EVS SA (EVS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the EVS Q1 2020 Trading Update. [Operator Instructions] I must advise you the call is being recorded today, Thursday, the 14th of May 2020. I would now like to turn the conference over to your first speaker today, Yvan Absil. Please go ahead.

Thank you. Good afternoon or good morning, everyone. Welcome to the EVS Q1 2020 Trading Update Conference Call. Today with us, we have Serge Van Herck, CEO, CEO, sorry; Benoît Quirynen, SVP Strategy; and myself, Yvan Absil, CFO. So we'll first go through a presentation that is available on our website in the Investors section on the quarterly financial results, and this presentation will be followed by question and answers. Note that this presentation and this conference contains forward-looking statements with respect to the business, financial conditions and results of operation of EVS and its affiliates. These statements are based on the current expectations and beliefs of EVS management and are subject to a number of risks and uncertainties that could cause actual results or performance of the company to differ materially from those contemplated in such forward-looking statements. EVS undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. And I will hand over now to Serge Van Herck, CEO of the company, for the international presentation.

Thank you, Yvan, for that introduction. So let me go effectively to the presentation and to the agenda of the presentation, that is Slide #3. So today, we'll talk about our trading update, of course. With the perimeter, as you all know, it's up to now. Then we have my colleague Benoît, who will talk about an important acquisition that we have recently announced on May 1, the acquisition of Axon and we'll end effectively with a slide about the new perimeter taking Axon into account. So let me go to Slide #4. I well, we give an outlook and guidance for 2020. So we all know we are living a very special moment, of course, and we see that due to the coronavirus, our 3 market pillars of revenue being the Live Service Providers, the Live Audience Business and the Big Event Rental are heavily impacted by what's happening at this moment in time. Regarding the Big Event Rental revenue, you've seen that we announced a few weeks ago that due to the delay of the euro and of the Olympics, that revenue of about EUR 12.3 million would shift from this year to next year. So that is clearly confirmed as we speak. It will not be in this year, those events and the revenues, of course, will not be recognized this year. But we can't -- we expect that this will be the case in '21. So the message here, those are not canceled events. And this is not revenue that is lost, but which is indeed shifted in time. So typically, we have good years in the even years. So and uneven years are less good, this time, it will be the other way around. And we expect the 2021 will be definitely better than 2020. Due to the cancellation of the sport events around the world, I'm sure you have seen all of that as well. We see that many of our LSP customers, the Live Service Providers customers have heavily reduced their level of activity. And they have a lot of trucks, which are just standing still. And their priority at this moment in time is to keep their staff ready for the recovery period. On the spending side, definitely, at this moment in time, many of them have just stopped or postponed to a later date any acquisition of new equipment. When we talk about our LAB customers, sorry, our Live Audience Business customers. We see that they are suffering as well. Some of them like stadiums, universities and college, of course, also have a situation where they have very little activity and that they are not allowed to organize any live event in their premises. On the other side, we see some of our customers, mainly in the news broadcast centers who see peak not only of audience, but also of work. But on the same time they've seen over the last weeks, some of their revenues, they were advertising revenues being challenged as well as some revenues from advertisers did not come through in this period. So for them, a special situation. There weren't a lot of audience, but on the revenue side, the advertising side, they see some loss of revenue. Hopefully, that will change in the next weeks. Now on the next point, we see that certain customers expect that the potential future concurrence of various live events will have an impact on them. So they are preparing for restarting. And in certain cases, they expect that the demand for capacity, both on the human side as on machine side will be higher than what they have available. So potentially, we'll see that some of those customers will need to acquire more equipment to face that compressed agenda. We took here an example as the 8 months international cycling season is now compressed to 3 months. So that definitely will put stress on those partners, those customers who are producing those various events. Last but not least here, of course, due to this coronavirus environment, we see a lot of demand for remote production. Especially for having production being also done with employees at home. So having EVS operators operating our service remotely from home. That's a new demand that has, for obvious reasons, been very high on the agenda for the last weeks. And we, indeed, are trying to serve our customers and provide them with solutions to operator our technology remotely and more specifically from home. So at this stage and given the above dynamics and uncertainty about how the crisis will unfold in the next weeks and months, we have, indeed, we are not in a position for the moment to give a revenue guidance for this year, for 2020. On the operational expense side, however, there, we indeed announced that we expect to slightly be below last year. So our objective is to keep operational at the similar level and take definitely no specific measures to heavily reduce costs, but to continue investing into our future, by, for instance, keeping all our engineers working and making sure that the new products and solutions will come on the market in the next weeks and months ready for undertake of the new activity period. So Slide #5 impact on dividend policy announced in 2018, and then I'll leave the word to Yvan to give us a detailed confirmation about this one.

