Good day. Welcome to Edenred conference call. My name is Priscilla. I'll be your coordinator for today's event. Please note this call is being recorded. Your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Bertrand Dumazy, the CEO, as well as Julien Tanguy, the CFO, to begin today's conference. Please go ahead, sir. Thank you.
Good morning, everybody. Thank you for joining us for the Reward Gateway acquisition by Edenred. I propose that we move to page two of the presentation and we start with a fast executive summary. What is it about? It's about the acquisition of 100% of Reward Gateway, which is a leading employee engagement platform. This acquisition is made for an amount of GBP 1.1 billion. What kind of platform are we talking about? It's a SaaS platform offering a full suite of employee engagement platform, mainly in 4 modules, employee savings, reward and recognition, well-being and social animation. This platform is fast-growing, is highly profitable and cash generative, and therefore we expect to get some revenue of GBP 95 million in 2023, and GBP 45 million of EBITDA before synergies.
In fact, this transaction is giving Edenred access to large, under-penetrated and non-regulated employee engagement markets. Thanks to the market-leading position of Reward Gateway in U.K. and Australia, but also a presence in the U.S. This strategic acquisition is fully aligned with Edenred Beyond strategy, the strategy we explained to the markets in October of 2022. It's aligned because it's an acceleration in our mission to be the most trusted global employee benefits and engagement platform. It's an acquisition that has strong geographical and business complementarity, and it's an acquisition that match perfectly well the Edenred criteria. Things that we like. First of all, world-class asset quality. When we say asset at Edenred, we are looking at the quality of the employees, the technology and the clients on large under-penetrated markets and with the ability to generate sustainable and profitable growth.
Please note that 90% of the revenue is generated by Reward Gateway on leading positions. That's another criteria that we like very much and value at Edenred. This acquisition is a unique opportunity to extend our compelling employee benefits offer, and we're gonna use Reward Gateway as a springboard to extend the employee benefits offer from Edenred into the fully fledged employee benefits and engagement market. It's gonna give us a strong potential to scale Reward Gateway outside of its current geographical footprint. Our targets on continental Europe are mainly, and to start, Belgium, France, Germany and Italy, Romania and Spain. Finally, this transaction is value creative, will be accretive and strongly on a standalone basis, and will provide significant upside from synergies on the top of the standalone position.
If we now go to the details, and I propose that we go to page four. What is Reward Gateway? Reward Gateway has been founded in 2006, is serving more than 8 million users via 4,000 customers, and employs 680 employees. Reward Gateway is number one of engagement platform in U.K. and Australia. The breakdown of the revenue in the U.K. is 68%, in Australia 20%, and in the U.S. 12%. If we look at the economics of Reward Gateway, that's the kind of economics we value at Edenred. First of all, growth. The revenue growth for the last three years has been 31% every year. At Edenred we love sustainable and profitable growth. When we look at the EBITDA, the EBITDA for the last three years has been growing at 43% per year.
As you know, cash is king. The free cash flow generation has been growing at 45% for the last three years as well. If we move to page five, what is the value proposition of Reward Gateway? In fact, as I said before, it's eight different modules that are, you know, regrouped on a single platform, proposing a full suite of integrated services. What is interesting is out of, you know, these eight module belonging to five buckets, benefits management, employee savings, reward and recognition, well-being and social animation. What is interesting to notice is when we look at the dynamic of the client portfolio, there is a high cross-selling between those 8 complementary modules because more than 10% of Reward Gateway clients are purchasing an additional module each year.
Another way to say it, I am a client of Reward Gateway. Start with one module, and then I got addicted to the Reward Gateway benefits. I go for another module, and there are eight of them that are proposed to the client portfolio. If we are moving to page six, another thing that we like very much is, in fact, this engagement platform is a way to answer the needs derived from working world mutations. We talked a lot together about, you know, the shift towards custom-made value proposition, and we are able to answer to that thanks to the benefits management platform. There are some other consideration that are secular trends. First of all, growing consideration about purchasing power. Employee savings module is a way to answer to that.
There is also the drop in employees' engagement and the modules of reward and recognition, also the social animation is a way, in fact, to increase the employee engagement under different ways of working, especially the remote working. Finally, we see everywhere around the world rising physical and mental health considerations, and the module of well-being that is proposed by Reward Gateway platform is a way to answer to these additional secular trends. If we move to page seven, how do we serve the 8 million users around the world with Reward Gateway? In fact, the same way as we do at Edenred via a scalable and modular technological platform. As you can see, the platform orchestrates, you know, the services and the payment between the 8 million users, the 2,000 merchants and the 4,000 corporate clients.
The module are proposed and they communicate with each other thanks to the smart hub and some API. You have some, obviously some integration within the HRIS of the clients, and you have a single sign-on. The good news also is when we look at the NPS, because customer satisfaction at the end of the day is what matters, the customer satisfaction of Reward Gateway is super high, with an NPS that has been measured at about 40, which is a world-class performance. The other thing is, this platform is operating on large addressable markets. Page eight.
