Esker SA (ALESK) Earnings Call Transcript & Summary

So we are going to cover the -- Emmanuel's presentation for like 20, 30 minutes, and then you will be free to ask your questions. During Emmanuel's presentation, I'm going to switch all the microphone off just to be sure that we have a quiet listening for everybody, and then I will switch them on again at the end of the presentation. Emmanuel, can you display your slides?

Yes. You should see it now.

Yes. This is good. So we are going to wait another minute.

Okay.

And then we are going to start. No, we don't have any new people coming. Emmanuel, I think we should start. Let's go. Okay?

All right. So good evening, everybody. Thanks for joining us for this call talking about the 2020 first half results for Esker. I'm just going to give you a quick tour of our numbers so that we leave enough time for questions at the end, and Jean-Michel and I will be happy to answer the questions that you might have. So let's start my computer. Yes, okay. So just -- like I said, just the highlights for the first half of the year, basically 2 very contrasted quarters. A very solid Q1 in terms of growth, 16% growth, very much in line with the growth that we were experiencing in 2019 despite the fact that we had sort of 2 weeks at the end of March that were already impacted by the lockdown measures that have been taken in various countries in various ways. But despite those 2 weeks, we still had a very dynamic Q1 in terms of revenue growth. It was 16% overall. And of course, Q2 was heavily impacted by the consequences of the pandemic and the, let's say, sanitary measures that were taken by the governments in the countries that we -- where we operate. And essentially, that resulted for us -- and I'll give you more detail or explanations about this in the next slide, but basically that meant for us a second quarter which was flat. So still flat, not declining, so not bad relatively speaking, but clearly not experiencing the same kind of growth that we were having before. So in total, this means for the first half of the year, 7% growth, organic growth and at constant currency rates. It's a little bit better when you look at the P&L. It's actually a little bit more than 8%. You have some -- a little bit of a currency effect in there. But in terms of constant currency, we did have 7% growth rate for the semester. If you drill down to the cloud business, as you know, we still have a little bit of on-premise business that was heavily impacted, like even more heavily impacted by the pandemic. But if you look at the cloud business only, the situation is actually better. It's 11% growth for the semester at, again, constant currency rates. And even on order intake where we were a bit nervous thinking that definitely, in Q2, companies would have a hard time making decisions and signing contracts, new commitments for their businesses given the high uncertainty of what was going to happen, and that actually happened. Q2 was definitely slower than Q1. But in total, we were able to sign as much and even more new contracts in value compared to what we had done in 2019, and 2019 was a very dynamic year in terms of order intake. So overall, a very good performance during the pandemic and during the crisis, the heart of the crisis in terms of order intake, which is actually quite promising for the rest of the year-end. Going further than that, going forward, 2021. We didn't stop our plans just because the pandemic was happening. We continued to operate towards the goals that we have because those are multiyear goals, 3 to 5 years anyway. So we continued to hire -- first of all, we kept the people that we had hired in -- at the end of 2019 or the beginning of 2020. And we continued to hire people where we needed them and when we could during the crisis, just at a more conservative rate. So in the end, this means that the average headcount at Esker during the first semester of 2020 is higher than what we had in 2019 during the same period. We have 14% more people on average in the semester compared to last year. So we continued our development plans. We didn't stop everything just because the situation was tense. Particularly, we focused on our 2 departments, R&D and implementation services or consulting services. 19% increase in average headcount for R&D is what we have for the semester. This is always a type of people where hiring is a challenge. So we even -- to be fair, to be honest, we're taking advantage of the situation right now where it's a little bit easier for us to recruit developers, new developers, the developers that we need on the market because people probably -- definitely respond to Esker's success, resilience, optimism in the market, and that's not always what they find in other places. So it's a good time for hiring developers, and we're taking advantage of that. It's true for consultants as well. We -- those we hired more towards the end of 2019 and at the beginning of 2020 because remember, we had very high -- very dynamic growth of the new customers and we needed