Yes. And so as you have seen in the prior communications, given the on market conditions, the Board of Director of EVS has decided to cancel the final 2019 gross dividend of EUR 0.50 that was forcing to be paid in May 2020. Of course, this will be subject to a decision to the General Shareholders' meeting, which takes place next week. Remember that an interim dividend of EUR 0.50 has already been paid in November 2019, and today, the plan is still to deliver the gross dividend of EUR 1 for the fiscal year 2020 and 2021, as previously communicated, of course, subject to market conditions and evolution of the situation.

Thank you, Yvan. So let me go forward to Slide #6, NAB that important trade show in April in Las Vegas, was, of course, canceled, but we have taken measures to find alternatives, if I may say this in this virtual world. And here you see some pictures of colleagues in our Hong Kong office who are indeed demonstrating remotely with cameras and with various teams or Skype calls, our new capabilities, our new products to our customers. So NAB has been canceled, but replaced by hundreds of private interactions with customers all over the world, being with calls, video conference sessions, remote demonstrations and interactive and personalized training sessions. And we are quite happy with the feedback we get during those calls and sessions. Next slide, #7, key wins and achievements. Although indeed there was an impact of the crisis of the corona crisis. In Q1, we've been able to win some very interesting and important deals for large deployments of XT-VIA platform for several customers in Asia Pacific, in Europe, but also, we have been able to win an important U.S. sports federation media center based on our XT-VIA technology. We had some interesting wins for DYVI for eSport in Western Europe. And last but not least, we have been very instrumental for delivering the Super Bowl in the U.S. a few months ago. So they were our latest technology has been used with XT-VIA as well to accelerate the transfer of information of those more than 100 cameras, which are in that stadium. And we've been also demonstrating our latest artificial intelligence technology on pylon cameras to artificially increase the frames per second from 60 to 180. So effectively, meaning that we create images between images and which result in a very cool replay experience. Going forward to Slide 8. And here, I'll leave again the floor to Yvan.

So if we look at the EVS perimeter or traditional EVS up to April 30, we had an order book, of course, then excluding Axon. So order book, remind you, it's including the revenue year-to-date that we have recognized, but not disclosed yet. And all the open orders that we have that will be delivered and recognized as revenue in 2020. So today, we have a bit less than EUR 40 million of order book, which is minus 7.5% versus the $42.8 million we had at the same period last year. Of course, all this excluding big event rental, and I'll remind you that in first half of the year, first quarter of the year, we have an additional EUR 1.1 million of revenues that have been recognized, delivered, invoiced and recognized for a big event that took place in early 2020. So this one is also done, and that will also be reflected in our full 2020 numbers.

Thank you, Yvan. Going to Slide #9 and introducing immediately Benoît, Benoît Quirynen for explaining us the Axon acquisition. But before doing so, let me just add the fact effectively that we are quite happy with this transaction. It's a difficult moment, of course, that this has been done. But we fully are convinced that this transaction will help us further grow into the future. So in that respect, I'm happy that also our Board has fully approved and fully supported the decision to go forward even in those very difficult times. To perform and announce this Axon acquisition. And I'll leave you the word to Benoît, who will indeed give us some more explanation about this deal and what it is all about. Benoît, the floor is yours.