Here you have a summary of the market in the U.K., Australia and U.S., and you see that in terms of penetration, it's very similar to what we have on the other product lines of Edenred, i.e., vastly under-penetrated market because the maximum is in the U.S. with 33%. The other thing is, the fact that on two of the three markets, Reward Gateway is the leader. In the U.K. with a market share of about 15%, in Australia with a market share of about 10%. The characteristics of the markets are markets that we like very much at Edenred. Large markets, under-penetrated market, fragmented market, growing market. We expect those markets to grow at 10%, at least per annum.
Another characteristic is the fact that those markets are not regulated, which is, you know, a good add-on on the Edenred portfolio of solutions. If we move to page nine and we look at the performance of the business, it's a strongly performing business. The revenue, as I said, has been growing at more than 30% on average per year for the last three years. As to the EBITDA, because we are huge believer in sustainable and profitable growth, the EBITDA has been growing very fast as well with healthy margin. An EBITDA margin that is over 45%. Cash is king. The generation of cash flow has been very strong for the last three years with a CAGR of more than 45%.
Finally, we do love having some visibility and one criteria is to look at the recurring revenue generation. What you need to know is, around 80% of the revenues of Reward Gateway are coming from SaaS fee model, i.e., you pay a fee to be member of the platform and to have access to the modules. It's a recurring revenue generation with, obviously, a high level of visibility. That's, you know, the best way to describe the Reward Gateway. Now let's move to the strategy part of this acquisition. This acquisition is a way to go Beyond. If we are moving to page 11, where do we stand today at Edenred? Sixty percent of our revenue is in food and meal benefits.
As you know, when you make the breakdown, 74% is in meal and food, and 26% is what we call Beyond food. We propose at Edenred the full suite of services made of gifting, mobility, remote working, culture pass, for example. We started the revolution of the Beyond food a few years ago. In fact, in employee savings, we had some initiative in the past. Maybe you remember, but we started in 2008 in the U.K. We bought ProwebCE in 2015, Easy Welfare in 2019 in Italy, Ekivita in Belgium in 2019, Benefit Online in Romania in 2019, and recently GOintegro, which is a mini Reward Gateway in Latin America. It means that today we have platforms in engagement and savings, more particularly live in 70 countries. If you move to page 13, you see where we operate today.
We operate at Edenred standalone in benefits management platform, but also in employee savings. Those two buckets belong to what we call employee benefits. Then you have employee engagement that are made of reward and recognition, well-being, and what we call social animation. If you move to page 14, you will see the unique combination between our two platforms. You see that Reward Gateway is from employee savings to social animation, and us, we are from benefits management platform to employee savings. It's a unique combination to be able to offer the largest suite of benefits and engagement to our large customer base. Remember, at Edenred, we have 1 million corporate clients, and we are serving 52 million users around the world.
If you are moving to the next page, which is the page 15, you will discover as well that ESG is embedded in both companies' DNA. You know that we have a program that we started in 2017, that we reinforced in a new cycle starting in 2023 around three pillars: IdealP eople, IdealP lanet, IdealP rogress. When you look at, you know, what Reward Gateway is aiming at, in fact, from a DNA point of view, we are very close to each other. Culture eats strategy for breakfast. I did not invent that. It's Michael Porter himself. Based on that, what is the plan? As you know, at Edenred, there is always a plan. If we move through page 17, it's a twofold plan.
The first part is the combination of our offers in the U.K., because we have an offer in the U.K. that is very complementary to the offer of Reward Gateway. We started that in 1982, and we employ 165 people in savings, benefit solution, reward and recognition, incentive and rewards. The combination will make, you know, a unique leader in the U.K., we gonna do that as early as possible, i.e., starting tomorrow. We will have a team that is gonna be dedicated to the combination. We have five tracks to ensure the successful combination, we will be super careful on the people and culture, on the product and tech, and on the operating model. We are absolutely convinced that we're gonna create a lot of value, first, on the U.K. market.
If we move to page 18, it's an example of the second part of the plan. The second part of the plan is the deployment of the Reward Gateway offers on our markets. We took the example in France and Germany for you to better understand what it means. If you look at the employee benefit and engagement market in France, for example, it's a market that represent about EUR 75 billion per year, the total business volume. Today, at Edenred, we address 20% of this market. When we are looking at the add-on coming from Reward Gateway, and you see it in savings and discount, well-being, reward and recognition, and engagement, plus childcare and holiday vouchers that are not dealt by Reward Gateway, this additional market is 5% more of the total benefits and engagement market.