basically people to actually do the implementation. So we kept those people. And as you'll see later, they actually were busy during the semester and they will be useful for us to continue to grow in the future. With regards to other operating expenses such as beyond personnel, of course, we were cautious going into this period. Sometimes, we were forced to be cautious and conservative, like in marketing. I mean, most of the shows that we were supposed to do in Q1 -- in Q2, sorry, which is a heavy trade show period for us, most of them, if not all of them, have been canceled. So this is like forced savings. Travel also was drastically reduced, obviously. But other expenses as well we kept an eye on and just when we could delay, we delayed. But we also, like I said, for the people, we did spend money that was actually needed for the development of the business in the future. So in total, operating expense for the semester increased 12%. So it's a little bit less than the headcount, and that allows essentially the EBIT to decrease slightly, about 3 points from the first semester of 2019, but still 11.4% of revenue in terms of EBIT, given the weight of Q2 in the semester and the intensity of, let's say, the prices that we had to face, I think is a relatively good performance actually for us. Another thing interesting, which is quite new for us in 2020, has to do with income taxes. Essentially, Esker has applied in 2020 a new regulation for the French business that essentially applies to software revenue, software profit, profits derived from software that you have developed, a lower income tax rate compared to the regular tax rate. So for France, we're talking 10% income tax rate versus more than 30%, which is the regular rate. And this is new. This has just been passed, so extended by the French legislators to software because this regime is usually designed for patents. That's why it's called Patent Box. And in Europe, as you know, software is not patentable. So we cannot drive our profit from patents just because we don't have patents in Europe. But due to this extension that has been granted in France this year, we can now apply that 10% income tax rate to the profits that we derive from the software that we develop. We applied this new rule to both 2019 and 2020. For 2019, obviously, recasting our tax expense, income tax expense for 2019. We have booked that in essentially exceptional income for 2020, and we're talking about a bit more than EUR 800,000 positive impact on the P&L for 2020. So that's the 2019 effect. The 2020 effect, basically you can see that through a decrease of 4 points to the average effective tax rate that we have for the first semester of 2020, which is now 27% and was 31%. So there's a decrease of the income tax expense due to the implementation of this new law in France. We're still learning on this thing. The 27% is probably a little bit conservative. That's what we want it to be. It's definitely going to be more precise -- precisely determined at the end of the year and probably will be a little bit less than 27%, but we're already basically enjoying the benefits of this new regime on the half year results. In the end, taking into account a bit of a negative impact on the share of profit that we get from the JV that we have with Quadient -- Quadient's business was, particularly in France, was very, very heavily impacted by the crisis, by the health situation in France. And during the month of April and May, we're talking 30%, 35% decrease of the business of Quadient. Therefore, we're getting less share of profit from the JV. So that's what you can see on the P&L there, so taking that into account on top of everything else. In the end, we come to a net income which is essentially flat from the first semester of 2019, which is a very decent performance. One additional note. We did decide at the beginning of the crisis to take advantage of government-guaranteed loans that essentially the government decided to grant to companies to help them go through the crisis. Those are loans that -- or banks essentially are giving us but are guaranteed by the government that, that means we can have a very low interest rate. In this case, it's 0.5% fixed rate. It's a short-term loan. It's 1-year maturity. You can prolong it if you so decide a year after. We'll see if we'll do that or not. We did take advantage of this measure just to be cautious. We didn't know exactly what was going to happen. We weren't sure if our customers would be able to continue to pay us with the same timing and if DSO would be a problem also. In the end, it didn't -- it wasn't a problem. We were able to manage the situation correctly, but we took this money just to make sure we're not going to have any difficult situation with that. So 2 very different quarters. I talked about that. 16%, very much in line for Q1 compared to 2019 and Q2 essentially flat. The big impact there for 2020 on Q2 is, as most of you know, the money that our customers pay to be on our platform consists of 2 things. One part which is fixed, which is