Thank you very much, and good afternoon, everyone, and good morning to our U.S. partners. Before we start this presentation, let's note that ACAMS is currently owned by Adtalem, a U.S.-listed company. We hence cannot interfere with their own financial communication, and we will focus on Wendel's own aggregates computations and forward-looking performance expectations in the following discussion. If I'm turning to slide 2 of our presentation, we announced this morning the signing of a binding commitment to acquire ACAMS, the Association of Certified Anti-Money Laundering Specialists, which is a global leader in training and certification for anti-money laundering and financial crimes prevention professionals. The company was founded roughly 20 years ago, and it has developed a unique knowledge of global financial crime activity and of the corresponding regulatory framework that help clients remain at the top and forefront of compliance regulations.
ACAMS' key certification, called CAMS, the Certified Anti-Money Laundering Specialist certification, is recognized as the gold standard by institutions, governments, and regulators worldwide. The company serves public and private sector organizations in over 175 countries, primarily banks and other financial institutions, with roughly 40% of its revenues derived from outside the U.S. Scott Liles, current ACAMS President and Managing Director, will become its CEO upon closing. I'm now turning to slide 3 to talk a bit more about this transaction and how we ended up here today. We did identify the company almost a year ago through a very proactive screening of potential acquisitions after the acquisitions of CPI, you remember back in 2019.
We did approach its owner and quickly realized that if it was to be put for sale, it would be in a larger group of assets. We then approached Colibri, who appeared to us as a natural parent company for the remainder of the financial service group of Adtalem. They had synergies and the financial means to be our partner. We therefore worked together as a consortium, diligencing the assets together and bidding together on various pieces of the group. There will be very limited relationship between ACAMS and its sister company that Colibri will acquire, Becker and OnCourse. The deal that we are announcing today will be financed with equity from Wendel, roughly $355 million, and from debt, with leverage slightly over 7x LTM September bank EBITDA of $21 million.
I am now turning to slide 4. As you can see here, this acquisition is a great example of the collection of leading companies we are building. You can see this company has tremendous growth, a pretty good resilience through the crisis and the recession. Its value creation is on the back of pretty strong ESG tailwinds. It's a leading business, and it has good barriers to entry. The long-term organic growth prospects seems pretty strong, and we have identified some profitability improvement opportunities as well. The cash flow generation is strong. We estimate that it's around 75%, and we feel the leverage we are putting on this acquisition is adequate. This is a controlling investment.
We are going to have roughly 98%-99% of the equity with an equity investment in the range we disclose to market. We believe we can uniquely contribute to the growth of these assets with our past experience in CPI, our global understanding of certification and compliance issue, and our ESG expertise. This acquisition is a perfect fit for what we want to do, and I'm happy to introduce you to our U.S. colleagues, our U.S. team colleagues, who are going to present the asset in more details. Thank you.
Thanks, David. Good afternoon, everyone. This is Adam Reinmann, CEO of Wendel North America. Just to build on what David was saying on slide 6, we tried to lay out what we think are sort of the core tenets of our investment thesis in ACAMS. This is really the global leader in what's a growing and an increasingly international market and a pretty sizable and increasingly dynamic sort of societal problem that's being faced by countries all over the world, regulators, law enforcement, and certainly the increasing regulatory burden on financial institutions.
As the world generally is increasingly trying to grapple with the changing face of financial crimes, ensuring strict adherence to regulatory standards that are consistent across financial institutions globally has been an important part of tackling that problem. ACAMS really serves as the de facto trade organization and trusted partner to people fighting that issue around the world. The industry has been growing quite consistently and globally for some time. It's been increasing in other areas as cryptocurrencies develop in other areas of threat start penetrating the issue globally, ACAMS services become more important.
The business provides basically the certification and professional training and through that really acts as sort of a global membership organization for this group around the world. It's an attractive business model, which is characterized not just by the recurring membership revenue model and the regulatory driven demand that I've mentioned, but an increasingly large install base, 20%+ EBITDA margins. The company's growth strategy is really focused on several levers, including the continued expansion internationally, entry into adjacent markets, including financial technology firms and other companies and industries increasingly subject to anti-money laundering and financial crime regulation. The introduction of new products to service some of the expanded threats.
