Earnings Call: H1 2021

Sep 27, 2021

Hello, and welcome to the First Half twenty twenty one Presentation. My name is Lydia, and I will be your coordinator for today's event. Please note, this conference is being recorded. And for the duration of the call, your lines will be on listen only. However, there will be an opportunity for live questions. I will now hand you over to your host, Jean Fred Godet, Chief Executive Officer of Quadient, to begin today's conference. Thank you. Thank you for this introduction. Good evening and good afternoon to all of you and thank you very much for joining this call to discuss Quadion sales and result performance in the 1st semester ended July 31, 2021. I am Geoffrey Gaudet, CEO of Quadient, and I am joined on this call by Laurent Depassage, our CFO. Throughout this call, I will be referring to the slide presentation that can be downloaded from our Investor Relations website, which complements the press release that we have published today after the close of trading. So starting with today's agenda on Slide 3. I will first provide you with an overview of Quadrant's key achievements in the first half of 2021. As you will see, our H1 financial performance was strong with organic sales growth above 11%, a 28% plus organic increase in current EBIT and a sustained cash flow generation. We have also continued successfully to execute our back to go strategy as reflected notably by a strong commercial momentum across all solutions, the accelerated shift to our subscription based model and obviously, continued synergies between the businesses. Then Laurent will provide you with a more detailed review of our first half financial performance. Next, I will share with you our updated outlook for full year 2021 with the upgrade of our guidance on expected current EBIT organic growth for the full year. Finally, we will be happy to take your question together. So moving to Slide 4. Before we get into the key highlights of the first half, let me first spend a few minutes to remind you of the Back to Growth strategy we announced in January 2019. The first phase of this plan was focused on the transformation of Quadrant, as you know. We successfully moved away from a holding companies of independent businesses to become 1 integrated company with a simplified and synergistic portfolio of both smart and hardware solution and with high growth potential and market leading position in each one of them. In March of this year, we announced the 2nd phase of our strategy aiming at driving sustainable value for all stakeholders in the next 3 years and beyond. So let me summarize the key components of Phase 2 of our plan. From a business standpoint, we will focus on 3 main areas. First one is scaling fast our growth engines, accelerating the shift to our subscription based model and fostering synergies across all solutions. With regard to our financial we have 3 main priorities and they are around. The first one, the organic sales growth focus, the increase of profitability and obviously deleveraging through sustained cash flow generation the company. We also continue to reshape our portfolio with 1 more acquisition and 2 divestments completed since the beginning of 2021, and I will detail them later on. So moving to Slide 5. From a strategic perspective, we focus on 3 selected markets based on the needs of our extensive base of 500,000 customers globally. The first market is our physical mail market, as you know, and this market is structurally declining. However, as we communicated many times, this is a manageable and predictable decline, and especially as our solution are dependent on transactional mail volume, which as you know are much more resilient than mail in general and also more resilient in North American region. The industry has enjoyed a rebound in H1 in which Quadrant's position has been very strong as the number 1 leader in Europe and a strong number 2 in North America. Our 2nd market on the left of the slide is centered on the need for companies to evolve digitally by providing differentiated digital experience and automated traditional processes and specifically like for account payables and accounts receivable. Companies no longer compete on product and price only. They do compete by delivering great experience to their clients and their employees. The cloud, financial automation and customer experience digital customer experience markets are fastly growing at double digits. As anticipated with our acquisition of Beanworks and Iape earlier, the landscape is evolving with new IPOs, acquisitions and infusion of new capital into start ups. As you will see when we'll discuss about our ICA business, Quadient is very well positioned with industry leading solutions and recognition from customers and analysts as well. And ICA also benefit from Quadient's 400,000 Ameris existing customers looking to intelligently automate digitally their communications and processes. Lastly, our 3rd market is addressing the booming e commerce and the explosions of parcel deliveries as a result. Today, consumers rely more and more on online retailers and the market saw huge increase of 35% of volume of parcel deliveries in our main countries. It is expected to have double digit growth this year, and all stakeholders, including carriers, retailers, consumers and property owners, mandate a solution in which environmentally friendly, cost effective and is also convenient and secure. So to address the growth of volume on parcels, there is a strong need for parcel delivery automation. This market is also seeing new IPOs, acquisition and region expansion. Quadrant is already a leader in parcel locker. We're being the number 1 in Japan, the number 1 in U. S. And residential in particular, number 1 in France for the retail market, running a global network of already 14,500 lockers installations. Moving to Slide 7. I now want to present you a snapshot of Quadrant's financial performance in the first half of twenty twenty one. We are really pleased with the strong financial performance achieved. We delivered organic sales growth in excess of 11%. We grew current EBIT before acquisition related expense by more than 28% organically. And we recorded more than a doubling in net income. We also sustained free cash flow, which led to a slightly improved leverage ratio in spite of the Beanworks acquisition. Part of this performance reflects a favorable comparable base in H1 last year due to the impact of COVID-nineteen pandemic obviously, But it also relates to the strategic decision we took last year. And as you may remember, we voluntarily maintain our investments efforts notably in marketing and go to market and R and D in order to fully benefit from the economic recovery. So before Laurent and I provide you with more details in the following slides on Quadient's business performance for the 1st semester, I want to share with you some key numbers related to our core solutions. Starting with our software solution, in line with our strategy of building an even more recurring business model, subscription related revenue grew by around 20% in H1 alone, driven by SaaS and volume based solutions for both SMBs and large accounts, including an even higher growth for ARAP, accounts receivable and account payable, cloud platforms. Moving to our mail related business. We recorded a strong rebound in hardware sales in H1, achieving an organic growth of around 27%, driven by the sustained performance of North America and a good traction with new customer acquisition again. Lastly, regarding the parcel lockers, H1 performance was strong with organic growth of around 41%. This is driven by sharp increase in hardware sales, thanks to the continuation of the rollout of the retail contract in the U. S. And the benefit of the 2020 expansion of the base of the installed base. Moving to Slide 8. I want to share with you that we're celebrating this month, the 2nd year anniversary of the Quadrant brand. Quadient represent more than just a name, a logo or a visual identity. This is who we are. This is our culture. It represents our ambition to bring our clients and partners and employees together with one strategy. As already mentioned, we continued to successfully execute our Back to Growth strategy in H1. So first, we divested our automated packing systems and our Dracton factory, which is a new milestone in the reshaping of our portfolio. And it allows us also to optimize our mail related business in digital footprint. We also acquired Beanworks to compete our suite of cloud software solutions and to address the growing need for automated account payable solutions. The second major point is that we benefited from a strong commercial momentum in all solutions, demonstrating from our perspective the relevance of our strategy and the attractiveness of our portfolio to our customers. 