the subscription fee. They pay the same amount of money just to be on the platform, and that's not linked to the actual consumption that they have of our services, of our software, not linked to the actual usage, if you will. So that part essentially was growing during Q2 as we actually had added more clients compared to last year, so the subscription revenue was higher. But the other part, which actually is the largest part, approximately 45% of our revenue, is the variable part. This is where our customers pay x euros or dollars an invoice or per document. So if you're going to process 30% less documents because your business is slowed is down by the situation, then, of course, you're going to give less money to Esker. And this is what happened during Q2. Month of April and May were definitely the hardest month, and we could see this variable part of our revenue decreased by 25% approximately. And again, that was the largest part of our revenue, about 45%. So in the end, with growth on subscription fees, good performance on the consulting services but the decrease of the variable part, Q2 was a flat quarter, which, again, relatively speaking, is very decent. It shows the resilience of the business model. But clearly, it wasn't growing like Q1 was growing and Q4 even more of in 2019. In total, that means that the business was growing 7% for the first semester, but like you see, it's a very contrasted situation. Just a reminder about our business. You know that the majority -- the vast majority of our business is actually in the cloud. 74% of our business is actually pure cloud revenue. This is where you have the fixed part and the variable part in that 74%. On top of that, you have the consulting services that we invoiced to mostly the new customers that need to implement our solutions, that was 19% of the revenue for the semester. And then the rest is what really is left from the previous business model, the on-premise business model, plus the historical products that we still carry, that's about 7% of the revenue, and that was hit hard by the situation, clearly harder than the cloud business. As you know, our business is recurring in nature, more than 80% is recurring in nature. It does not mean that it cannot fluctuate, obviously, but it's not going to go away, even in a kind of an area unusual and a bit sometimes unbelievable situation that we had to face in Q2. Looking at how the revenue behaved by revenue type, and that's what I was referring to. You can see the SaaS still growing 9%. And so despite the situation, despite the impact on the variable part that I was talking about earlier, we're still growing the SaaS business by 9%, which is quite good. The consulting people were busy during the first semester. And they grew the consulting revenue by 15%, which is normal. There's a bit of a difference with the 9% and the 15%. 15% really is just recording the fact that our consultants were busy implementing deals sometimes sold in Q4 of last year and Q1 of this year. And we're not really seeing any slowdown yet of activity. They could work from home without a problem -- I mean, with most of our customers, clearly we could work from home and most projects could actually go on. And the fact that we have a backlog, that helped us keep the consultants busy. We do expect, and that will be normal, that the -- this trend will slow down in Q3. One, because it's the summer and it's usually not a very busy period anyway in most of the world, but also because clearly, in Q2, the new deal signed actually were not as strong as where they were supposed to be. So the backlog will slightly decrease during this period. And that probably will mean that revenue for consulting services will be a little bit softer for Q3, but then it should pick up again in Q4 and Q1 as we get back to a normal situation in terms of new deals closed. You can see that license revenues way down, maintenance revenues way down. And really, that's what takes the plus 9% and plus 15% to the plus 7% which we published for the semester. In terms of growth by region, so our business is split between Europe, 54%; Americas, 40%. It's largely the U.S., but we also have a presence in Canada and Latin America. And Asia Pacific is the newest and for now smallest region at 6%. Within Europe, France is definitely the largest country, about 1/3 of our revenue comes from France. And it just so happens that France was probably the most impacted country by the crisis and the situation. This is due to 2 things. This is due to how strict the lockdown measures were in France. They were very strict and they basically had a very big impact on the economy, that's one thing. And the other thing is most of the business that we do with Neopost, Quadient, is actually in France. And that business, as I was referring to a little bit earlier, has been hit even harder by the situation for a variety of reasons that had to do with the type of business that they do and how it's carried out by Quadient. But they were seeing like 35-plus percent decrease in this period. So France