Thank you, Serge. Good afternoon, everyone. So in fact, in line with our play forward strategy, we want to increase our blueprint, and that's the main reason of the acquisition of Axon. So who is Axon? So if we move to Slide 10. In fact, we can see that Axon has a quite rich product portfolio with strong products. And the one on the top is Synapse, and in fact, it's a robust [ glue ] and multiviewer environment to convert video and audio signals. And it's largely deployed in both car centers and in OB Van. They have as well brought to EVS, the Cerebrum. Cerebrum is a centralized control system, which is able to configure, monitor and control a wide collection, hundreds of different broadcast systems and devices from various vendors. It means that Cerebrum is used to configure not only the Axon product, but the products for many other vendors. And then Axon worked on the last few years on the Neuron product. And the Neuron, it's 100-gig IP, audio and video, data stream processing platform, supporting various use case deployed [Audio Gap] gives even more flexibility than the Synapse product in terms of deployments of different kinds of use cases. So Neuron is disruptive in several ways. It's a platform with different use cases that can be deployed to maximize the [ reuse ] and scalability. Second, it's 100-gig platform versus many 10-gig, 25-gig, 40-gig alternatives. And this is, therefore, a technical challenge. And this brings some benefit in terms of total cost of ownership on the overall infrastructure, especially considering live IP switches and routers. And then different use cases can be deployed easily to leverage the platform benefits. And the chassis is compliant with both OB facilities and IT data centers. We already sell Neuron for specific use case today. And of course, many other use case will follow and will be deployed on top of this platform. So a company selling history made products, 2 different kinds of customers. So the customers are mainly located in EU and Asia Pacific. And they are both from Live Audience Business and Live Service Providers. Compared to EVS, in fact, Axon is selling more through sales channels through integrators, making the deployment of the products and also to resellers in the different regions. So in terms of market share, in fact, if we analyze based on our data, the presence of Axon on the Slide 12. In fact, if we analyze the presence of Axon in large OB Vans, we can see that Axon is present in about 30% of the OB Vans events with more than 12 cameras. Present with multiviewer and/or the stream processing. So it's a few percent behind Evertz or GV, mainly due to the limited coverage, geographical coverage. But if you consider the world, in the area where they are present, they overperform compared to these competitors. So this means that it's very complementary. It's another set of products than the current portfolio of EVS, but very complementary and addressing the same kinds of customers. Now in terms of revenues, I'll let Yvan comment on the Slide 13.

So and if we look at the key financials of Axon in the last years, as they are published on the Dutch cameras or chamber of commerce. And that's reflecting before any IFRS adjustment or before any alignment to the EVS policy. So we can see the evolution of the revenues from 2016 to 2018, at which point in time, they brought some new management on board that will help us also through this integration into this transition, which represent at the end of 2019, about EUR 17.5 million of revenues. They have a gross margin of about 50%, sorry, the impact on the gross margin coming from the introduction of the Neuron product, which was at the early stage in 2019, and with low volume, then not the level of pricing we would like to see or profitability that this would like to see. And in terms of EBITDA, after some losses in the year 2017 and 2018, up to EUR 2 million of loss, they are breakeven in 2019. And of course, we'll talk a bit later on the synergies we expect to achieve and how this -- the contribution that we could expect from Axon in the coming years.

So if we move to the Slide 15 -- 14, sorry, Slide 14. In fact, we can see that, in fact, the Axon acquisition is fully in line with play forward. So we have different kinds of criterions to analyze the possibility of acquisitions, targets and in fact, these are listed on the slides. First, we need companies that are complementary to the EVS portfolio and that complements the solution blueprint with minimal overlap. And on that, it's a check. It's fully implements, in fact, these criterions. Second, in fact, we want to onboard companies that are selling other products to the same customers. And it's, again, the case as we have seen on the slides before. Third criterion is about the size. So we do not want to onboard companies that exceeds 100 persons. Here, we have a company which is a bit more than 80 persons, which is already significant for EVS. So we want to grow step by step. And here, in fact, again, Axon matches the criterion. Then we also consider that after the synergies, we will have a profitability and that is a priority. And so the fact that the EBIT was, let's say, humble for the previous year is not a blocking factor for us. And so we consider that we will be able to leverage the synergies to improve the profitability. And finally, last but not least, in fact, the technical and the product expertise is really significant in Axon. That means that they know the market, they know the product, they know the technologies, and this will help the broader EVS to really have a better performance and be more relevant even to the customers. So and the nature of synergies that we are expecting is geographical synergies. And typically, on that front, we expect to sell more Axon products on the NALA region, not only NALA, but NALA is certainly one of the examples where we can sell more Axon products. In terms of portfolio synergies as well so that we can sell more and broader solutions so that we can really complement the blueprint. And then in terms of expertise, as already described, we feel that Axon is really complementary. If I move on to Slide 15. In fact, Slide 15 was shown during our call in February. And that, in fact, addresses the different kinds of market trends from -- listed by Devoncroft. In the big broadcast survey, so mainly focused on big broadcasters. And they have defined there the different kinds of priorities. And on the 2 columns, you can see the evolution of the priorities from 2017 and 2019. And in fact, on this slide, we have, let's say, highlighted in green, the points where Axon contributes to solve this trend. The first one is, of course, IP networking because they bring a product Neuron, which is really a strong IP processing product. They bring as well Cerebrum. And when we mix it with Score Master then in fact, we come with the most modern solution for IP media infrastructure on the market. Thanks to Cerebrum as well, which is a centralized control system, we can have more automation of the workflow. Third point, which is important. In fact, Neuron also brings to EVS the capability to enter in the audio market. That means that in Neuron, there are some use cases, some software that can be deployed on the platform to solve all your issues and to bring nice audio routing and processing. And then we expect as well that Neuron will help us globally to better address the HDR problem globally. And help our customers as well to solve some of their issues on cybersecurity and certainly on remote production, where Axon also brings some use cases to be deployed on the Neuron platform that should ease remote production. If we now consider the blueprint on the Slide 16, then we see that, again, compared to the slide that we've shown -- that we have shown in February, you see a new category, which is media infrastructure based on the Axon products, so Synapse, Neuron and Cerebrum, but as well mixing and embedding the Score Master, which is the SDN-IP orchestrator. So that means that in terms of tools, in the hands of operational teams, in fact, we enhance these tools. So that we can have a central configuration, Monitoring & Control of all the broadcast and media infrastructure. That means that we control not only the EVS product, but also third-party products. And in terms of production platform, we bring resource management for let's say, controlling all these third-party devices. And so we integrate in terms of configuration, these third-party devices. And in terms of globally, the modular infrastructure, we bring Neuron, which is typically helping in terms of conversion, transformation, contribution and Cerebrum in terms of monitoring to really be strong assets in this area of modular infrastructure. And finally, in fact, we also enhance our capability to design the workflow, design the systems as part of services, which are a strong part of where we want to strengthen the EVS position in the future. So we see that from a market trend perspective, on Slide 15 and from solution blueprint perspective, Axon is contributing to the strategy of EVS. I now let Yvan comment on the acquisition price, Slide 17.