It means that we're gonna increase, thanks to the add-on of Reward Gateway, our addressed market by 25%. This number is even higher in Germany. The total benefits and engagement market in Germany is EUR 45 billion. Today, we are addressing, in Germany, this market via meal voucher and gift Ticket Plus, which represent about 10% of the total market that we addressed. If you look at what's gonna be brought by Reward Gateway, in fact, the total addressed market will move from 10% to 25%. It means that we're gonna increase our addressed market by 150%. Page 19, if we look in a nutshell at what it means, part one of the plan is the U.K. combination. What does it mean in terms of synergy?
It means, you know, combining both business, mutualize the tech platform, getting some economies of scale on variable costs, because as you know, the platform business is a scale business. The bigger you are, the more profitable you are. We expect EUR 10 million, more than EUR 10 million of synergies within the next two years. The part two of the plan, it's not because it's part two that it's gonna be sequential. We're gonna do that in parallel. The extension of our value proposition and business synergies will be done in, first of all, six countries. Wave one, Belgium, France, Germany. Wave two, Italy, Romania, Spain. We will boost the cross-selling with the existing employers through the platform model and the extended value proposition.
That's something we are not too bad at, Edenred. Once again, around the world, we are serving 52 million clients that are, in fact, facing, via their employers, the same secular trends in terms of remote working, in terms of loyalty, in terms of well-being. Based on that, we're gonna create a unique digital environment for the users and for the employers. We will further improve our client retention through the platform solutions. In fact, it's gonna increase the cost to switch, and it's gonna provide a better experience overall for the employers and for the employees. Finally, we believe that we can have a strong monetization of the merchants for the inaudible because with our size we're gonna bring volume to the merchants, and it's a volume that we will be able to monetize.
When we look at what it means in terms of additional operating revenue within the next 5 years, the assessment leads to more than EUR 60 million five years from now due to the extension of our value proposition in six countries in continental Europe. Now that we explained the plan, what are the financial consideration. I propose that we move to page 21. First of all, the transaction will make the acquisition of 100% of the share capital from two private equity firms. The cash out is GBP 1.1 billion, and the financing of this cash out is gonna be made, first of all by a bridge financing, and then we're gonna refinance in the coming months on the debt capital market, this bridge financing.
EUR 300 million will come from our corporate cash. The deal is based on the 20x EV/ EBITDA 2023 multiple post-run rate synergies. it's a transaction that will be completed in the coming days, in fact, in the coming hours now. what does it mean in terms of financial profile post-transaction? It's gonna add EUR 51 million of additional EBITDA before synergies in full year 2023. This transaction is gonna be accretive in terms of free cash flow generation as from day one, because Reward Gateway is a negative working capital business. It's another characteristics, as you know, that we like very much at Edenred. positive free cash flow day one, accretive transaction. From an EPS point of view, it's gonna be an accretive transaction as from 2024.
As you know, we are now A-/S table with the S&P rating. We will keep a significant post-transaction M&A firepower. Why? Because at Edenred we have a cash flow generation that is high. You remember at the Capital Markets Day we said we have a firepower of about EUR 2 billion. Remember that every year we are generating around EUR 1 billion additional of free cash flow. It means that after this transaction, the firepower in terms of M&A is gonna stay super strong at Edenred. To conclude, page 23, what are the key takeaways? You understand the enthusiasm we have, Julien, myself, the entire team behind this acquisition. Yes, we acquire a leading employee engagement platform with leading position in the U.K. and Australia and a presence in the U.S.
For us it's a critical milestone in accelerating the Beyond vision that we shared with you at the Capital Markets Day seven months ago. Yes, Reward Gateway is a SaaS platform, fully scalable, which can be rolled over in some of our core geographies. We will capture short-term synergies in technology platform utilization, economies of scale, but as well medium-term synergies, thanks to the international roll-out in six countries in Europe. Finally, yes, we acquire a strong performer, with characteristics that we like, i.e., high double-digit top line growth, high EBIT margin, and good generation of free cash flow. For us, it's a value-creative transaction that's gonna contribute to generate sustainable and profitable growth, not only as a business, but also as a reprofiling of Edenred, with the ability to provide more and more SaaS servicing to our large customer base.
We are on our way to be the most trusted global employee benefits and engagement platform. Thanks a lot to your attention. Julien and myself, we are here for you to answer any question you may have.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. We will take our first question from Justin Forsythe from Credit Suisse. Please go ahead. Your line is open. Justin, your line is open. Please go ahead. It appears there is no request from Justin.
I propose that we move to the second question, and then we will go back to Justin.
Sure. We'll take our next question from Ed Young from Morgan Stanley. Please go ahead. Your line is open.
Good morning, two questions please. First of all, on the growth, I mean, you laid out very clearly that 80% of revenue is essentially recurring as on the SaaS model. If I look at the revenue growth that the business has done over the last few years, it's been quite lumpy. It's been as low as sort of 10% or 13% or as high as sort of 40%. Could you help square those two? Is that new geographical entry or is there something else there that means the revenue has perhaps been a bit more lumpy than we might expect from a recurring revenue model? A similar question on the EBITDA margin.