3rd, and as planned, we accelerated the change of business model of our gross engines to focus on subscription related model, aligning also on how companies today purchase technologies. And lastly, we continue to foster synergies across our core solutions. This is essential objective of our strategy to scale our gross engines and thanks to an efficient cross sell and upsell approach. Internally, we have many more synergies such as with R and D, marketing and obviously, our supply chain teams. So I take this opportunity to thank our employees, all of our employees across the globe that continues focusing on making each customer successful, delivering new innovation and supporting our back to go strategy. Moving to Slide 9. As you know, in March this year, we strengthened our existing and long standing commitment to sustainable development by becoming a signatory member of the UN Global Compact. And in H1, we continue to make progress across the 5 pillars of our Aquadeon's corporate social responsibility program. So the first pillar on the left, people. We continue to focus on inclusion and diversity by launching our 1st inclusion policy and training all of our employees in line with our Empowered Communities program. To support this program, we joined the Valuable 500, which is a global initiative where Quadrant has committed along with 500 other leading national and other multinational companies to unlock the social and economic benefits of people with disabilities. The second point is on ethics and compliance. We continue to invest and develop our global compliance program. In H1, we made progress to improve our policies, processes and training and controls for both our employees and the partners, suppliers and all the third parties that we work with at Quidiot. The third point is the environment. We focused on the renewal of the ISO 14,001 certification for all our industrial sites, and we expanded our MIS remanufacturing programs to the U. S. Market. In March, and I'm proud that Credion established a well below 2 degrees initiative to reduce our carbon emissions by 2,030. Our 4th solution in H1, our digital solution, received several industry recognition. And for instance, Quadrant was recognized as a top 10 French software leader for the 4th year in a row in the Truffle 100 annual ranking. Quadient was also recognized a leader in customer communication management and search for the 4th consecutive year by the Aspire leaderboard, highlighting our leadership in omnichannel orchestration, communication composition and business automation. And 5th and final, philanthropy. In H1, we launched Quadient Cares, our new philanthropy program focusing on education, inclusion and diversity and protecting the environment. This program is deployed across the organization and enable via a new community engagement platform that provides opportunities for volunteering and skills based sponsorship and donation activities to all employees. So moving to Slide 10. As we move to our software solutions and at the same time, we celebrate the 2nd year anniversary of our brand, Quayient, which was our software brand originally, as you may remember. I'm super excited to announce that Quadient has crossed for the first time over the 10,000 software customers threshold in this 1st semester. This is a huge milestone for Quadient and the best validation that Quadient is in a unique position to help small, mid and large organization alike across the world to intelligently automate their communications and finance processes. In H1, we continue to rapidly expand our customer base with ICA acquiring over 1200 net new logos and such across all region and verticals. So the commercial momentum was particularly strong in the mid market and customer demand for our recently acquired account visible and account payable cloud solutions. Most of IC and new customer gains came from cross selling through our MIS channels, which reflects our successful strategy to foster commercial synergies between ICA and MIS. So if we take an example in H1, ICA posted strong revenue growth in mid market, realized through the MLS sales channel cross selling. That represented plus 33% in France and plus 48% in the U. S. And in just a few weeks, ICA also already signed several account payable automation contracts from BINworks with existing MIS customers in North America already. In the first half, we also continued building partnerships and we extended our partnership with Sage, leading accounting software company. And we created a new partnership with UiPath, one of the global leaders in robotic process automation, to automate repetitive front and back office task in particular. And last but not least, our solutions continue to be recognized by the industry. So if we move to Slide 11. Within the framework of the 2nd phase of Back to Growth, we have set KPIs for each solution, which will help us monitoring our growth trajectory as well as our profitability. So let me now update you on the progress we have made regarding ICA's 3 main KPIs. 1st, and in line with our strategy to shift to SaaS and subscription models, we monitor the share of SaaS and subscription customers in the ICA total customer base. In the 1st semester, SaaS and subscription customers represented 70% of ICA total numbers of customers, up from 65% at the end of 2020. The second indicator is that we aim at building an even more recurring business model. So we measure ICA annual recurring revenue, ARR, which gives you a sense of our future revenue trajectory. ARR stood at EUR 133,000,000 in H1, up from the €123,000,000 at the end of 2020. Our 3rd KPI, we monitor the share of subscription related revenue in ICA total revenue. It was 66% in H1 versus 59% in 2020, and this is driven by the expansion of our SaaS and subscription customer base. Moving to Slide 12. We have continued monetizing our MRS product portfolio. We announced several new version of Quadrant's smart solution, the industry most advanced shipping, mailing, accounting and reporting software suite to meet the needs of businesses of all size. 2nd point is that ideally fit for high volume, the IX9 series automatically sales, weight, measure, meters and start large mail runs in just a few minutes. We have also continued to outpace the market by almost 2 times in H1. So let me repeat this, by almost 2 times. This is thanks to the renewals and new customer acquisitions. These customers include very well known brands and from many industries showing the diverse and modest customer base. And lastly, we continued fostering synergies from shared supply chain and customer services centers as well, notably to scale our parcel locker business. We also, as I mentioned in the beginning, we also optimized our initial footprint, thanks to the divestment of our Dracon facility that I will briefly comment on the next slide. So moving to Slide 13. In line with our strategy to continue reshaping our portfolio, we completed the divestment of our Automated Packing Solution Business, CVP, for our French colleagues. We divested at the same time our production facility that was based in Drogton in the Netherlands. This transaction marks another important steps in the optimization of our industrial footprint. By further increasing the share of outsourcing in our mix, now close to 70% post transaction. It also reduced the risk related to the decline of MRs production and will lead to significant cost optimization over time. Total consideration for the sale was above €20,000,000 Moving to Slide 14. Let's now review the 3 KPIs we used to monitor the evolution of our execution plan for MIS. So the first one is that we measure how much of our customer base we have converted to our new technologies and how much upgrade potential we still have in front of us as we roll out our new lines around the world. The share of our upgraded installed base increased to 8.5% in H1, up from the 4.9% in 2020. 