was actually declining in revenue for the first semester. And that basically given -- being the largest country in Europe, that explains why Europe as a whole is only growing by 1% for the semester because beyond France, Italy and Spain were slow as well, but a little bit better than France because no Quadient impact. But in the U.K., in Germany, in Northern Europe, in general, Benelux as well, the performance actually has been quite good, even sometimes better than in 2019. So that helped the European numbers, but again, it was heavily impacted by France and Quadient. Asia Pacific was very dynamic, 32% growth, and probably will continue to be. Of course, it's smaller numbers, but I think it shows a very good direction, very good dynamism in the region. And the U.S. is on its trend. It continues to increase its growth driven by cloud solutions, although most of the legacy business that we have or the on-premise business that we have is actually located in the U.S., and that was hit hard as we've seen earlier. So when the U.S. post a 14% growth for the semester total, if you look at cloud solutions only in the U.S., we're talking more 23% growth, which is quite significant for the size of the business that we have over there. So again, what we're seeing there is the result of the very good sales performance we had in the U.S. in 2019, especially towards the end of 2019. And even in 2020, which the U.S. proved to be very, very resilient even in terms of order intake. So we're very optimistic about the future of our revenue in the region. Speaking of bookings, this is the situation. So most of you know, when I'm talking about bookings, order intake, it's the value of the new contracts that Esker signs during a given period. Those contracts usually have no impact whatsoever on the revenue that we published for the period just because they usually haven't been started yet from an implementation standpoint or if they have, it's very minimal, but they give you a very good indication of future revenue performance for the companies. In this case, the contract signed in H1 2020 would be implemented in the second half of the year and maybe even going into 2021 and definitely will increase both consulting revenue -- consulting services revenue and SaaS revenue for the future. Like I said, we were wondering how companies would react to the situation. In the end, yes, there's been a slowdown in Q2, but it wasn't stopped. And if you look at the semester, we have been able to sign as much value of new contracts in 2020 as we had in 2019. And if you look at the 2019 number compared to the 2018 number, you can see that 2019 was not exactly a bad performance. So we were growing fast. We've been able to match that in 2020 despite the situation. So I think this is a very good accomplishment. That makes me very optimistic for the rest of the year. Speaking of that, the slowdown in contract signature or -- in Q2 does not mean that those deals that did not close are lost or disappeared. They're definitely in the pipeline. You can look it up. When I look at my pipeline, it's basically at a record high, which, again, is normal. It just means that we haven't closed as much as we should have in Q2, but those deals are still in inventory so to speak, ready to close hopefully in Q3 and Q4 this year, so kind of optimistic regarding those numbers for the rest of the year. And we could actually have a very good year in terms of bookings. Of course, if nothing changes regarding the pandemic, that's always the unknown, but if we stay like we are today, I think we'll have a good year for contracts signed for Esker in 2020, which means definitely a good performance to be expected from 2021. Our model combines profitability and investments. So we're able to grow the business quite significantly and at the same time, be profitable regularly in a very decent level. That's not always the case for software companies and that's not even that's the case for software cloud companies. So we're trying to be reasonably profitable. We usually say we aim at 15% profitability. We usually fall short because essentially we favor growth over profits, and you can definitely see that in 2019 where we had 20% growth and 12% profitability, so decreased profitability, but accelerated growth. Clearly, in 2020 -- by the way, the numbers at the bottom are like off 1 year, so sorry. So definitely, the numbers at the right are 2020 and then 2019 and before that. So clearly, what we see in 2020 is a decrease of growth, which is quite significant, but because of the way that we manage the business and the cautious management of the situation, we've been able to limit the decrease of profitability from 11.9% to 11.4% of revenue. So we've been able to preserve profitability a little bit without actually canceling our plans as we discussed earlier. Speaking of plans and recruitment plans, like I said, we continued -- first of all, we didn't fire the people that we had just hired in Q4 and in Q1 2020. We kept them. And we actually are keeping our efforts in some departments