Margins obviously gone up into the 40s and has been around that level, so slightly above the group, but you know, obviously a very profitable level. Do you, do you anticipate that being at around the same level or being able to drive further operational gearing to drive that higher or like CSI, might you choose to reinvest some of that or even more than the synergies to drive stronger growth still? Can you just maybe give your mindset around the EBITDA margin profile? Thank you.
Okay, Ed, thank you for your question. I will start with the second one. First of all, you know that it's always a couple between the growth and the EBITDA margin. In the case of Reward Gateway, the couple is about, you know, 75%, i.e., you have an EBITDA margin that is at 45%, and you have a growth that is more than 30% of the revenue. Can we continue like that? Yes. We think that the growth will continue to be, you know, to be high and strong double digits. As to the EBITDA margin, we don't see any reason why it should not continue like that.
Having said that, as usual, if I need to leave one or two points of EBITDA margin on the table to accelerate the growth, we will do it because our ambition here is to be much faster than the market. We want to address, you know, those markets. We want to be the first one with a full suite from benefit to engagement. Starting today, we are the first one to do that. So we want to take as much as we can, so everything is gonna be put on growth knowing that we start with a healthy margin. To make a long story short, the couple of margin growth is a strong couple.
We expect that to continue, but if we can grow even further and faster, we will not be shy to, you know, to reinvest a little bit of this healthy margin to accelerate the growth. As to, you know, the revenue growth and the recurring revenue, in fact, you have many drivers to explain the growth of the revenue each year by about 31%. First of all, in fact, you have the addition of new modules. The access to new modules creates on, you know, the customer base, additional revenue that are complementary to the SaaS fee because we said 80% is a SaaS fee, but 20% is coming from, you know, transaction revenue, for example, led by new modules in reward and recognition, for example.
You have, what we call the same-store sales, i.e. same client generating more revenue because they are using more and more the additional offers of Reward Gateway. That's one thing. The other thing is the development of Reward Gateway in the U.S. It means that it's additional revenue that did not exist before. That's the second reason why we're able to generate this revenue growth, even if 80% is recurring revenue, coming from the SaaS fee. As to the SaaS fee, it's not because it's a SaaS fee that the fee does not evolve. You can follow the inflation or more, for example. That's one thing. Due to the fact that we bring access to more modules, even if the people are not paying for additional modules, but the simple fact that you have the option is another way to work on your SaaS fee.
To make a long story short, yes, it's surprising to see a revenue growth of 31% with 80% of the revenue that is based on SaaS fee. New geographies, new modules, and the ability to monetize more via the SaaS fee explains that. Then you have one last element, which is probably the major driver, which is we are operating on largely under-penetrating market. It's a penetration game. Penetration game with new clients. Obviously those new clients under SaaS fee are contributed to the growth of the revenue.
Thank you. Just in terms of the lumpiness of the revenue, I understand that the drivers there's quite a few different ones there. Just in terms of the lumpiness, could you perhaps remind us when the business entered the U.S. or was there anything particular that drove the very strong growth 2021, 2022 and 2022, 2023?
Yes.
Compared to the other years? Is that helpful? Thank you.
In fact, Julien, the acceleration in the U.S. of Reward Gateway started in 2021 actually.
Yes, in 2021. Then on top of that, if we look at the revenue growth, it's, it also comes from the transactions that are done on the platform and that are coming from the employee savings business. You know, employee savings is a business where users can spend their own money and get discounts from retailers and e-commerce platforms. The growth of this business has been strong and has been pushed by inflation and the cost of living increase. This is another explanation of the revenue growth of the last two to three years.
Thank you.
Thank you, Ed.
Thanks. Thank you. We'll move on with our next participant, Simon Lechipre from Stifel. Please go ahead. Your line is open.
Yes, good morning. Three questions, please. First of all, so we're looking to the U.S., so it's 10% of revenue only at this stage, but, I mean, what are your ambitions there? How large are the opportunities, and what is the competitive landscape in this market? Secondly, what would you say are the main differences of the offer of Reward Gateway compared to your existing employee engagement platform business? Lastly, on the revenue synergies, what is the phasing you expect within the next five years? I mean, how much of the EUR 50+ million should come in the next, let's say, two to three years? Thank you.
Hello, Simon. Thank you for your three questions. First of all, if we start with the U.S. Yes, in the U.S., the revenue right now is 12%. The bias of Reward Gateway in the U.S. is on well-being. What is our ambition? First of all, as we said, the U.S. market is a super large market. It's the first market, you know, in the world. It's still an under-penetrated market. Based on that, our ambition is high. Having said that, there are some strong competitors, in fact, in the U.S. Strong competitor on the market of, let's say, GBP 4.5 billion. We're gonna do it the Edenred way, but now I should say the Edenred Reward Gateway way, i.e., step by step, inch by inch.