2nd KPI, the resilience index, measures the difference between the supply revenue evolution and the total revenue evolution. It is at 2.4% in H1 versus 5.2% in 2020. So if we look at it in details, in H1, the supply sales rebounded, but total revenue grew even faster due to the stronger hardware sales. So while in 2020, the usage slowed during the lockdowns, but the total revenue did not slow down as much. The 3rd KPIs that we measure is how subscription related revenue move as a percentage of total revenue to continue our focus on building a resilient MIS business line. This share slightly declined to 72% in H1 from 74% in 2020. This is naturally the result of a strong hardware sales growth this year. Moving to Slide 15. In Parcel Lockers, we continued, as you could see, to see strong momentum in our 4 key verticals: carriers, retail, property managers and education corporate offices. We have 3 main goals for Parcel Locker Solutions. The first one is to grow our open network. 2nd one is to expand into new geographies. And the third one is to leverage commercial and supply chain synergies with our MRIs business. Let's now review PLS main commercial achievement in H1. For carriers, we reached a new amazing milestone with 6,000 units installed in Japan and we also signed 2 new contracts in France with Relais Collie and Pickup for a total of 2,000 more units. In retails, we are proud of the successful completion of the Loews U. S. Rollout in Q1, but we also completed an extension and extended the rollout into Canada for Lowe's in the Q2. For property managers, we experienced good traction in usage in the U. S. With over 18,000,000 now parcels that went through our network in H1 alone. And last, I would say, but not least, we reached 300 new installations for corporate and universities in the U. S. While booking through our MRIS sales channel grew very strongly. And moreover, the pipeline for universities in the UK increased in H1. So moving to Slide 16. Let's now review the 3 KPIs we use to monitor the evolution of our execution plan for PLS. So first, the first one is that we monitor the evolution of our installed base. In H1, we recorded more than 1500 new installs, bringing our global installed base to about 14,500 lockers installation in our geographies. The 2nd KPI that you see on the slide that we measure the usage rate of our networks of lockers, It improved to 60% in H1 from 57% in 2020, and we have seen an increasing turnover rate for Parcels from our customers. The 3rd KPI is that we monitor the evolution, sorry, of our Parcel Locker solution subscription related revenues as we are expanding our install base. And they grew by 20 over 20% organically in the 1st semester to now reach €23,000,000 So this concludes my review of Quadion's H1 business highlights, and I'm now handing over to Laurent to discuss about our first half twenty twenty one financial performance. Thank you, Geoffrey. Good afternoon and good morning, everyone. I am Laurent DuPassage. I'm Quaidon's Chief Financial Officer. And I have the pleasure to walk you through our H1 2021 figures. Starting with slide 18. In Q2, we have confirmed our strong recovery in organic growth of revenue. As you can see on the left hand side, we maintained in Q2 the same level of year on year organic sales growth then in Q1 at 11.1%. On the right hand side, you can see the year on year quarterly evolution of recurring revenue on one side. So it's typically SaaS, rental, volume, maintenance and services and non recurring revenue, which are one off hardware and license placements. The trend of Q1 is confirmed in Q2 with the recovery of hardware and license placement at plus 33.4% and a good level of growth of recurring revenue as well at +3.4 percent year on year. Moving to slide 19. If you look at our major solutions in the Q2, we experienced again a sustained performance across all our solutions confirming the good recovery we already had achieved in Q1. In Intelligent Communication Automation, our software practice, organic growth has accelerated at 17.3% in Q2 to end up at 11.7% in H1. In Mail Related Solution, organic growth remained positive in Q2 at plus 4%, thanks to the strong growth in hardware sales to end up at 5.1% in H1. And finally, in Parcel Locker Solution on the right hand side, organic growth decelerated compared to Q1 when we were still deploying the Lofts contract in U. S, but we remained in the double digit territory in Q2 at 17.5% to end up at 40.7% in H1. So now when moving to slide 20, to bridge H1 organic growth from H1 2020 reported revenue of €485,000,000 on the left hand side with the 5 0 €4,000,000 revenue on the right that we report today. We need to exclude the scope effect for €13,000,000 which is mostly resulting from graphic divestment net of the acquisition of Dieppe and Binworx. And you need to exclude the €20,000,000 of currency effect on the right. This allows us to isolate the pure organic performance of 11.1 percent, which is a +52,000,000 The performance was very well balanced with each solution growing organically between €10,000,000 €16,000,000 year over year. Now if we focus on the next slide on ICA, our software division. It accounts for €97,000,000 over H1 and it grew by 11 point 7 11.7 percent over the period, thanks to dynamic Q2 at 17.3%. ICA revenue mix continues to move more and more towards subscription. It's 66% in H1 with a year on year growth at 20%, including a strong demand for AR, accounts receivable and AP accounts payable solutions, which are growing by about 70% organically. We have seen small and medium businesses as well as the large accounts growing their SaaS and volume based activities by 31% 13%, respectively. The professional services have shown improvement with 10% growth, thanks to project resuming and new placements implementations. License sales, which accounts for 14% of our revenue in H1, declined. It's mostly due to the shift in business model. Also one large enterprise deal was signed in Q2, which is a very positive signal from the market. On profitability, ICA solution profit stands at 16% in H1, which is as expected down by 2.7 points since H1 last year. Indeed, while we benefit from larger base of customer and increased usage, we have further invested in R and D, specifically for the recently acquired cloud platforms for AR and AP. We've accelerated our go to market and marketing in our main geographies. We've been specifically focusing on more cross sell incentive. We also see the temporary adverse effect of this change in business model from license to subscription. On the next slide, with €320,000,000 of revenue in H1, mail related solution recorded a sustained positive growth of 5.1% against last year. This positive organic growth was seen across all geographies with another strong performance in