in terms of new hires, actually thinking the period is also an opportunity to get good talents that maybe we would not gotten before. So in total, the headcount for the first semester is up 14% compared to the headcounts during the first semester of 2019. That means 86 new people on average more in Esker staff. We have, at the end of June, 717 people present at Esker. The largest department is the consultants. So those people doing the implementations, the trainings, et cetera, for our customers, mostly our new customers, but also sometimes existing customers. Then we have R&D at 22%; in sales, 18%; marketing, 11%; and then the support functions, admin, 12%. Production is people just managing the platform. Obviously, with the increased volume, we need to make sure this platform is solid, is running even in times like we've seen, is secure for our customers, and we'll take the increased volume as well. So those people are classified as production because they run the house essentially. Where did we hire? Mostly in R&D, like I was referring to earlier. You can see this is the largest increase in absolute volume, 19% more people in R&D in the semester and more than 20 people added net, obviously, to the department, and consultants at 14%, then customer service. Customer service is key in the cloud. New customers are very expensive to get. If they don't stay with you for a long time, then essentially you're losing money as you have all the cost upfront. So keeping your customers happy, making sure they like your product and they want to stay with you and hopefully increase their usage of Esker's solutions is key, and this is important that we continue to invest in this area. But in sales and marketing, you can clearly see that we've been more conservative during the period. Still increasing 10%, 12%, but definitely less than what we have done in the past due to the situation. Currency effects. You know that 40% of the business comes from the U.S., so it's expressed in U.S. dollars. So we report in euros. The exchange rate between the dollar and the euro does impact our performance. So we give you the impact that it would have on our numbers using various exchange rates, which you can see on the chart. So for example, the average rate for the semester was $1.1. And obviously, that has no impact on the published numbers because that's the rate that's being used, but if we had a rate like we had for the first semester of last year, which was $1.13, then it would have meant about EUR 0.5 million less revenue for us, 1% less revenue and 3% less operating income. The opposite is true. If the exchange rate improves, then it would have a positive impact on our numbers. So we're just giving you the numbers and so you can you can figure out what the impact might be, depending on the fluctuations of the rates. This is the P&L. So we now give you both the, let's say, Anglo-Saxon version of the P&L, which is the P&L by functions, and the French traditional version, which allows you to see different things actually. So we're going to start with the P&L by functions, which basically shows that 2 lines increased significantly in terms of expenses. We talked about revenue already. So 8% is different than the 7% I was referring to earlier because, here, I'm not talking constant currency. This is actually current currency, and this is a little bit better. Two lines increased significantly in terms of expenses. You have cost of goods sold, which includes the consultants, and remember that consultants is one of the departments in which we invested. Well, there's cost for that, and that's included in cost of goods sold. So within cost of goods sold, you have EUR 8.8 million of consulting services cost, and that's actually increasing by 20%. So this is the major driver behind the increase in cost of goods sold. R&D is increasing by 18%, same thing. You've seen that we increased the headcount there. So there's no surprise. The cost is increasing despite the fact that we're capitalizing R&D costs, and I'll get to that on the next slide, but nonetheless, we're not capitalizing 100% of the cost anyway. So the more people we have in R&D, the higher the cost, and this is what's reflected here. Selling expenses, marketing expenses, selling expenses basically very directly linked to the headcount. Marketing expense is almost flat. Well, normal, because most marketing events have been canceled, didn't happen. So we save money. We were almost forced to save money in marketing expenses, so that explains why. The G&A was essentially just the infrastructure going at the rate they were supposed to grow at. In total, income from operation is decreasing from 14.4% to 11.4%. So we're losing 3 points of profitability essentially because we didn't decide to stop all the investments that we had made before the crisis happened and we essentially were staffed for a much higher growth. As you can imagine, 16% in Q1 and 0 in Q2. So of course, you can see that on the operating income, but yet, we're able to show a significant profit for the first