes. Okay, thank you for the question. Yes, let me elaborate a little bit. I think the first thing to keep in mind is that we basically have two sides of the working capital here. One is that relates to sort of the restricted cash, yeah? Where we collect on behalf of merchants and then pay out to merchants, that amount, that doesn't belong to us. We're sort of just a short-term custodian, if you like, and then we pass it on. Then there's our own operating working capital that we actively manage. Splitting those two, on the...
Let's say, let's start with the restricted one, There we've seen indeed a significant step down in the payables position, that is immediately related to the cash position, because the cash that we hold is immediately also payable to the merchants who we owe that cash to. That's a matter of, first of all, the volumes were higher in towards the end of Q4 last year as mostly as a result of a lot of Duo transactions. People wanted to finalize their settle their study debt, college debt. There was a high volume there.
We collected a lot yeah, there's the payment sequence. That meant we actually held a higher cash balance. As a result, also a higher payables balance. That's sort of settled right now to, yeah, where we are today. It's not something we actively manage, but we just collect it, and then a week or so later, we just pay it out. That's one significant step down in terms of the accounts payable position, if you look at it on a consolidated level. In our own working capital drivers and positions, then obviously on the accounts receivable part, there's, well, there's never an issue how fast we're invoicing at, because we always invoice either directly or we invoice ahead of time.
The more SaaS business we do, the more we invoice ahead of time, and the sooner we sort of collect. That's one. The other one, where we actually made a significant step forward, is our trade receivable positions with our customers.
... yeah, we've resolved a lot of, let's say, friction in getting payments in on time. Yeah, certain customers in certain regions have very specific requirements before they actually will make the payment. Yeah, we're sort of working very closely and have been working with them very closely to facilitate that and settle on a process that works for both ends. As a result, we've seen a sizable improvement there in our accounts receivable position. Our trade receivable position on the other side was a little bit lower. That's a little bit timing, so when the payouts exactly are timed, but also because our overall cost level was a bit lower than towards the end of 2024, both in cost, but also in...
2022, sorry, Q4 2022, both in cost of sale, but also at lower OpEx, 2% also, make sure that we have a lower cost base. As a result, also our trade receivable position is lower than by the end of 2022.
Okay, clear. Any outlook regarding the working capital going forward, or maybe what you would highlight within your cash flow that's important to come? You're guiding for the positive free cash flow in H2 of 2024. Anything in between that you would guide for or would you expect?
No, I mean, the main driver of our cash flow outlook is obviously our EBITDA performance. Yeah, if we, if we deliver on our EBITDA performance as we expect, then, yeah, positive cash flow is not far out. We also, as you see, are managing actively our capital expenditure, which is not a big item, between EBITDA and our cash flow generation. Also there, yeah, we made a lot of investments in tooling, in licenses, but also in a lot of hardware and servers around the world. We believe we can do with a lower level structurally going forward. In that sense, we expect CapEx also to come in below what we've seen in recent years. Yeah, those elements are the main drivers.
On top of that, our effort that we started in the H2 of 2022 to improve our working capital is always work in progress. We keep working with both our customers, but also with our vendors. The more SaaS business that we do, obviously, the more upfront payments we'll be able to collect. That's also a driver of working capital improvement. Yeah, I think the main one is EBITDA performance and lowering the CapEx. On top of that, yeah, we are continuously working to optimize our working capital also going forward.
Okay, clear. Thanks very much. Maybe a bit of an odd question, but if I look at your geographical split and where you generate your revenues, what struck my eyes was that suddenly you report for the Seychelles. Also if I look at your EMEA performance, for example, in CPaaS, we see a decline in Netherlands, but overall quite a significant improvement or growth in CPaaS for EMEA, I guess partly driven by the Seychelles. Can you maybe elaborate a bit what the business in the Seychelles is from, and why it grew or what new deal you struck there, maybe?
Yeah, sure. Obviously, we have customers around the world, and what basically happened in the last year is that on top of the regular business that we, that we have, one of our larger customers moved their contracting entity to the Seychelles. For us, we report here based on where the entity that we contract with is located. As a result, that part of our business grew to more than 10%. That's basically what we do, but it's just a very large global business that happens to have moved their contracting entity for us to the Seychelles.
On top of that, I mean, we have. It's not necessarily always a very stable business in terms of sometimes some customers do more business with us in a quarter, sometimes a little bit less. Also, the push that we have in terms of profitability puts, makes that mix a little bit more fluent. By and large, what we see is that we are pretty happy with the growth of our business around the world and also the diversity that we try to achieve outside of our traditional home country, had to be a more diverse company, and we're making progress there.
Okay, cool. Thanks. Maybe just a follow-up question regarding the geographical split? In the Americas, for example, revenues dropped quite a bit. Is that also due to the volatility within CPaaS, or is that ongoing trend that you witnessed there?
It's exactly that.
Okay.
It is related to volatility that may be temporary, but again, depends very much on, yeah, where we believe, we can find the most attractive business, and that's what we're going after.
Okay, clear. Thanks. One last question to wrap it up, regarding the AI tool. I guess you haven't seen any impact there on the sales business yet. Do you expect that to materialize in the H2 or maybe 2024 going forward?
Yeah, I can answer that. Yes, it is of course a very attractive proposition for our clients and they really need to buy them. As I explained it, just explained it, and it's really to integrate it. It helps us also to, nay, to build pipeline but with sales, to, to increase fees to clients, to retain customers, to renew them at a higher level, so there are a lot of advantages within SaaS to add this generative AI opportunities and we also have a whole roadmap in front of us with new developers who are also working on it at the moment. So it really
It really makes our offering more compelling, and that, of course, will materialize by our expectations in also more revenue and margin for SaaS. What we already see is that it adds value for our clients. It makes our clients more successful in answering better the question to the client, understanding the customers better in the future, also speaking more the sound of the customers, that they really have the right denomination. There's so many opportunities now, which we have with AI, which were just not possible half year ago or a year ago, that it just makes our product more compelling and our clients more successful.