So as we have said, we have acquired Axon for EUR 10.5 million on a cash-free debt-free basis, which represent 0.6x the revenues of 2019. There is also an earn out, which can amount up to EUR 2.5 million, which is based on financial metrics, which is limited to early 2021. Just to note as well that prior to this acquisition at the end of April just before paying for the acquisition, EVS up EUR 64 million of cash available. And still, we are considering to finance some of these -- part of this acquisition through debt, which would allow us to leverage our balance sheet, which will be left out of that at the end of this year because we will have finished repaying the loan for the building in which we are sitting. And even by doing this debt financing, we will maintain still really attractive ratio and a really strong liquidity position because we will have less than 1x debt-to-EBITDA ratio for the EVS group. We'll have a really low debt-to-equity ratio, and we'll still be left with a net cash position of about EUR 36 million after the transaction. So that's on the acquisition price. Now the priorities.

Okay. Thank you, Yvan. So let me continue on Slide #18 with the priorities that we have in front of us. Well, of course, at this moment in time, despite COVID-19, we want to ensure business continuity on both sides on the EVS and on the Axon side. So that's our primary goal at this moment in time to make sure that we can deliver upon the promises that we made to on our customers on both sides. We are preparing for the integration as we speak and with various colleagues on both sides in order that we can leverage synergies from next year onwards. And as we speak, we are also accelerating features related to remote production in order to better serve our customers who want effectively to operate their service from whom in many cases. So those are some of the major priorities at this moment in time. When we look to revenue synergies for both companies on Slide 19. As was said by Benoit, we look to further expand the geographic footprint of Axon. And definitely, that is the case in Northern America and Latin America where we have with EVS, a very good access to market, but where we see that Axon has nearly no revenues or nearly no revenues. Second important focus will be the integration of certain of our technologies. More specifically a Cerebrum that will be integrated with our EVS Score Master technology. So that's a very nice complementary product that will generate a lot of interest from customers. And last but not least, we'll be engaging with key clients on the future IP and remote infrastructure opportunities. So with certain of our major customers, we're looking ahead to look at the opportunities for those future IP and remote infrastructure projects. Continuing on Slide #20, when we talk about cost synergies, this is not the driver of our acquisition. But definitely, there are some presence. On the cost synergy side, we see about EUR 1 million in '21 that we will be able to cut away, mainly on the marketing side, when we talk about NAB and IBC, assuming they will still exist next year, of course, but if they do, we already expect that we'll be able to save on joint marketing costs. And we see some other opportunities as well in the facilities and infrastructure logistics. But on the other side, we expect that part of those synergies will be offset by increased operational expenditures in order to enable that revenue growth. So we will be increasing or reinforcing our EVS presales/consultancy team in order to help, for instance, in North America, sales of those products. And we also expect on the R&D side, some increase to further develop our Score Master technologies and to make them integrated to the Cerebrum technology of Axon. All right. And Slide 21 is back to Yvan.