North America. The strong rebound in hardware sales achieved in Q1 was confirmed in Q2 with a total 27% organic growth over H1, thanks to good market traction, the success of our new range of products and new customer acquisition. We also noticed a strong resilience in the subscription related revenue, which is coming from our installed base, it's leasing, rental and that's thanks to good retention. From a profitability standpoint, as you can see at the bottom, the solution profit margin stays very high at 44.5% and is down by 1 point against last year. This is related to the mix within the revenue as hardware is less conservative to the margin than our subscription related revenue. But the good news is that this hardware will add incremental revenue, recurring revenue in the coming years. We also have been impacted by higher freight costs, notably at the end of H1. Moving to slide 23 and our 3rd major solution. Parcel Locker solution recorded a very solid growth over H1 at plus 40% year on year after Q1 at 67%, which is 17% organic growth in Q2. With no large hardware sales deal like this was the case in the past three quarters, which were positively impacted notably by loss project. The plus 20% organic growth in subscription related revenue reflects the further expansion of the installed base with 1500 additional new lockers in H1 2021 as Geoffrey was mentioning. Hardware sales has sharply increased in Q1 with the completion of loss contract. And over Q2, it was still very dynamic, although at a lower level and driven by higher education segment and residential in U. S. We also noticed a promising start of the UK market over H1. We have a solution profit margin at minus 1.4 percent in H1. It shows a strong improvement compared to H1 2020 plus 540 basis points. And on one side, we have in fact a high profitability of the installed base, which is expanding and contributing to this margin. And on the other hand, we are still also investing, notably in R and D and in go to market for the launch in the UK and in France. From one semester to one other, it also this strategic margin also depends highly on the mix between hardware that provides revenue and margin upfront and rental additions for which the revenue and the margin is spread over time. That's also been impacted by increase in freight cost in the installation on the new installation side. As a summary, if you move to next slide, selling all those 3 major solutions, we see that major operational revenue for H1 is up by 9% year on year. It's €458,000,000 and subscription related revenue accounts for about 70% of the revenue. And all categories of revenue have been growing year on year with a significant recovery in license and hardware as well as professional services. Finally, we see a 3.6% growth overall at major operational level of subscription related revenue. North America revenue growth is particularly remarkable, which you see at the bottom with plus 12% year on year and it accounts for 55 percent of major operational revenue. This was driven notably by the rebound in all solutions in North America and in particular, the double digit organic growth across both ICA and Parcel Locker Solution businesses. While the level of activity has improved in Europe, notably in ICM, it has still been impacted by COVID health measure over H1. Current EBIT for major operations stands at €71,000,000 It's improved by close to 20% against last year and that's thanks to a strong pickup of the activity combined with improvement of the installed base profitability. Again, this has been partially offset by the increase in planned investment in R and D, go to market and marketing. ICA shifts in business model is, of course, impacting the near term profit as planned and increased freight costs and longer delivery lead time have affected H1 as well. On the next slide, you see a summary of the group. You see that the major operation accounts for 91% of our group sales in H1. It grew by 9%, again with all solution growing. The fact that it's 91% of the total group is a result of the refocus of the company on its major regions and operations. The additional operation that you see on the last blue column on the right, it consists in our major solution in other geographies as well as our other solution and it has benefited for a significant rebound with 39% organic growth year on year. This is notably thanks to the CVP, the Automated Packaging System, performance that has experienced a significant growth in Q2 with 9 units delivered this year versus 2 units last year and which was divested at the end of H1 together with our Braaten for the reinsata factory. The total current EBIT stands at €17,000,000 in H1. It's up 28% organically against last year and it is entirely produced by major operation segment. In order to bridge this EBIT figure between H1 in 2020 and H1 2021, again, like for the revenue, we need to exclude both scope effect, €3,000,000 on the left hand side and currency effect, €4,000,000 on the right hand side. This results in a net organic growth in current EBIT of €16,000,000 or 28% year on year. The stronger level of activity in H1 2021 resulted in a decrease in solution profit sorry, an increase in solution profit, while we continued increasing our investment in R and D and go to market and despite the ongoing impact of the shift of model. Overall, as you can see in the chart, we added €10,000,000 in solution profit, so it's an increase, equally split between major operation and additional operations. Also to be noticed significant improvement, that's the gray stack triggered in 2020 have been done in G and A, thanks to additional synergies implemented, which include further simplification of the organization and the reduction of our global real estate footprint. This translated into an overall reduction of €7,000,000 of G and A and innovation expenses in the period to reach a €74,000,000 current EBIT before acquisition related expenses at last year rate. Moving to next slide. The net attributable income of €45,000,000 is up from €21,000,000 compared to last year. It has more than doubled since last year. Walking you through the table from the top, it is obviously fueled by higher current operating income and lower acquisition related expenses, notably due to lower level of M and A activity. Optimization expenses and other operating income are up due to the impact of the DeHarten factory divestment. But within this number, the restructuring expenses are declining against last year. You look at cost of debt, it's significantly reduced, thanks to the 2020 refinancing operations. We also recognized a strong financial income, thanks to the increased valuation of our interest in 2 investment funds, Exane and Bartek, during the period. The tax level in H1 was back to a more normative level compared to last year. And finally, the net income for the period stands at €45,000,000 which is 8.9% net margin. Now moving to the cash flow. From a cash standpoint, despite the much higher level of tax paid, we recorded a robust cash flow generation with €54,000,000 cash flow after CapEx in H1 2021. This compares to €76,000,000 in H1 2020 and this reflects a strong increase in EBITDA at the top of the table, up by 2 points against last year despite the dilutive impact of recently acquired BillWorks and IAP. 1.9, which is other items, which is increasing and reflects the lower addition in provisions this year than last year, which is a non cash item including an EBITDA that needs to be removed. A very strong working capital management with a good receivable collection, presenting in a very limited degradation of working capital compared to H1 2020. We had a more modest lease receivable decrease than last year, thanks to business recovery. We had a normalization of tax paid compared to 2020 and a CapEx level in line with last year. Regarding