As we have always seen in the past, if we add more value for our clients, then it will also translate into more revenue and margin for CM.com.
Okay. Is that maybe an offering within SaaS that's a bit more resilient, given the current changing circumstances and the reluctance to invest in general? AI is maybe something that gives some tailwinds in that field.
Yeah, sure. Yeah, yeah. Especially what I just said about contact centers. Imagine you have a contact center you have to manage with a lot of people, you get more and more questions coming in, and you want to answer all these questions because you want to maintain your clients, consumers as a brand. It's hard to find people to man a contact center more than ever before. If you then can automate these questions by AI listening in to the questions, analyzing it, advising the agents, but also taking over conversations from the agents, you can just run a contact center with less and less employees as a client of CM.com.
That is, of course, as a direct business value, if you have a contact center of 40 people, and now you can manage with 30 people. If you add our software, the reduction in cost for our clients is so substantial that they see so value in our software. If you can translate that value into our pricing, then our revenue and margins will go up. Yeah, for us, it's very attractive, but it is so successful because we integrate it in our platform. We really believe in integrated platform where our clients can do the service, they can do the sales, they can do the marketing. It's also integrated on a one data source that makes it so efficient and so compelling for our clients.
The downside may be for integrating all the features in one platform is that it's harder for us, of course, to really disclose per business line, as if AI was like a separate business line. The total portfolio of SaaS will grow, as I believe, through these new technologies and this new added value. I don't expect you will see a separate business line anytime soon with AI. It is fully integrated in our SaaS portfolio.
Okay. All right, thanks a lot.
Your questions. We have a follow-up question from Wim Gille from ABN AMRO. Please, Wim, go ahead.
Just some bookkeeping questions. First, as a follow-up on the Seychelles discussion, is this one client moving their headquarters to the Seychelles or their billing entity to the Seychelles, and hence you are now exceeding the 10% threshold? Is the complete EUR 18 million related to one client only? That would be the first question. Maybe as a follow-up, how big is the biggest client for CM.com as percentage of total revenues? I think that's the first one. Second, follow-up question would be on the gross profit growth in messaging. You kind of already hinted towards it, but obviously you did a great job there.
Is this sustainable, or would you argue that competitive pressure would actually force you to kind of be more competitive going forward again, and hence the gross profit margin in the CPaaS business go down again? The last question, as a follow-up, is looking at the headcount. Obviously, if the business starts to show significant growth again, the answer to this question might change. If you look at the current size of the business, what would be the appropriate headcount, and when would you basically start to contemplate and start to replace the natural attrition that you have in the business?
Jeroen, would you like to take these questions?
Yes. yeah, I mean, obviously, we're not disclosing information on individual customer level.
... yeah, that's a little bit difficult, but what I can say is that the change that triggered the fact that we are now specifically disclosing Seychelles is, as I mentioned, the changing of billing entity of a individual customer to that location, which brought us over the threshold. That's one. The other one is the gross profit growth in messaging, and there's gross profit growth, and there's gross margin growth, of course, as two different elements. I think we are putting a lot of effort right now into, yeah, bringing that up quite successfully. That's good. Are we able to keep that up?
Yeah, probably we can for a bit, it's a volatile market, it's very hard to mention it straight away. What we do expect is that we are able to continue our gross profit in this sector and in the messaging, business going forward, which is what we have been quite successful in. Right now, we've practically fully replaced the whole contribution of the voice part, which is very high margin business that kind of went away. Yeah, we've been successful in that effort, and we will continue to push on that and are also comfortable that we're able to continue to grow gross profit in our SMS and our CPaaS business.
Then your question related to our appropriate headcount level and, yeah, what happens if we grow again, et cetera. Yeah, I think what we're doing right now is we're just sort of right-sizing our company to what fits us right now. We're now at a stage where we have a lot of data. We see where things are paying off, where things are not paying off that much. We have now the ability and also sort of the headroom to optimize our processes, eh? If you're growing by 60%, 70% a year, then everything goes into making that happen. Right now, at the current growth rates that we have, we also have the room to optimize the processes that we have.
We have implemented a lot of tooling in the last year, as you know, that helps improvement of efficiency. People can do more, an individual can do more than they could do a year or a year and a half ago. Yeah, that gets us to an optimum size of our business based on where we are right now at this point in time. We don't have a specific target headcount to announce here, but yeah, we do expect costs to come down more, also headcount to come down a bit more, but certainly costs to come down quite significantly, yeah. The outlook that we provided is that we expect OPEX in EUR values, excluding the restructuring cost, to be at minus 10% versus last year.
Well, if you know that we're at -2% for the H1 of the year, that really means a rapid acceleration in year-over-year cost decline. That's, yeah, what we have plans for, which we are executing on and making very good progress on. That's why we're also comfortable making the statements on EBITDA. When we're done with doing that and we're growing our business, then, yeah, very specifically in pockets where we want to invest in growth, we will continue to invest in growth, because ultimately, we are a growth company. We are focused on, yeah, growing our business bigger. Yeah, now it's the time to sort of right-size first, and then we continue.
Thank you for your questions, Wim. If there are no further follow-up questions, this would conclude our call. We would like to thank you for attending this webcast and for all your questions. Our next release will be the Q3 trading update, which will be released on the 26th of October 2023. There will be no webcast for that release. For all other details and our full financial calendar, please visit our investor relations website on CM.com. Operator, you may now end this call. Thank you all.