We do think that, as is often the case when a division of larger companies are independently capitalized and resourced, that there'll be additional value creation levers that the management team at ACAMS can pursue as an independent business. It's worth noting as well that we do think there is earnings upside to the business, which, as the revenue generated from the company's trade show conferences rebounds after its decline during the temporary decline during the COVID period. I would mention as well two last things at the bottom.
One is the cash flow dynamics in this business, as David alluded to, are very strong, and particularly given the fact that the membership fees are collected in this business upfront, such that the cash earnings are actually better than the reported accounting earnings. The last point, obviously consistent with Wendel's values and our strategy, but also really critical and similar to the dynamics in CPI. The mission-oriented nature of the business, we think is a really critical element to what propels the people inside the organization and the global membership and also an important investment trend for us as well. On page five, rather. Sorry, on page five, we have the basic business model.
Just to simply say, we describe sort of the nature of the trade organization. The company derives its revenues from three primary sources. One is offering advanced certifications to compliance professionals and professionals in mostly in financial institutions fighting financial crime around the world. Their flagship certification is called the CAMS certification, which you can see detailed on the left. That's about 40% of the revenue during normalized times. The expanded membership contribute through annual fees that give them access to all of ACAMS programs, webinars, knowledge base, et cetera. That's about a third of the revenue.
The conferences which we mentioned, of which there are several around the world every year, generate about 20% of the company's revenue in more normalized times. With that, I'll turn it over to Harper, who can walk us through the next couple of slides.
Good afternoon or good morning, everyone. This is Harper Mates with Wendel North America. I'm on page 7 now. As Adam mentioned, the ACAMS business reported September LTM revenue of $83 million. While still part of Adtalem, we would expect under our ownership on a standalone basis, it would report about $18 million of EBITDA or 20%+ margins going forward. Our growth strategy for the business from this point forward is largely to continue what the company is already doing and benefit from increased regulation and spend in compliance services. That will include the introduction of new programs, which they've been doing historically, successfully, and finding new ways to enhance membership engagement. On page 8, we provide a view of the historical revenue growth through the pandemic period.
I think the key takeaway here is they've demonstrated their ability to grow, but for the impact of COVID and then quickly rebounded after that. In the bar chart we have here, we show about a 10.5% CAGR all in, including the impact of COVID on the conferences, or 14.5% excluding conferences. On page nine, a lot of this is public knowledge, but, you know, we really think there's a compelling opportunity ahead of ACAMS given the vast amounts of money being laundered each year, and the significant expense of non-compliance, both economically, reputationally, and on society. Then finally, on page ten, ACAMS has a really global diversified revenue base.
About 60% of revenue is outside of the U.S., and no single customer accounts for more than 6% of revenue. Their penetration across the world and across their client base is quite strong.
Thank you, Harper. It's David Darmon again. I'm moving now to slide 11. As you can guess, there is probably some work ahead of us to transition this company to a standalone business.
Part of this, back office functions are to be integrated in the global Adtalem. We do not expect any changes in the ACAMS leadership and organization to remain in place. We don't expect any disruption of the customer relationships or the member engagement either. While certain administrative service are going to be provided by Adtalem during the transition, we don't expect these transitions to last for over a year. Wendel has a track record in managing complex carve-outs. In the past, we worked on complex reorganizations when we acquired Editis or CSP Technologies or Tsebo, for instance, where we had to set up complete central functions when needed, and we've done that successfully. I'm now turning to slide 12 before opening up to questions.
Just to state the obvious, this is the type of business where we can both achieve good financial returns while having a positive impact on our society. ACAMS is a key player in fighting against potential funding of illegal activities such as terrorism, human trafficking, cyber, ransomware, and illegal wildlife trading. In developing this group, we are increasing the fight against those crimes, and that's a great combination that we really like, and we hope you share as well. I'm now opening the floor for questions.
Thank you. As a reminder, if you would like to ask a question over the phone, you need to press star and one on your telephone, and to withdraw your question, you can press the hash key. Once again, it's star and one to ask a question over the phone and then the hash key to cancel. You can also submit your questions via the web. Please stand by while we compile the Q&A roster. It'll take a few moments. We'll now take the first question. This is from the line of Joren Van Aken from Degroof Petercam. Please go ahead. Your line is open.