We don't want to over-burn cash in the U.S. because we know by experience that it's a market on which you need to be patient, on which you need to craft your own niche. Our job is not to go head to head versus, you know, large competitors like O.C. Tanner, that you have, you know, in the U.S. What we want to build in the U.S. is a healthy niche to start with. To make a long story short, large market, under-penetrated market, first market of the world, it's the U.S. market. We have the beginning of good assets representing 12%. We're gonna do it the Edenred way, which is inch by inch, step by step, to craft our own niche because there is room in this market.
There is room, i.e., we want to avoid head- to- head competition with, you know, large national players. Your second question is about the Reward Gateway size versus the Edenred today size. In fact—
Sorry, it's about the offers. What is the difference?
Well, go for it. Go for it, Julio.
Indeed, when you look at what we are proposing to our clients, we are more on a employee savings modules, as we explained during the presentation. The number of modules that Reward Gateway propose to the market is much larger. We have reward and recognition, we have social communication. We have many, many modules. This is why when you sign a client at Reward Gateway, you can start with one or two module, and then you can do upselling, proposing new modules to your clients. I think this is what they are doing today, and this is what we are going to do with the platform.
Then, thanks to the number of modules we have, we'll have the opportunity to adapt the platform and the offer to the different markets we are going to enter. When we say that we're gonna take this platform and deploy it in six European countries, it means that we will use all those modules using the right ones to have the right offer that has the market. So this is the big difference between our platform and the Reward Gateway platform.
Okay. Thank you, Julien. As to the revenue synergies, which was your third question. Things to take into account is the deployment of Reward Gateway on continental Europe in six countries is a top priority. We have a little bit of work to do. The first one is an integration work, because we have some bits and pieces in both countries, so we need to work on the combination of our technological assets. Based on that, we need to start work that we like very much, which is working on our install base of clients to convert them to a larger integrated offer. That's why when we are saying, in fact, more than EUR 50 million of additional revenue thanks to Reward Gateway, we gave this objective out of five years.
It's too early to tell you that year one is gonna be 10%, year two, 20%. You have to let us a little bit more time to go deeper into the plan. The work starts today.
Okay, thank you. Just to follow up on the U.S., you mentioned some niche markets. Should we think particularly of the SME segment, for example?
Yeah, that's one way to look at it is per client. If you look today at the segmentation, one third of the client of Reward Gateway is large, 1/3 is mid, 1/3 is SME. Obviously, SME, that's something we will look at very carefully. There's another way to look at it, is when we say United States of America, it's state by state. Maybe you don't need to be in every state to start with, from a commercial point of view. There are many ways. When I say niche, maybe niche is too restrictive. What I want to say is, at Edenred we are laser-sharp on focusing. We don't want to blast the entire market day one, every state, every product lines on everything.
We are much more in, as I said, inch by inch, step by step, but our ambition is large in the U.S., but we don't want to overpromise for now.
Thank you.
Thank you. We'll move on with our next question from André Juillard from Deutsche Bank. Please go ahead. Your line is open.
Good morning and congratulations for this acquisition. A few questions if I may. First one is about management, as the structure of Reward Gateway was privately owned company. Is the management staying on board or not? So appreciate if you can give us some more detail about that. The refinancing, could you also give us some more detail about the timing and the way you are planning to do that? Last question about pricing power. Do you have the feeling that you have the same kind of pricing power that you have on your existing products on this new platform or not?
Are the two platforms, I mean on the technological point of view, really complementary, and how are you going to integrate them? Thank you.
André, thank you for your four questions. I propose to take question one and three, then refinancing for Julien, and then we'll see we still alive for question four between Julien and myself. You know, we have a lot of energy, so we should be okay. Yes, the management of Reward Gateway is gonna stay fully on board. That was a key element for us because when you look at the economic performance of Reward Gateway, what they did is absolutely fantastic. The track record they have is excellent. The intrinsic quality of the people we met, we have been super impressed. As I said, it's largely under-penetrated high growth market, so we need all, you know, hands on deck to accelerate the growth of our benefits and engagement platform.
We need everybody from Reward Gateway to overcome the challenges with us. We have been very impressed by the quality and the years of experience of, you know, the management team. All of them will be part of the adventure, and we discussed a lot about this concept of the next journey. What you need to know is for the management of Reward Gateway, all the feedbacks and conversation we got was we love the idea that being part of the Edenred family we would be able to accelerate. Because when you have, you know, a venture capitalist, there are many advantages and there are a few drawbacks. One of the drawback is you have limited resources in terms of geographical development.
For them, accelerating on continental Europe was totally out of range based on their structure of capital. Now that they are part of Edenred, they are part of the Edenred family and not part of the private equity world, it's gonna be much easier. Yes, the management team and all Reward Gateway people will be all hands on deck to accelerate the development and the deployment. Your second question is around the pricing power. Do we think that we're gonna have the same pricing power? The answer is yes.