semester. So it's quite satisfactory in our opinion. If you go down below the operating income, there's financial impact, which is mainly exchange rate-related as well as some reserves that we had to take on. The market conditions in June were not great, so there's a few reserve that we had to book there, but that's small, as you can see. If you go down below further, you can see exceptional items. This is the Patent Box situation, which I described earlier for 2019. So the gain that we have from the recasting of our income tax expense in 2019, that's EUR 800,000. The income tax itself is down from 2.3 to 1.6, one because the profit is down, but also because the effective rate is down, and for the same reason, the application of the Patent Box regulation in France. The share of profit in associates is linked to the Quadient's business. It's down for the reasons that I explained. So in total, the net income is EUR 5.4 million, which is about the same as what we had in 2019. So given the situation, it's actually quite a very decent performance. If you look at the same numbers, the same P&L by not function design but type of expenses, you can clearly see that one line explains most of the increased expenses. This is personnel-related, 20% more salary cost basically and really to taxes. That's normal, that's what I was describing earlier. This is where we invest. This is where we're bringing new talents for the future. Of course, there's a cost to that. And you can actually very clearly see it on the P&L if you present it that way. Another thing which you can see is the capitalized R&D expense, which is the first line. You can see that it's actually increasing from EUR 3.2 million in H1 2019 to 2020, almost EUR 4 million. You had the detail in the lower chart on the right-hand side. We did capitalize a lot more, about EUR 769,000 more of R&D cost, but that's just because we have more people because if you look at the percentage of expenditures capitalized, that's almost exactly the same. We don't want it to be the same. It just happens to be that way. It's not a number that we use. It's basically a project-by-project analysis of all the activity from the R&D department that we have to do to decide what's capitalizable and what's not capitalizable and, yes, basically look at hundreds of projects and you come down to the same number. So the increased development costs that have been capitalized is strictly linked to the fact that we have more people. Of course, the amortization increases as well. And the net impact is the result of that, EUR 1.4 million for 2020 and EUR 920,000 for 2019. The rest of the rest of the P&L is the same. It's basically the same number. It's just presented another way. Look at the balance sheet this time. The -- not much to say, except that we have a very healthy balance sheet, more than EUR 60 million in shareholders' equity, and this is more than covering the fixed assets that we have at EUR 48 million. And those consist of intangible assets are, for the most part, the R&D costs capitalized, and we talked about that a little bit earlier. The PPE is essentially stable, as you can see. Financial assets are essentially long-term investments. This is basically cash. We can -- if we need it, we can basically mobilize it. But as we intend to invest for the long-term or beyond 1 year, we have to classify it as long term and as fixed financial assets, so to speak, but it's essentially cash for EUR 5 million. EUR 5 million of the EUR 6 million is actually cash that we can mobilize. In terms of current assets, the accounts receivable line is declining, and that's linked to -- compared to the end of 2019. That's definitely linked to the decrease of revenue that we had towards the end of Q2 for the reasons that we talked about. So obviously, we have less in AR. The DSO is stable, so not much of a change there. It's just a reflection of the lower revenue for the end of the Q2 period. Cash increased significantly from EUR 21 million to almost EUR 34 million. And this is linked to 2 things as we'll see in the cash flow statement. One is the operations. We've been profitable and we've been generating cash again for the first half of the year. And 2 is the -- those loans that we got from the government, which I was talking about earlier, EUR 11.5 million, which you can see on the financial liabilities, going from EUR 6.5 million to EUR 16.6 million, well, obviously you'll find that in the cash level that we have. All the other lines are pretty much consistent with what they were, and I'm not going to talk about it further. Speaking of cash flow, here it is. You can see we generated in operating activities, EUR 9.5 million of cash, which is more actually than last year due to timing differences with the fact -- with the timing at which the revenue actually was invoiced during the period, so EUR 9.5 million. That more than finances the investing activities, so the purchase of new fixed assets, either tangible or intangible, intangible being capitalized R&D costs. So all the investment were 4.4 -- I'm sorry, EUR 