Hello, good afternoon. Thanks for taking my question. I've got a few. Just trying to understand a bit of the business model. If I understand correctly, basically a client comes and in the first year, for example, they go for the certification and the training, so they get in the 40% category of revenue. After that, they pay annual fees, so they arrive in the 30% membership segment. Now, the question basically was what is the retention rate that you get? How many people are actually convinced to move to the membership or are leaving? Are people just leaving after one year, let's say? Then maybe a question on the partners.
Do you have, for example, large partnerships or large companies that really choose ACAMS as a reference for those certifications? Maybe also a bit of information on what the closest competitor would be for the company. Thank you.
Regarding your question on large partners, and then I will leave the floor to my colleagues, Adam and Harper, on the business model, knowing that this is still part of a U.S.-listed company and we cannot disclose information which they have not disclosed in the past. The company obviously has some large partners, mainly, most of the largest financial institutions use ACAMS as a partner and as a service. That being said, none of them account for more than 6% of the company's revenue. The company deals with large and small institutions, but with no lack of diversification. I think your last question was about the closest comps, if I heard correctly.
Yes.
Yes.
Yes.
The closest competitor in the
Competi-
Competitor or listed company?
No, competitor.
Competitor.
Okay.
Competitor.
Maybe Adam and Harper, while answering on the business model, can give you the name of the two other large institutions as well.
Sure, happy to. The business model question that you described is relatively accurate. As David said, they approach the market both directly to customers, individuals, as well as through enterprises, and do have those large partnerships with enterprises as well. Depending on the type of customer, they incur revenue through membership certifications and then ongoing trainings, webinars, et cetera. Retention, I don't believe that is publicly reported, but I think you should expect logo retention to be very high and consistent with this type of business model that, you know, we see in CPI and others. On competitors, the largest competitor globally is a company called ICA, which is based in the U.K. There's also a very small player in the U.S. that's a division of another company, and that competitor is called ACFCS.
Harper, your line is broken up when you
Got cut out.
Yes. Your line was broken up when you mentioned the U.K. competitor.
I apologize. The U.K. competitor is a company called ICA, which is a division of Wilmington based in the U.K. There's also a very small competitor in the U.S., which is part of the business VettaFi, and the competitor's name is ACFCS.
Okay, very clear. Thank you very much.
Thank you. Move to the next question. This is from the line of
from ODDO BHF. Please go ahead.
Hello, gentlemen. Thank you very much for taking my question. I have a question on the business you are not acquiring, i.e., Becker Professional Education and OnCourse Learning. Why wasn't it of interest for you? That's my first question. My second question, you mentioned a lot of upside on the margins, EBITDA margin. Could you help us to quantify the kind of upside and where it would come from? We understand it would be from the conferences, but, are there also, let's say, a non-catch-up levers to improve the margin? Thank you very much.
The two assets you mentioned are addressing very different end users and have different content and different business models with different financial trajectories. They are very different in nature. We saw limited synergies in keeping the assets together. While our partner, Colibri, has some synergies, and it makes much more sense for them to own those assets.
Thank you. On the margin levers to improve?
On the margin, while we were due diligence-ing the company, we realized that they are invested a lot recently. We believe that with the growth to come, this recent investments they made in the structure is going to be growing at a lower pace. We do expect to see some benefits from scaling the company with the costs growing at a lower pace than the top line.
Okay. That's very clear. Could you quantify it? I mean, could we reach, I don't know, 25% EBITDA margin? Is this the kind of target you would expect?
We are not communicating on the long-term margin prospect, but it's higher than 20% for sure, but we are not communicating on that.
Okay. Very clear. Thank you very much. That's all for me.
Thank you. The next question is from the line of Alexandre Gérard from CIC Market Solutions. Please go ahead.