First of all, we have a little bit of experience because we are doing that in certain countries at lower scale, but we are doing it, and we see that our solutions provide a lot of value added for the employers and for the employees. In fact, when you look at the secular trends as to the need for higher purchasing power for the employees, the need for the employers to find attractive offer to recruit but also to retain their employees, the need to have, you know, some help from the employers as to the well-being of the employees. When you look at those secular trends, if you're able to answer to them with a unique platform and a full suite of services under the same instance, you bring a lot of value to the employers and the employees.
The innovation is gonna drive the pricing power. That's the first thing. The second thing is the leadership position drives a little bit the pricing power as well. As we said, it's a super fragmented market. In this fragmented market, we are number one in the U.K. and in Australia, nascent in the U.S., then serving 52 million users around the world, it could be a blast in terms of, in terms of deploying. The scale of Edenred is gonna drive as well as the pricing power. To your third question, yes, based on those elements, we will have a strong pricing power, innovation and scale. As to the refinancing, Julien.
Good morning, André . Regarding the refinancing, well, we plan to do it in the coming months, as Bertrand said. We plan to issue two bonds for a total of around EUR 1 billion. We work on two different maturities. One short-term maturity that could be between three to four years and another one, which will be a longer maturity, probably seven to nine years. When we look at the market conditions today, it means that we should be able to refinance the acquisition with an average interest rate of 3.5% if we take into account the market condition that we have today and our rating.
Okay. The fourth question is the technological integration. Here we could discuss about that for a long time, André, main principles are the following one. First of all, during our due diligence, we are looking at three major areas, the quality of the people, so the management team and the employees, the quality of the client portfolio and the quality of the technology. We did that extensively with our internal experts, but we are always smarter with, you know, a second pair of eyes. That's why we use as well the same technological partners each time we contemplate an acquisition. We did that. To make a long story short, what we like about the platform of Reward Gateway is, first of all, it's a single instant platform that is deployed worldwide.
It's the same platform that is used in the three countries to deploy the different modules. We like the high level of security because cybersecurity is something that is super key for us. We have a secure platform. We have a worldwide platform under a single instance. We have a scalable and robust platform. We have a platform on the cloud, and we have a platform with some API modules, which is the way we organize our platform at Edenred. Technological integration is never easy, but you have bases that are stronger than some other ones. In the case of Reward Gateway, the technological base is strong.
Very clear. Thank you very much.
Thank you, André.
Thank you. We'll move on to our next participant, Justin Forsythe from Credit Suisse. Please go ahead. Your line is open.
Justin, welcome back.
Can you hear me this time?
Yeah.
Can you hear me this time?
Yes.
Sorry, I dialed in from like five different numbers just to keep you guys guessing. No, just had a technical difficulty. Thank you for your patience and good to talk to you again, Bertrand and Julien. And congrats on the acquisition. Just a couple here from me. I guess I wanted to ask first a little bit about priorities in M&A. I mean, you noted in the past your M&A firepower that you have, and this certainly doesn't take up all of it that you've had over the or will have over the acquisition timeline that you gave, the 2022-2025 timeline. I mean, if you just look at the size of the TAM that you called out in the slides, I think we were talking single-digit billions in aggregate plus other countries.
Maybe you're into the tens of billions. I think you called out a TAM for the food and meal, kind of other extended of EUR 700 billion . I just wondered if you could kind of square that and your priorities in the other segment, operating segments you have, such as, you know, the corporate payments division and the fleet mobility. Also if that TAM is apples to apples, meaning I know you talked about this company earning SaaS revenue. I think your TAM was on issue volume. I was just curious if those are actually comparable numbers. Then I was just wondering, and I do apologize, I dropped off for a second, so I might have missed a portion of this response.
If you just could talk through the growth algo going forward of this company. I mean, I get your point around lumpiness and synergies and things like that was talked through. Just wondering if I could ask it in a bit of a different way. You know, to me it sounds like the algo is something like upsells plus new clients plus synergies on top of that. It seems like given this is a share leading platform, maybe a lot of that will be comprised of upsell to begin, and then the longer tail might be new. Maybe you could just kind of weight those different pieces and what the longer-term growth trajectory is, if that wasn't already mentioned. Thank you.
Justin, thank you for your question. If I start with, you know, the priorities in M&A. First element is, we are a highly cash generative company, so we have some M&A firepower. It's not because we have M&A firepower that we use it on low quality assets. You saw that for the last two to three years, we didn't spend a lot. Last year we spent something around EUR 150 million. We want to keep, absolutely our, let's say, strategy discipline and financial discipline. I think Reward Gateway is a good example of this financial and strategy discipline. Why we decided to make it happen? First of all, it was the right time for, you know, the two private equity firms to sell.
We didn't want to miss that. Secondly, we love the fact that Reward Gateway is operating on large, under-penetrated, growing at double- digit, unregulated markets. That's something we like. The other thing we like is totally complementary to what we are doing today, as explained, you know, in our Beyond strategy. In fact, the third thing we like is growth, but sustainable and profitable growth. Here we have a couple of margin, 45% growth, about 30%, between 20% and 30%, depending on the year, and free cash flow positive. Cash is king. I think Reward Gateway is a good example of the perfect match with Edenred, i.e., at the heart of our strategy, first thing. Second thing, the fundamentals in terms of market, but also track record in terms of financial performance is what we like.