5.4 million, which was financed by the operations, and that also allows us to finance the dividends that we paid, which is slightly down this year compared to what we had in 2019 to basically cope with the situation. We also were repaying our regular debt, our pre-COVID regular debt at EUR 1.5 million, and we took another loan or other loans guaranteed by the government, like I said, for EUR 11.5 million. So in total, the -- that explains the increase -- the sharp increase of cash from EUR 21 million to almost EUR 34 million. Again, not including the long-term -- the part of the cash which is classified as long-term, which is 5, roughly, million euros. That's what I wanted to tell you. So in summary, looking at what we had in front of us for the future, definitely, 2020, 2021 will be -- will depend on what's going to happen with the virus and the pandemic and if there's a vaccine, if there's no vaccine, if there's a cure, if there's a second, third or fourth wave or whatever. That will have an impact on the business. The good news is that we survived the worst and we actually did more than surviving. We actually went through it, continuing to develop our product the way we wanted to develop it, continuing to sign deals, okay, maybe slower, but still signing deals and preparing for the future in terms of revenue. And we've learned to do that, working from home without a problem. So we're prepared for what might be ahead of us, and that makes us definitely optimistic for the rest of the year in 2021. But nonetheless, we're not isolated from the economic situation that our customers are facing. Clearly, if our customers are showing a decline in their business, that will somehow reflect on ours. It doesn't mean we cannot grow, as we've seen, but clearly, the growth will be a little bit lower or softer than what we would want it to be. Right now, when we're looking at our business, we're thinking that we can grow about 9% in organic growth, excluding currency impacts. It could be better. It could be worse as well, but it could definitely be better as well. For 2020, that's what we think we can do. If that happens, then this will mean that 2021 will be very likely to go back to the type of growth performance that we were enjoying before COVID. So we were talking about 16% in 2019 and we were actually increasing the growth at the time. So we would look at going back to that type of performance for 2021, again, depending on what's going to happen with the health situation and the economy in general. For profitability, we -- you've seen that it's fairly stable as a percentage of revenue in H1 compared to what we had in 2019 as a whole. We're still thinking that it would be fairly stable for 2020 and then probably again in 2021, but then we'll see how things happen. But this is basically what we're forecasting or expecting for the year in terms of profitability, and this is what we manage to, let's say, the company towards in terms of goal. Another thing that's important for us, and most of you know that, we're -- Esker has come to where we are today essentially working by ourselves and doing everything ourselves. And it was a conscious decision because we wanted to make sure that we could respond to customer needs, and if we're making any mistakes, we could correct them ourselves and immediately so that we keep our customers, so that we can grow, but now, apart from Neopost, which is Quadient, which is a significant partner, 85% of our business essentially is sold direct. It's not a problem if we want to accelerate the growth, and you know that. So we have decided to make an effort to create an ecosystem around us of companies who can help us sell the product, implement our solutions with customers, recommend our solutions to customers to certain verticals, to certain countries, geographies, type of customers, so essentially getting the help of other companies through this ecosystem that we're trying to create in this partner network we're trying to create. And you've seen a few announcements basically towards this goal. Clearly, the COVID didn't help this year in terms of making those guys successful selling or recommending our solutions, that's for sure. But nonetheless, we're not giving up. We continue to push in the same direction. We know very well that it's a multiyear effort anyway. We never thought that by snapping the fingers, the situation would change immediately, particularly because we're really looking at adding growth potential to our own forces. We're not trying to replace the direct sales force with a bunch of partners. We're trying to add the strength of other companies to our own strength so that we can accelerate our growth. So that's still going on, is still an effort, still and will be for the next 3 to 5 years easily in the future for Esker. So we'll keep focused on that -- focusing on that. That's what I wanted to tell you. Hopefully, it wasn't too long and we have enough time for questions. Jean-Michel and I, I think, we'll be definitely happy to answer the questions you might have.