Yes. Good afternoon, and congratulations for that transaction. A few questions on my side. Can you be a little bit more specific regarding the type of growth rate that you target on average for the next, let's say, five years? And be maybe more specific regarding when you comment on when you say geographical expansion out of the U.S., can you be a bit more specific on that? That's my first question. Second question, regarding the growth drivers also going forward, are there any acquisitions in the pipe? I mean, is it going to be fueled by M&A, or is it going to be purely organic?
Maybe my last question would be on the type of return that you target on that asset, let's say, internal rate of return over the next five or ten years? Thank you.
Okay. That's a lot of ground to cover. On the growth target, we believe that the company can achieve high single digits sales objectives. Hopefully we'll manage to beat that number, but that's what we have in mind. In terms of geographic expansion, today, you saw it's a global company, and we expect growth to come from every part of the planet. There is a very strong prospects in Asia, in Europe, and the U.S. as well. Regarding acquisitions, this is not an acquisition company like Allied, which is going to pile up acquisitions months after months. This is not what we have in mind here.
So far they built a company mainly organically over the last five years. I don't think they have closed any acquisitions, so this was purely organic. That being said, there are a few assets here and there of smaller scale that we have identified, and then we'll look with the management team to see if they make sense to add to the portfolio of content. It is on our list, but there is a lot of wood to chop in the near term, and we'll focus on organic growth first. In terms of returns, this is a typical type of returns we have in mind for this asset, so low double digits IRR.
All right. Maybe I can ask you two additional questions? The use of the cash flow of the company if there is no acquisitions in sight, how fast is the company going to de-leverage its balance sheet from 7x or 8x the EBITDA? First question. Second question, that acquisition was made through a competitive process, or were you alone bidding for the company, or how?
Yes, there will be some de-leverage, but in a combination of the cash flow generation and the growth of the EBITDA at the same time. We do expect significant de-leverage over the next few years, clearly. I don't know if Adtalem has actually communicated on the process they run to get to this outcome. I don't want to speak for themselves, but you can expect that for this type of high-quality asset, there was a lot of appetite.
Okay. Thank you, David.
Thank you. The next question is from the line of Mourad Lahmidi from Exane BNP Paribas. Please go ahead.
Yes, thanks for taking my questions. I was wondering, what's the biggest cost item for the company. I guess it's staff, but just double checking here. Also, is there a big difference between EBITDA and operating profits? Finally, you mentioned that you want to grow this company high single digits over the next few years. It seems that you've already achieved that in the past few years, even with including the sharp decline in conferences. With the conferences bouncing back, seeing that this target is kind of cautious. That's it from me. Thank you.
Adam and Harper, do you want to comment on the cost structure and the customer acquisition cost?
Yeah, we can do that quickly. Without giving specifics at this point, you're right. The staff is the disproportionate share of cost here, and the sales force is really the largest component of that globally. I missed the other question, I apologize.
The difference between EBITDA and operating profit. I think Adam's earlier comment was on the EBITDA and the cash EBITDA, so more on the cash flow. I think what he wanted to express was the difference between the accounting EBITDA and the cash EBITDA with deferred revenues, with prepaid revenues, where the company was actually collecting sales before having the cost. When you go through the cash flow line, the cash flow is actually higher because of this positive working capital item. I guess part of your question was as well to understand the capital intensity of this business. This is not a number which is disclosed by the current owner, so we are not going to comment on it.
We did put in the presentation that EBITDA minus CapEx over EBITDA is over 75%, which gives you a rough idea of the CapEx intensity, which is low. Then your last comment on our forecast. We don't make forecasts. Your previous colleague asked for indication of where we felt the growth was. We wanted to give a zip code, but don't see the high single digit as a public forecast on this company. We don't provide forecasts.
Okay, thank you.
Thank you. We have no further questions from the phone lines at the moment, so I'll now hand over to Olivier Allot to manage the questions from the webcast.
Yes. Thank you. First question from the web: Can you elaborate on value creation plan and targets post-acquisition, say, over the next three years? Any focus areas over the near-term? Adam and Harper, do you want to take this question on the priorities in the value creation?
Yes. As I mentioned earlier, it's largely what the business has already put in place. One is introducing new products to existing customers. Two is expand geographically and further penetrating their existing markets as demand increases. Those are the two largest.
Harper, we do not hear you well.