So on the outlook of the synergy and how will that impact the financials of EVS going forward. So we will start consolidating the numbers from Axon into EVS financials as of May 1, 2020. Working through the price purchase allocation as we speak. This definitely will have a significant transaction for EVS, have significant transformation of the EVS activity because we increased the size of about 20%, looking at the measures in terms of revenue and number of employees. And finally, the synergies that we just described before and many on the revenue synergies, we have the objective to reach between EUR 6 million and EUR 10 million of additional EBITDA by 2023, which will lead to an accretive earning transaction as soon as 2021.

Okay. Thank you, Yvan. We go to Slide 22, and I give back the floor to Benoit.

Thank you, Serge. So in fact, we do an acquisition, and we all know that in an acquisition that the integration, which is the most important. So in fact, we are assisted by post-merger integration consultant to proceed with this integration and make it -- a success out of it. And so we plan the integration with different kinds of waves in fact. And of course, the integration management team has been set up prior to the acquisition. And then we have 4 weeks. The first one is dedicated to stabilization, defining the [ assisting ] practices and also further refine the macro planning so that we can know what we will do in the next waves. And then we'll have a second wave, which will be to prepare the IBC, which will be focused really on the short-term synergies, as explained by Serge. And then we will prepare the year end with the year (sic) [ wave ] 3. And then on the wave 4, we target to reach the lean operation when all the systems are integrating, especially considering the EVS ERP transformation program. So that means that for this integration, we work on -- as described on the Slide 23, with integration management office, with the different kinds of work streams, some of the work streams are functional, some of the work streams are transverse and then we want to highlight here that we have, in fact, 2 specific work streams, which are really important in the context of this integration. It's about the culture. So we put a specific attention on culture and on communication so that the integration process is as smooth as possible and that everybody is conscious about the cultures of the neighbors, in fact and their colleagues.

Thank you, Benoit, for that part. Let me add to this that you see here that we are very serious about the integration of Axon into EVS, of course. But we're also preparing for the future, meaning that we could do other acquisitions in the future. So we are looking indeed to make sure that this becomes a process and that we can integrate various companies in the future. So this is showing you that we take a lot of -- we put a lot of effort to do this in the right way. Good. Going forward, last point on the agenda is the new perimeter. And there, I give back the floor to Yvan, Slide 25.

So unfortunately, the new trading updates or guidance we can give you at this point in time, given the COVID-19 situation, we cannot provide any revenue guidance for 2020. Serge explained, that has impact for our customers on both sides for EVS and for Axon. So we will hopefully be able to give some more information later during the year as we publish our H1 results. But for the time being, we prefer not to give any guideline. And the only one is, except the extraordinary integration costs due to the acquisition and the Axon cost itself, we expect the operating expenses to decline slightly compared to prior year. This brings us to Slide 26 and to questions and answers, correct. So operator, if you can start taking questions, please.

[Operator Instructions] We will now take our first question.

Guy Sips, KBC Securities. Can you elaborate a little bit on the competitive landscape of Axon? And is it fair to say that together with Axon, it will be much easier for EVS to compete with Evertz, especially in the U.S. as the portfolio is now wider?

Okay. Thank you, Guy, for that question. So I can confirm effectively that this combination will help us in the U.S. to further go to certain markets where up to now it was difficult for us to enter. Especially because the product portfolio of Evertz in stadiums is broader. So this acquisition effectively will help us in certain cases, effectively, to be better positioned and to have higher chances for winning certain deals. So the answer is, yes.

And what does the Axon products differentiate from competition like [ Lawo, AvL ], Evertz, what makes the Axon products, let's say, more specific and better?