I'm going to reopen all the microphones. So feel free to ask your questions.

This is Andreas Markou from Berenberg. And thanks very much for the presentation and congrats on the results and the resilience of the business. A couple of questions, starting with guidance for this year. Effectively, the updated guidance today feels a bit of a downgrade to -- going from 10% to 9% in growth. Can you explain that a little bit? Is the situation in recent months worse than what you expected a couple of months ago?

I think it's very -- we went into the situation with no experience whatsoever, like us or anybody else. And as we get closer and closer to the end of the year, basically we use the same models and they might slightly change the result that you get. There is that reason. The other reason is it's conservatism.

Yes, but today, you're more conservative compared to what you were 2 months ago.

Yes, that's the reason is that initially, we thought that the pandemic will finish by the end of the summer and then everything would be back to normal starting in September. And obviously, this is not the case. We have seen in our traffic during the month of July and August that we are not exactly back to where it should be. We are like 5% below. Therefore, we don't think that we will be back to a normal situation before year-end. That's why we built this -- I think our interval was like from 9 to 11 last time, and now it's more like around 9.

Okay. No, that's very helpful. And then maybe just confirming that for next year, you're expecting something in the range of 16% organic growth...

Up to 16.

For '21.

Yes, yes, yes.

Yes, something like that.

Around -- between 15 and 20, basically.

Okay. And Emmanuel, you mentioned earlier about the new contracts that you signed in H1 and that the pipeline remains very strong for H2. So if we look at the summer months and the early September days, how is the volume -- the value of new contracts signed year-on-year looking?

Well, it's better, definitely improving, but to be fair, I mean, August, let's say, it doesn't mean anything. I mean there's -- we never -- this is not a significant month. So it's up, but yes, I think, frankly, the busy months in terms of deal closing are probably more September, October, November. And actually even November, a little bit less because of the U.S. -- because of Thanksgiving, but that's -- these are the months that will drive the booking performance for Q3 and Q4. And it's better. July, August are better. But again, if September is not good, then I don't think July and August are going to help. One thing we're sure, so one thing that is for sure. There's a lot of deals that we have in the pipeline. The pipeline has never been higher historically at Esker, ton of deals we expect answers on. And if we don't close them in Q3, maybe we'll close them in Q4. So that is where we are optimistic.

Okay, that's helpful. And then in terms of the partner networks, my understanding is that these haven't really produced any new clients yet, but you are quite optimistic that we should be seeing new contracts from these partnerships that you've already established.

They have produced new clients, but do not necessarily -- the weight of those new clients or the impact of those new clients on revenue is relatively small just because you add a few more clients and then you really have to compare that with all the clients that we've signed since forever. So it takes time for those clients to be signed obviously, but then to be in production and for the volume to ramp up and for the revenue to come, so that's what I'm really saying. And for Fuji Xerox, for example, if I take Japan as an example, clearly COVID didn't help there, that's for sure, but the deals that they're closing, and they have closed approximately 15 deals on the Japanese market, which, by the way, is more than we've ever dreamt of doing ourselves, but they tend to be smaller deals. So not only they will take time to actually hit the revenue line, but they're smaller deals. And actually, we're quite happy about this because as we work on those smaller implementations, we are learning the market. We're learning how to work with Fuji. We're learning the Japanese customers and what they want. We make our product, our solutions, evolve. For example, we're adding new Google technology to our solution to better respond to the needs of the Japanese market. So we have the opportunity to improve our solutions, to improve our operations to better address the Japanese market without having to face huge deals at the beginning. So for me, this is -- even though it's not reflected or it doesn't impact the revenue very much, fundamentally, I think this is really good for the business going forward. And again, we cannot expect that even a partner like Fuji is going to quadruple the revenue in 1 year. That won't happen ever.

And in terms of KPMG Netherlands, any updates there that you can share with us?

Sure. I mean they -- it's a deal-by-deal type situation. KPMG is facing the same situation as we're facing with the end customer, meaning sometimes they delay the decision. So again, we have a big pipeline with KPMG with big projects this time compared to Fuji Xerox. Clearly, much, much bigger projects, but also probably longer sales cycles, particularly given the circumstances. So it's all good, but it's all pipeline.