the last line, which is acquisitions net of divestments, the €72,000,000 reflects the acquisition of Minworx, but not the Draughtonsen as the cash was at hand only a couple of days after the closing. Net cash evolution is minus €18,000,000 over H1, but can be summarized as €54,000,000 of cash flow after CapEx, net of €72,000,000 of acquisition cash out. A quick focus on the CapEx on the next slide. You can see that total CapEx is steady between H1 last year and H1 this year. And please keep in mind that we expect an acceleration over H2 2021 and notably in the rated equipment. The development CapEx was maintained at €60,000,000 and maintenance CapEx was broadly stable against last year. And now Slide 30. The net financial debt is only slightly up against end of full year 2020 at €526,000,000 in spite of Benoit's acquisition. With improved EBITDA, the leverage ratio at group level has even been improving from 2.1 times to 2 times and the degradation if you exclude leasing was limited from 0.4 times to 0.7 times. The addition of our leasing portfolio and rental future cash flow that you see on the right hand side remains much higher than our net debt position. Today, Quadrant still enjoys a strong liquidity position with €722,000,000 out of which €322,000,000 in cash and EUR 400,000,000 of undrawn credit facilities. This concludes my session and I'm now handing over to Geoffrey for full year 2021 outlook. Thank you, Laurent. So moving to slide 32. I want to discuss about Quadrant's outlook for full year 2020. So let's start with the revenue trend by solution we expect for the second half of 2021. Regarding ICA, we expect a continued strong momentum for subscription related revenue. And at the same time, we should expect an acceleration of the shift of our model from license to SaaS. Regarding MIS, we expect organic sales decline to be at a low single digit level in H2 2021. Lastly, regarding PLS, there is a particularly high comparison basis set by the Loews contract in H2 2020. And just as a reminder, PLS organic growth stood at +29 percent in Q3 last year and around 88% growth in Q4 last year. This is the reason why even as we expect a dynamic rollout of new lockers planned in the second half of the year And we also expect a growing level of subscription revenue from the installed base. We do expect an organic decline of around 15% in PLS revenue for the 2nd part of the year. In addition, we are factoring on the divestment of our automated packing system business as from early August 2021 and its negative impact on the expected total organic sales growth for the full year 2021 compared to our initial guidance. On the other hand, thanks to a better than expected performance and across all solutions, Offsetting the negative impact of the divestment of the automated packing system, we have maintained our full year 2020 one organic sales growth guidance unchanged at above 4%. With regard to profitability, we expect that the operating efficiencies that we have implemented, in particular, thanks to the simplification of our real estate footprint, but also our organization, will positively impact the group's current EBIT and more than offset the anticipated increase in freight cost in H2 2021, but as well as the active hiring campaigns and continued investment in talent to support the future growth. So as a result, we have revised upward our full year 2020 guidance on organic growth in current EBIT before acquisition related expense, which is now expected to be above 6% versus between 5% 6% previously. So moving to Slide 33. Let me spend a few minutes to discuss about Quadrant's midterm ambition by solution. We shared during our last Capital Market Day specific targets by solution for the 2021, 2023 3 year period. So starting with ICA, subscription related revenue increased by around 20% on an ongoing basis in H1, which is in line with the over 20%, twenty 5% subscription revenue CAGR we target over the 3 year plan. I see a profit margin stood at 16% in H1 versus our target of around 30% solution profit margin. But by the end of this year plan and reflecting as planned, the near term impact on profit margin of continuing shift in customer base from license to SaaS model as well as increased investment earlier. And then for MRS, organic growth was above 5% in H1, which favorably compares to the better than expected minus 5% organic revenue decline CAGR that we target over the 3 year plan as well. And while solution profit margin stood at 44.5 percent for MRAS, in line with the 43% to 45% range expected by the end of the 3 year plan. And for our parcel locker solution, we target an installed base of more than 25,000 lockers by the end of the 3 year plan, representing an increase over 12,000 units compared to the 13,000 lockers installed we had at the end of last year. In H1, we recorded already more than 1500 new installs, bringing our installed base to 14,500 units. That is a great achievement in line with our ambition and our backlog is strong. And in addition to installed base, our installed base has remained highly profitable with a profit margin of between 25%, 30% in H1, and which is also in line with our ambition to reach a 35%, 45%, 40% profit margin of the installed base by the end of the 3 year plan. So moving now to Slide 34. Lastly, with regard to Quadion's 20 1, 2023 3 year plan, we naturally confirm all of our midterm targets with a minimum 3% organic revenue CAGR over 20 1, 2023 and a minimum mid single digit organic current EBIT CAGR over 20 1, 20 23 as well. So this will conclude today's presentation. And Laurent and I are happy to take your questions. I remind you that you can submit your question orally, directly through the conference call or in writing via the webcast interface. Excellent. We'll begin with a question from the phone lines. We have a question from the line of Murad Lamidi of Exane. When you're ready, please proceed. Yes. Thank you, Jean Francois, for the presentation. I have a couple of questions on your guidance. So the first one is on the MRS. How much visibility do you have on the low single digit decline for the division? I mean, the comparison basis is quite depressed in the second half. So what are your main assumptions in terms of hardware sales into the second half for MRS? And second on ICA, so you talk about an acceleration of subscription based revenues. What does it mean for total revenues? I mean, that comes down to asking you what's your pipeline in terms of license sales? And do you intend to continue to basically sell licenses in that business? Thank you very much. Okay. Do you want to take the first one? Maybe Laurent, I take the second one. No problem. So on MIS, Moelad, it's again, we have a very, very strong momentum on MIS. I think there is no doubt about that. H1 was very strong as you could see. I remind you that the H2 last year was minus 7% as far as I can remember that compares to the minus 14% -ish that we had in H1. So it was twice a lower decline than what we had in H1. So the comparison basis is not necessarily comparable, I would say, between H1 and H2 last year, which explains why here we are communicating in the guidance that we are looking at the sales decline at the low single digit level in H2 2021, which I think when you think about H1 and H2 last year, you can easily made up your mind about the trend it could have. But the booking in hardware keeps us a very strong momentum. Just the comparison basis is very different. And for the second question, Bernard, for ICA. So we do push today most of the sales in the pipeline as a subscription model. But as you probably know, our sales cycles sometimes are over even 1 year. So as we had engaged that shift now more than 6 months ago, there's still relationship with customers on previous deals that may still happen as license. And we'll take the deals obviously