Sorry. Can you hear me now?
Can you hear us?
Yeah.
What I was saying is that the two main focus areas are introducing new products, similar to what we've been doing in the past. The first is introducing new products to their existing customer base. Two is expanding geographically and further penetrating their existing markets.
Okay, thank you. Next question. Do you expect other revenue, i.e., seminars and webinars, to increase relative to other revenue streams?
Conferences, when you take slide eight, account for roughly 10% of sales. We do expect this percentage to grow and to take a larger share of the total revenues of the company. Yes. Thank you.
Can ACAMS be held responsible if a member company is fined for non-compliance?
A member company. Like, you mean a client?
A customer. Yeah.
Adam, Harper, you want to respond? I think the answer is a plain no, but if you want to comment on this.
That's correct. No is the answer.
Okay.
One more question. Can you let us know the market share in top three countries, please? And what are the CapEx plans for international expansion? Adam, Harper?
Adtalem does not provide that information, so we can't provide specifics on market share. Suffice it to say they are the largest player. The CapEx for international expansion is consistent with what they've invested in the past.
Thank you. I have no more questions from the web.
Just a reminder, if there are any further questions on the phone, then you can press star and one, and it's the hash key to cancel, or you can type your questions into the webcast. We have a question on the phone. This is from the line of Alexandre Gérard from CIC Market Solutions. Please go ahead.
Yes. Thank you for taking, again, my questions. Three additional ones on my side. Firstly, can you comment quickly on the management of the company? Who is running the company? Their track record with that company? For how long have they been managing that asset? Second question, regarding the volatility of margins in the past, I'm not talking about the optimal level of EBITDA margin in the future, but I mean, were margins stable? Very stable? At what level can we have an idea about that? My last question is regarding your stake in the company. Do you intend to keep 99% of the equity for yourself? Or will it be possible for you to syndicate part of that investment? Thank you.
The company today is run by Scott Liles. Scott joined in November 2020. He has quite an international background, graduating from the University of Cape Town and the London Business School. While in the U.S., he initially joined McKinsey for a time and, after serving different roles, he joined Nationwide Insurance, where he led two of their business units growth, including the turnaround of Nationwide Pet Insurance, which is a $500 million market leader in pet health insurance. Adam and Harper, you want to take the following questions?
The question around margins, the answer is no. I think the profitability on the business has been relatively consistent, but for the impact, obviously, as you noted, of the declining conference revenues over the past couple of years.
Then, David, I think the last question was around the intention to retain our full stake versus syndicate.
Yeah. The intention to retain our full stake of 99% or any plans to syndicate down?
We might have one of our lender who is eager to take a very small equity and passive stake, and we are in discussion. We do intend to keep this investment on our books.
All right. Thank you very much.
Thank you. We have a last question on the web. What is the expected agenda, i.e. acquisition close, growth and exit?
Well, I think on acquisition, we discussed about that it's there is a lot to do organically, and we'll focus on that. There are a few potential targets out there, so we'll be in an opportunistic way looking at them. For the first few months or first few quarters, we need to focus on the transition out of Adtalem first. The plan is clearly to put the company on a good trend of organic growth before looking at M&A. We have not even closed the acquisition, so we are not in the mindset of talking about the exit.
We do believe there is a long road ahead of us in terms of growth. Discussions will come in due time.
It's André François-Poncet. Just to wrap up, this is a company that we've been looking at for a while, that our team went and found as part of a screening based on the successful investment we've made in CPI and our interest in the education certification sort of space. We feel that the transaction itself was relatively clever because we found the ideal match with somebody who had synergies for the other business, which we felt distinguished us from quite a number of potential buyers here. We feel that the company has a growth avenue, which is quite obvious to all of us in finance, who are pestered but positively all the time reminded of all the various obligations.
That requires a lot of training because it's a moving target constantly. It's a global business, which has opportunities in product and by geography. It's a very significant leader. Although we didn't give market shares, it is, you know, significant. It's the biggest player in the space by quite a bit, maybe not everywhere, but in general. We think that once they become an independent company, they will have also all the opportunities that come from that, and we fully intend to give them our support with a perspective of the medium to long term. Thank you for your attention.