So the first one is Cerebrum and Cerebrum typically is a controlled system, which drives a lot of devices and which supports the fact that all this configuration and control can be done in a multiuser environment. That's one of the differentiators, means that you can have different persons. Being located in the current location, even possibly through different mechanics to cooperate and configure the overall system as a team, which is not necessarily possible with some of the other control systems. Another differentiator is the Neuron platform where, in fact, the Neuron platform is one of the first 100-gig on the market. And its approach to be modular. That means that you can deploy different kinds of use cases and on the morning, in fact, on the same chassis, you can run a conversion, let's say, from 4K to HD or HD to 4K. And on the afternoon, the same machine can be used for another use case, either for audio processing or for HDR conversion depending on another workflow. So it gives a lot of flexibility in terms of deployment. So the combination of this 100-gig and this software kind of capability is today unique on the market.

Okay. And then the last one is yes. Last one is on Slide 16. So with Axon, you're adding now media infrastructure on this slide. Is it the -- yes, to go to add more and add lines in that chart? So more third-party IPs? Or how should I see that evolving?

In fact, media infrastructure, it's a domain, which is evolving quite, let's say, in a huge way because of the IP. So it's not necessarily fast, but it's coming -- the IP is coming and will force a complete reinvention of the media infrastructure. We think that if we combine the Cerebrum, the Score Master, the Neuron and in fact, also the IP switches, the live IP switches, we can offer a comprehensive environment for the media infrastructure. So there are possibly some other components that could come in the future. But with the products that we have, we have already addressed a very significant and large part of this, let's say, segment.

[Operator Instructions] We will now take our next question.

Yes, David Vagman. Can you read me properly?

Yes, David.

So yes, on the acquisition, could you help us understand the level of the, let's say, integration costs that you might have in 2020? And then in 2021, when you say that the transaction, the deal should be [ cascaded ]? What are basically your core assumption? Then let's say 2 questions a little bit more short-term on action? And then maybe another question related to Axon. I see that the sales will decline, the gross margin has also been under pressure. Could you help us understand why that was the case? Is it related actually to legacy products, maybe kind of progressively replaced by new ones, maybe at lower margin? So we see the sales jumping back up, but actually gross margin are not coming back at the same level. And then maybe on the last question on this transaction. Did you have a lot of competition actually for buying them? And given that it's nearly a perfect fit, I would say, for EVS. Yes. Basically, did you consider buying them a long time ago? And how are you pricing the COVID-19 [ lift ] in your valuation?

Thank you, David. So I'll take -- so concerning the acquisition costs. So the main acquisition costs are rated soft. Some external advisers that are helping us and guiding us into the acquisition. So Benoit talked about the structure. We are trying to put in place with the different work stream with the different processes and systems we want to build and to learn ourselves to go forward and to really make a success of this integration, but also learn for the -- as an organization to be able to absorb or to handle future other acquisitions. So that's the first type of cost. And now of course, some additional costs of just rebranding, merging some systems where also there, we might need some temporary external helps in hands, I would say, in the engine to make it work faster, for example, just merging IT environment, merging or moving offices. That will happen over time, and most of them should happen in this year with a small portion maybe in 2021.

Can you quantify them? Just -- or say, if it's really marginal?

It's -- I would say it's really marginal. I would say it's not -- it's a couple of hundreds of thousands of euros, but it's not that -- it's not in millions, that's for sure. The only additional cost that there might be, but that's in case we need to do some redundancy, but that's not once again a goal of the synergy of the acquisition. But that's the additional cost it would have. And once again, we don't speak about big numbers at this point in time. And the legal fee, of course, and that's one of big fee that we had -- although it was a cheap fee. I think we manage well all of you.

Then on the gross margin. So indeed, gross margin has been reduced over the last years. And if you look at -- as I mentioned, in 2019, they introduced a Neuron as the first version and the first product design that they wanted to bring to the market. This product is still evolving, and we expect to gain some and certainly also leveraging on some of the supply chain of EVS that might not take place in 2020, but later, to have some better cost of materials on some of these equipment to be further investigated. But the impact on gross margin 2019 was certainly due to the low volumes and the first releases of the product that was the first objective for Axon to bring the product to the market. And then refine and redesign and rethink about the detail of the components there. So that was really what's driving some of the gross margin pressure in the 2019 environment. Now in terms of competition of pricing in COVID-19 -- or sorry, Serge you want to take that? No?

No. I want to take that question.

Okay. Serge will take that question.

So it's about the transaction itself and who else was interested in the company. So we've seen a certain consolidation happening in our industry, and we've seen that last year, end of last year, 2 other potential companies who might have been interested in Axon have acquired each other. So we think that, that helped us to reduce the number of competing companies to buy Axon as some of them who we thought could have been interested just had done a transaction amongst themselves. So that definitely helped us to -- well, well, it helped to reduce the competition in the race for acquisition if I may say so. And the fact that we were in the COVID period during the final stretch of this exercise has helped us to make sure that the price is fair. That the acquisition price is fair?