as the customer preferences for license, we will obviously satisfy them. And we have also some existing customers that did not necessarily migrate to a cloud platform for which they could benefit from a subscription model. And sometimes they may still from time to time ask us for additional usage or seek license, which could also on a longer basis still generate some license amount. But disconnected from those elements, the push is global for us today to get all our sales force to promote subscription from now on and every new sales and opportunities are towards subscription. And this is what Laurent, I think, explained just earlier. We do expect the subscription likely to accelerate in the license from quarter to quarter. Like in Q2, we had a large yield in license, but we're still in a depressive or declining license trend. So this is why at some point, obviously, in the future, the top line of ICA will normalize with the subscription rate especially for the next two quarters, will have a little bit of some impact of the license decline. Okay. Thank you very much. And at this time, we'll move to our next question from Francois Gajon of Auto BHF. When you're ready, please proceed. Yes. Good evening, everybody. Just my first question is regarding ICA. Would you expect that margin decrease after the first half? Do you expect same magnitude of margin for the full year, so for ICA? My second question, when you mentioned organic growth for the EBIT above 6%. If I were to understand, the pro form a last year would be €140,000,000 is it exactly? And my third question concerns the positive ForEx impact. So with a huge impact into net income, what do you expect for the full year? And my last question regarding the SG and A, if I will understand the SG and A decrease during the first half, do you expect the same magnitude of decrease for the SG and A for the full year? Thank you. Okay. Thank you, Jean Francois. So let me take the first one. On the Solution profit margin, we obviously don't give today a particular guidance by solutions. What I think I could share naturally is that we're going to have in H2 likely more subscription revenues. Subscription revenues that will be generated from the new customers we have embarked in the 1st part of the year will likely be more contributive. We may have also more usage. So there's obviously some element that could help contribute to a higher profitability coming from the installed base in H2 that we inherit at the end of H1. And then obviously, we will have also compared to last year, the comparison basis on the level of license. So as you know, the license goes almost straight to the bottom line. So we have a little bit less license. On the other hand, the positive of profitability from the existing base and the usage will be offset in part from the change in business model, which is as planned and as we had anticipated at the beginning of the year when we did the shift. Laurent, do you want to take the other points? Yes. So second point was about the comparison base on EBIT full year for 2020, if I remember well. So as you remember, we reversal effect of Parcel Penin that we disclosed for €6,500,000 comes to €145,000,000 So €145,000,000 is the starting point on which if you want to do an organic AB growth, you need, of course, to retreat all the scope effect. And of the scope effect, we divested ProShip end of February last year. We divested Graphics in January 2021. And we acquired, in the meantime, Beanworks, IAP and we divested finally, Dharten with the CVP and APS, I would say, activity. And all this scope effect over the 2020 EBIT being taken for ATA employees on the divestment and acquisition is €5,000,000 which makes the comparison base at €140,000,000 to treat a comparable scope. Then you had a question on the net income, I think, and I didn't catch. I think it was ForEx related to ForEx. Can you let us know? Was it about the currency gains and losses on this line? We see a strong impact on the ForEx in the first half. So what do you expect for the full year? There's a huge impact on the net income. So what do you expect for the full year? I believe it's a positive ForEx impact. Right. So which has an impact on net income is the increased value in our share in 2 fronts, which are Exane and Partec, where we invested back in 2015, which has significantly valued between end of fiscal year 2020 and first half 31st July this year. So this accounts for the bulk of the EUR 40,000,000 of financial gain that you see here. Obviously, I will not make assumption on what it how it will turn in the coming 6 months because as you could see, I mean, this was a significant gain that we had in the last 6 months. Does it mean that it's going to reproduce? It's not something we make assumption on. But it's we still have a portion of this investment in those funds that we'll keep until this fund is closed. And the last question was on the And the last question, sorry, I think it was on the G and A. So it's G and A is not SG and A that we report, not just G and A. The sales are in the solution profit. Yes, you are correct. We see a decline over H1. It's partially due to the measure we've taken in our H2 2020. So as we've taken we've been taking this measure in H2 2020, we expect that, of course, it has produced a strong impact on H1 2021. But depending on when those measures has happened over H2, it will likely continue to produce in H2, but at the level of when they have been retriggered basically. So on the trend, yes, on the amount, probably depending on when we started the closing of the real estate notably. Okay. Thank you very much. We'll proceed with our next question on the phone from Nicolas Savo of Stifel. When you're ready, please go ahead. Good evening. Thank you very much for taking my question. I mean, a number of them were already answered. Can you give us an idea of the pro form a organic growth of the additional operations that we have an idea of what the rest of the business is doing? And same for the solution profit, I mean, if you've given us an idea of the savings you intend to deliver with the divestment of the Darahen plant and the CDP? And what can we expect in terms of ramp up? And what's the pro form a today if we had the 1st January over the full 1st semester, the impact on organic growth and on the solution profit? Just for us to have an idea of what to expect for the rest of the year and the 2nd semester? Thank you very much. Let me answer the first part of the question and you take the second one, Laurent, on the rest of the year on the impact. So for additional operation, if I remember well, I think around 2018, probably pro form a before we make the change, it was a little bit more than EUR 200,000,000 of revenue, EUR 220,000,000. And we have obviously divested along the years many of the different non core business that we had. The latest one that is obviously impacting additional operation for the 2nd part of the year is the CVP in H2. I mean, the innovation, but it won't impact H2. And we also divested our Australian business at the beginning of the year. So now in terms of pro form a, Laurent, what would be a good comparison basis? Nicolas, if I understand well the question is basically compared on our 2020 full year, what is the impact of those divestments basically on the overall trajectory for additional operation? So as you have seen, the APS business, which was the external revenue recognized on this part, was producing significant growth in H1. It was expected to continue producing this gap of growth in H2 with a strong backlog. The overall impact that this growth in H2 would have brought to the group is around 1.3. Of growth over H2, which means over the full year, it's 0.6. Roughly, okay? So that's the top line impact of the divestment of this APS business on the top line. Now from a solution profit or