From a cultural point of view, it's gonna be easy to combine because we believe in the same thing, both management teams. It's probably much more difficult when you buy companies that have been burning cash for years and years and years and have never been in, you know, positive territory of EBITDA. What are our priorities in M&A? Priorities did not change since, you know, our Capital Markets Day. First of all, on employee benefits, we want to consolidate the core. That's the first thing. The second thing is we want to extend Beyond, and Reward Gateway is in the Beyond, complementary to the core. We want to expand in new territories, and in fact, geographical territory, for example, that's the case of Reward Gateway, for example, for us in the U.S. and in Australia.
Reward Gateway is a good example of our M&A strategy on employee benefits. Your question is: what about fleet and mobility and corporate payments? In fact, the answer is exactly the same. The priority in fleet and mobility is to consolidate the core. Anything we can do to consolidate the core, it's priority number one. Priority number two is to extend Beyond. As you know, Beyond fuel for us is today 30% of our total revenue. We will continue to develop organically Beyond, but also via acquisition, if we have the opportunity to do so. In fact, it's exactly the same strategy on corporate payment. Look at what we did, in fact, last year with the acquisition of IPS. The acquisition of IPS is, in fact, a vertical integration.
It's, you know, the ability to propose to our clients the full suite of services, starting with, you know, the invoice automation and then the payment automation. The integration between the two and the cross-selling between the portfolio of the two. What you can see is our strategy is super clear. Consolidate the core because it's a scale business. Go Beyond by adjacencies, organically or also by acquisition. Last thing, which is about 10% of our total growth plan for the next three years is expand in new territories. That's, you know, how we see things. The good news is due to the fact that Edenred is growing fast, Edenred is generating a lot of cash. We are able to move towards and along that vision.
Remember, we said by 2030, we want to reach a total revenue of EUR 5 billion. Two additional will come from organic growth and one will come from acquisition. The Reward Gateway acquisition is part of this EUR 1 billion bucket. If you do the math of, you know, the current level of revenue of Reward Gateway, plus the synergies, plus the growth, you will see that it's a significant step towards the EUR 1 billion revenue, additional revenue coming from acquisition. You had a second question about the term, and maybe here I need the help of Julien, because your question was the comparison between issue volume and revenue.
I understood that the fact is that today our business is much oriented toward the issue volume management than in a fee revenue model. Yes, you're right, Justin. We have some businesses where we are managing fees revenue and where we have SaaS revenue. It's the case, for instance, in France, you know, we did an acquisition in 2017. It was ProwebCE. The French market is quite specific because, you know, in France, we have Works Council and Works Council needs to manage their accounting. ProwebCE is a business where we are serving our clients with a software, and we are charging them with a revenue fee.
What we see is that when we look at our ambition, moving from employee benefits to employee benefits and engagement, this ambition needs to means that we will have to manage platforms and software platforms to come to our clients with the proper offer, reward and recognition, well-being. When you do that, you propose software to your clients. Why are we doing that? We are doing that because first it's an expectation from the clients today. You know, the talent war is tough everywhere in the world. You need to attract talent. You need to retain people in your company, so you need to take care of your employees. To take care of your employees, you can use those modules, bringing well-being or reward and recognition solutions.
We will deploy this new model in six European countries for the next three years or five years. We will try to cross-sell this solution with our existing client base.
Maybe Julien, one additional element is the experience of Edenred in terms of integration.
Yeah.
If you think about what we have done with Embratec, we bought Embratec in 2016, June 2016. Fleet and mobility in Brazil. When you look at the performance of fleet and mobility, in fact, in Latin America, based on this detonator, which was, you know, the buyer from Embratec, we can say that we did pretty well. In terms of integrating the technology, the product and the people, we are not too bad at it, to say the least.
Yep. Okay. Got it. I guess did you guys catch that question around just the growth algo going forward, between kind of upsell, new clients and synergies, in the business you acquired?
Yeah. Here, Justin, it's slightly too early to answer to that question. It's going to be a mix of the three of them. If I summarize, today, without us, Reward Gateway on U.S., Australia and U.K. is able to grow at strong double-digit without us. When we look at once again, the secular trend, the commercial dynamics that they have, plus, you know, the product development and the innovation they bring to the market, they will continue to grow like that without us. That's the first thing, their own dynamic on their own market. There will be an acceleration thanks to our go-to-market on continental Europe. It's going to be the cross-selling on our installed base. Part of the sales on continental Europe will not come from our installed base.