Yes, in an overview then, let's say, I understand the sales comments, is it related to the [ or no ]? Or is it -- or if you try to price it in basically because it's quite risky, let's say, period for which everyone has basically little visibility, at least in the short term.

Well, clearly, the -- or not is there to we hope that we all pay the earnouts, by the way, of course. But if indeed, things are less than expected due to the COVID, then there will be no earn-out. So that is clearly a way to mitigate part of the risk.

[Operator Instructions] We will now take a next question.

Just an additional question maybe on the on OB Vans on the market share, actually. When I look at your chart on Slide 12, I see that you have in the installed base, I think of large OBVans, you have 88% market share. I got the impression if maybe I'm wrong, that this is lower than it used to be. I had the impression you were above 90% before. Are there sort of trends? Are you -- is there something going on? And then maybe another question, a follow-up on Axon. Could you help us understand the addressable market size of the 3 markets of Axon basically for Cerebrum, Neuron and Synapse.

So the answer to your first question. So I think this figure of 88% was already part of the package in February. So like it's the same figure because it's based on the same kind of set of data that we have. So no surprise on this side. So it has been higher in the past, a bit above 90%. So yes, it evolves, but it evolves slowly based on the let's say, the different kinds of opportunities that are appearing on the market as well. So it depends also on the years and things like that. It's a few percent in a small market. So you can very rapidly have an impact in terms of percent because the number of deals is quite reduced. So -- and on the second, in fact, the second question is about the global addressable market. So it depends, of course, how you define the addressable market in terms of regions, in terms of perimeter as well. So it's quite difficult to give you a figure up to this stage because it depends on the perimeter. So for example, we have Axon selling sometimes in some customers on the playout systems. So it depends on -- if you consider the playout as part of the addressable market or if it is really a structural way to -- that we see Axon products evolving in this market. So I will not give a figure like that because it depends on the different kinds of perimeters that we can consider.

Okay. And if I can just ask a quick follow-up on EPS accretion in 2021. Basically, what is the core assumption? Why isn't it in 2020, and then in 2021? Is it purely driven by some cost reduction already you're discounting or already modeling some applying synergies.

So no, as we mentioned, the main synergies are coming from the revenue synergies. So there is a little, really little cost synergies factored into the 2021 plan. Or 2020, 2020 will definitely be acquisition cost as we mentioned and some non-cost synergy time to put them in practice basically. On the revenue side, it's also the same. It's more time to put the cost -- the revenue synergy in practice. Certainly as we speak about media infrastructure, it's a complex environment. When you bring 2 solutions together and the sales cycle might be sometime longer if you want to have the comprehensive solution. To bring the 2 products together. So that's why we have factored in our plan as of 2021 only some synergy that are coming, as we mentioned in the blueprint that are coming from the combination of both products. So we will sell more Axon products, but we will also sell more EVS product by providing the combined solution of the 2 companies. And that's what we have factored as assumption in the different markets that we have reviewed and discussed with our sales team to come up with these numbers and making this accretive as of 2021.

And with sales cycles of at least 6 months, that shows us that when we start here, and we add 6 months to now, we come to the end of the year. So we prefer to be cautious and clearly indicate that the full synergies will only start us from beginning of next year. Yes. And I can add that the feedback that we got from customers all over the world was quite positive. So that strengthens our conviction that we made the right decision. So we're quite happy. We have the positive feedback that we received from various customers. Some customers in North America had been looking to Axon technology, but we're not willing to buy because there was no local support, and they saw Axon as a too small company with a too high risk. And while now, indeed, they tell us well, we're under the EVS umbrella under the EVS flag for us, it's definitely now an opportunity. We really can and want to look at.

There are no further questions at this stage. Please continue.

Okay. Thank you very much, everyone, for your time. Thank you for your participation. In our corporate calendar, we have the annual ordinary shareholder meeting followed by the extraordinary shareholder meeting next Tuesday, May 19, and we will publish our H1 2020 financial results, including the first consolidation of Axon numbers on August 27. Thank you again. I wish you a great day and stay safe. Bye-bye.

Thank you very much. That does conclude the conference for today. Thank you for participating. You may all disconnect.