an EBIT even standpoint, which we did divest the overall entity, It's on one side an APS business on which we've been losing money historically that with the volume was coming closer to breakeven. And on the other side, DS, so folder insertor manufacturing that we have been divesting where there was some margin being kept at the factory level. And altogether, it's very close to 0. So you can assume that on this full year EBIT, you have a very limited impact at the group level after the divestment of this entity. That being said, as you mentioned and as Geoffrey mentioned on the D'Harten focus, we have a plan to progressively basically not source our Forti and Sutter machine from NARTEN and being able to significantly leverage and benefit on the M and A solution from economies tied to an outsourcing outside of Parten. And those savings will come in the coming years? Yes, 2 to 3 years. Yes. Thank you very much. Thank you, Nicolas. And we'll move on to our next question from Patrick Cherson of Societe Generale. When you're ready, Patrick, please go ahead. Yes. Good evening. Can you hear me? Yes. We can hear you on the call. Please proceed. Okay. So I have three questions, if I may. First question, to come back to the one which was asked just before myself, I understand that when you guide for still to 4% organic growth, this is 4% excluding I mean, this 4% now includes 0.6% negative impact generated by the disposal of CBD. So just for confirmation. 2nd, regarding the bring to you except this very welcome capital gain or let's say, evaluation profit? So can you come back on this? And finally, could you provide us some inform some, let's say, guidance, I mean, colors on the cash flow start effect that you expect for 2021, please? Thank you, Patrick. I will take the first two, and I will let Laurent respond to your last one. On the first one, so yes, we do confirm that the 4% organic growth top line guidance does include the negative impact that we'd have expected from the growth of the CPD that we're not going to have. Again, there would have been obviously a better top line without it, and we did take it back into account. And so, while we despite that negative impact, we did confirm the 4%. On the exchange and the other form, it's mostly related to the strategy for Quadrant to also invest into private equity firm that look at different startups and have a privileged access, obviously, to different business model, to new concept, to new trends and being able from an innovation perspective to always have an eye on what is being done outside of the company and have better way obviously to understand those dynamics and therefore makes better educated decision on our own investment in terms of technologies of new business model and in particular on the software side. The choice of those 2 forms was related in particular to some of the software investment that those funds were committed to. Sorry, Patrick, I got the first two questions very well and I think it's the third one. So, Jafran, I want to start to do 2 easy ones. So what was the third one? The third one was about cash flow after CapEx that we expect for Q1 And if not our guidance, at least some colors. In H1, Patrick, we generated 54 €1,000,000 As we mentioned, the level of CapEx that we had in H1 was a little bit lower than what I mean, it's lower than what we expect in H2. So all in all, when you look at your profile of EBIT or CapEx, it should increase a little bit. We expect that the cash and it mostly depends on our ability to maintain the working capital as good as we had at the first phase one, but it will sit probably in the range of €80,000,000 to €100,000,000 Okay. Thank you. Thank you, Patrick. At this time, we have no further questions and we'll turn to any from the web. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Okay. So we have questions on the webcast. The first one is from Olivier Lombard. What's the package divestment profitable activity? Thank you. So I believe Laurent gave the answer earlier. The APS business has never been a profitable activity, unfortunately, for Quadient for the last several years. And as Laurent mentioned, as the growth of the business picked up in the last few years, year on year, we did reduce the impact of the losses that we had up to this point to this year in H1 where the loss was fairly reasonable. We're still an expected loss in H2, but much more minor compared to what Laurent shared. Thank you, Geoffrey. Another question now on from Dominique de Quid. Could you tell us what would be the cash impact of a divestment in H2? [SPEAKER JEAN PIERRE ANDRE DE CHALENDAR:] So if Dominique is talking so full cash for the company, as you saw from a sales standpoint, we sold Draughten and APS activity for a consideration above €20,000,000 Okay? This amount is has been partially paid. The majority of this amount has been paid. And the rest of this amount is either deferred or conditioned to some performance and will be collected later. From an operational standpoint now, which is a different question, so I'm answering both of them. From an operational standpoint, we don't see the divestment and having the return being now external, having an impact on the cash flow, operational cash flow that we'll generate over H2. But you'll still expect the procedure, the sale that you receive for H2 to impact H2 cash flow? Correct. So we already to be clear, the majority of the cash that we already collected was collected, as mentioned, in the presentation earlier during the 1st days of August. So we are not accounted for as of the 31st July, but will be in the next closing. Thank you very much. Another question from Olivier Dombart for MRS. Leasing portfolio seems to be decreasing while you said to gain new customers and you posted rise of hardware sale. What was the retention of your existing customers, please? I can take this one. So Olivier, you need to keep in mind that in the leasing portfolio, basically, we have contracted end and customer either leaves or disappears basically, go bankrupt. So this turns some accounts off of the leading. Then we either replace them, is it the end of the term, or we either gain new customers. So it's all about the balance between the two flows. Having a very strong booking of hardware, depending on how many contracts will end up in the same period of time, could result still in decrease in leasing portfolio. That being said, if you look at the decline we had in H1, it was much more contained than what we had 1 year before and it was very comparable to the one we had 2 years ago, which is a very good sign for us and shows the stickiness. Also the underlying driver is declining, the stickiness of our leasing portfolio. And I would add there's also a little bit timing difference from the moment you recognize the hardware sales to the moment you recognize the full benefit of the leasing. It's like any recurring subscription amount. If you had the hardware sale at the last week of July, you're going to have a very small contribution on the recurring part of the leasing revenue, which will come in the coming months. The hardware sales of today will be the recurring of tomorrow. That's why you could also see some difference from a timing perspective. Thank you very much. Another question for MRS. Could you tell in MRS business how much was consumable products? What was growth for this part in H2 last year, please? Very good question. So speaking just making sure, because I'm not sure we have the number top of the mind. What happened in H2 last year is that we saw 2 things or 2 trends going on. 1 is obviously the sales organization being able to reengage with customers from what they've been presented to do during the lockdown phase. So the hardware sales were picking up, but the usage was also coming back. So where most customers on the existing part of the