Once again, even for Edenred employee benefits, we are largely under-penetrating markets. We will be fool to focus our sales effort on continental Europe only on Edenred clients. It's still, you know, a market that is not yet fully penetrated by Edenred. It's gonna be a combination of Edenred clients and new clients that are not Edenred clients. It's gonna be the combination of all those elements. That's another thing we like at Edenred, is to be able to play on different levels and then to choose where do we focus, what are the priorities. Obviously, when you look at it from a profitability point of view, you have a pecking order. Rule number one is sell more to the current clients. It's what is the most profitable.
The second priority is to sell to existing non-equipped customers, i.e, the Edenred customer base. Priority number three is to go after clients that are not equipped. Priority number four is to go after the clients that are equipped by a competitor. This priority is only number four. Because in fact it's much more costly to move one client from one competitor to another one. It's much more easy and profitable to maximize your base than to cross-sell on your base, and then to go after non-equipped people. It's gonna be a mix of all of that. The plan needs to be now written in detail country per country, because the dynamics of each country is slightly different as well.
Got it. Super helpful. Just Julien, just wanted to clarify on the TAM question. The hundred or the EUR 1 trillion in TAM for employee benefits, for instance. I mean, obviously, 'cause that's what it says in the CMD slide, it doesn't include SaaS fees. I guess it is a bit apples and oranges rather than apples to apples, the TAM that you're giving in the slides today. Is that a fair characterization based on what you just said?
Justin, because we have many other questions, we propose that, we call you back on this specific question. Cédric is gonna do that in a few minutes with you, if it's okay.
Yeah, sure.
Okay.
Thank you. Appreciate it.
Thank you.
Thanks again.
Thank you, Justin.
Thank you. Thank you. Moving forward, we limit the participants to ask only one question. We'll now take Sabrina Blanc from Société Générale. Please go ahead. Your line is open.
Hello, good morning. Sabrina speaking. Good morning, Bertrand. Good morning, Julien. I have two questions, if I may. The first one is regarding your target of Beyond, the food strategy. Just would like to understand how many now of your revenues will come from Beyond strategy in the employee benefit? Is this acquisition already in your target that you have provided at the time of the Capital Markets Day? My second question is regarding the from one part, the potential entry in Australia for you regarding your other revenues. You have not mentioned this country in your slide or almost very limited. From the other part, are you going to penetrate the German market?
Okay. Sabrina, thanks for your question. Beyond food in the Capital Markets Day, if I'm not mistaken, we said the proportion will be around 35%. With the acquisition of Reward Gateway, we are moving towards the 35%. We're gonna be between 30% and 35% depending on the year. It's a big step towards, you know, the Beyond strategy. Your third question was, Germany. Yes, Germany is obviously the leading economy of Europe. We are growing super fast in Germany, thanks to our Edenred City, but with Reward Gateway, and it's part, as I said, of wave 1 of deployment, we want to accelerate our development on Germany.
To say it another way, even if we are growing at strong double- digit, in Germany, we want to grow faster. Reward Gateway is gonna be one of the priority to accelerate in Germany. I'm not sure I understand the intermediate question.
It's about Australia, because the acquisition is involved in Australia, and as far as I remember, you are not based in this country, so just to understand the strategy behind that.
In fact, Sabrina, there is no strategy behind that. We were not in Australia. Thanks to Reward Gateway, we are now in Australia. We are happy about that because once again, if you look at the Australian market, it's in fact in terms of engagement, employee engagement, it's a large market. It's a market of EUR 0.6 billion per year. It's still under-penetrated. The penetration is only 26%, and it's fragmented, and we are number one with 10%. Now that we are in Australia, we're gonna accelerate because being number one with 10% is good, but being number one with 20% or 30% is even better. It's the entrance of Edenred on the Australian market.
Okay. Very fast, very clear. Thank you very much.
Thank you, Sabrina. It's 8.
Nine.
It's 9:35. Time flies. I propose that we stop here. First of all, thank you for on such a short notice for being with us today to understand the Reward Gateway acquisition by Edenred. Once again, you understood our enthusiasm. At Edenred, we do what we say, we say what we do. Seven months ago, we explained to you our strategy and especially the Beyond strategy. Yes, with the acquisition of Reward Gateway, we are making the acquisition of a leading employee engagement platform with a leading position in the U.K. and Australia and a presence in the U.S. Yes, with Reward Gateway, we are buying a SaaS platform that is fully scalable and that will be rolled over in some of our core geographies.
We love the ideas that we're gonna capture short-term synergies, but also medium-term revenue synergies on continental Europe. Finally, we always stick to our financial discipline and strategic discipline. Strategic, it's, you know, straight and right in our strategy. Financial discipline, we are buying a strong performer generating high double-digit top- line growth, high EBIT margin, and a good generation of free cash flow. Bear with us. Edenred is on its way to be more and more recognized as the most trusted global employee benefits and engagement platform. Thanks a lot for your attention and we wish you a very good day. Bye-bye.
Bye-bye.
Thank you for joining today's call. You may now disconnect. Have a nice day, everyone.