base did not renew new ink cartridge basically at the beginning of the year as they were slowly coming back to the office. We've seen them as they need to use the machine again or coming back at the office, reengaging on the supplies. And I believe we had some I wouldn't say some catch up effect, but the Q3 and Q4 were much stronger, we see, than H1 on the supplies. I think with some catch up effect, overall, more forward looking, I think, for our own H2 this year and moving forward, the usage is obviously lower than it used to be. 1st, because even in H1, not all customers came back yet to the office, in particular, we've seen in Europe that we still had health restrictions that prevented people in the UK or France or even Germany to be back in the office until even sometimes in early late July or early August. So the usage is still lower than pre COVID and it has more or less normalized a little bit itself on the COVID H2 actually, probably H2 COVID level in H1 this year. As we look at H1, H2, getting into H2, as the European countries seems to be relaxing those health rules, we may have some positive momentum on supplies that we didn't add in H1. At the same time, usage again is not at the same level as it used to be. So it's probably a comparison basis that is a little bit easier, but I would not count so much on it. I think we still are going to have in H2 a more favorable basis on the hardware sales. And just to add a little bit of color, Dominique, this supply part is not the bulk of our revenue. It's a little bit more than 10% of our revenue. So just to put things into perspective, it's not what the vertical revenue depends on. That being said, as Geoffrey mentioned, in last year, notably in Europe, as you remember, March, April, May, we have strong lockdowns where people were not going to the office. And this, of course, has been waiting on the supply revenue at this time. And we can see it coming back proactively when the people come back to the office, but it's not at the level yet where it was. So this is a small portion of even the recurring revenue? Correct, yes. Thank you very much. A question now on PLS. How is the pipeline in PLS? And do you see larger contracts to come in the next quarters? [SPEAKER JEAN FRANCOIS XAVIER BOUVIGNIES:] So we'll not make a projection on our capacity to sign a large contract for the coming quarters. But what we could say, because we've been showing that all along, is that the pipeline is strong and the pipeline has been growing. And we see a few things in the pipeline. One is that we have launched some of our offers in some of our verticals in new countries at the end of last year, beginning of this year in the UK and France. And clearly, we see the pipeline building up very nicely and progressively quarter on quarter. So we see that positive momentum likely to continue and to yield at some point additional revenue and contribute to the growth. And then where we have seen definitely since the beginning of the year is an increase as well in the numbers of what you could call those larger contracts, in particular on the retail side and the carrier side. And we do have active discussion in most of the countries that we operate with some of those large organization. I think the fundamental point is that the COVID having accelerated the e commerce usage, it has aggravated the need to automate solution in terms of the numbers of by cells and the need for their automation. And while some of those deals could not potentially be initiated during the COVID year, definitely we see new opportunities as we got into 2021. As any large deals, those large deals could have a much longer sales cycle, so it's difficult to predict when it would come, But we feel pretty confident about those opportunities in the longer term future. Thank you. Could we have more insight on the perspective, especially on cross selling for Yape and Benworks and as well in Parcel for high growth and Parcel Pending especially? Sure. So on the ICA side, if we look at our net 1200 net new customers or logos we have onboarded in H1, I think it's a relevant case. Probably more than 2 third, if not maybe 80 percent of those new net new logos came from the cross sell of our MIS sales channels. This is definitely an increase in terms of new logos because of the success of those cross sell synergies. We already had some countries highly advanced in the cross training and the I'm sorry, in the training and the cross sell of those software solutions in France. And now what you're seeing is the progressive contribution of the other countries, obviously, trying to catch up, if you want, in those level of cross sell. The U. S. Has definitely had a huge increase in contribution in Q1 and has accelerated even in Q2 and now probably coming on par with what we've seen in France. And we also see some progress. And I think there's more to come in the coming quarters, in both in our other region. Specifically around APAR, so we had a certain numbers of net new APAR customers in H1. As you know, for BINworks, it was a very recent acquisition. So we just had a few months, barely 4 months of track record after the acquisition. But even though the period was short, in 4 months, we have been able to initiate our first campaign on our MIS customer base in North America, in particular. And through those cross sale campaigns, we've been able already to add more than 10 customers on account label solution coming from those cross sale campaign. So it's a very encouraging sign for us obviously to be able to continue to build the cross sell synergies not just on our customer communication management platform, but also on AP and AR in the coming quarters. Thank you very much. When do you think the parcel and software activities would be above 50% of the revenue, please? It's likely to be depending, obviously, on those big deals. We have given the trajectory during the Capital Market Day of what our gross engines could do in the next 3 years. For the parcel locker, in particular, we're looking at having the base to double. We're basically around 13,000 lockers before the next 3 year plan, and we shared our commitment to double the base to go from 13,000 more or less to 25,000. And we see we will be eager to be able to accelerate this if the opportunity comes. Those are I think all the initiatives that we're making in the 1st year of that 3 year plan, as Laurent mentioned, to increase in the go to market, to launch those products into other countries, so making all the necessary investment this year as the 1st year of the plan, accelerating the transition from SaaS from license to SaaS the same way should all lead obviously to having both our growth engines representing a higher proportion of our revenue, which they are already representing after the 1st 2 years of our strategy. Thank you very much. On Parcel Locker Solution, can you please give the split of the installed base between sales and rental model, please? I believe so I don't have it in H1, but I believe last year it was 50%. 50% was based on hardware and 50% was based on subscription model rental model, right Laurent? Correct. And I think it's not very different. At the end of H1, it's broadly fifty-fifty out of the 14,500 lockers we have. It was for me the last question on the webcast. So if you want to ask another question on the webcast, please go ahead or by the phone, please. Okay. So just before ending this call, it doesn't seem that we have new questions. Just want to thank everybody, obviously, for all your questions. Let me remind you of the date of our next financial communication event. We will publish our sales for the Q3 of 2021 on December 7. After the close of the trading, thank you again for attending today's presentation and have a good evening. Thank you all for joining today's event. You may now disconnect your lines.