EVS SA (EVS) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the EVS H1 2020 Financial Results Conference Call. [Operator Instructions] There will be a presentation followed by a question-and-answer session. [Operator Instructions] I also must advise you that this conference is being recorded today. And I would now like to hand the conference over to your first speaker today, Yvan Absil. Thank you. Please go ahead, sir.

Thank you. Good morning or good afternoon, everyone, and welcome to this first half 2020 results conference call. Today, we have with us, we have Serge Van Herck, CEO of the company; Benoît Quirynen, SVP, Strategy; and myself, Yvan Absil, CFO. We'll first go through a presentation, which is available on our EVS website in the Investor Relations section in the quarterly news. And then we'll follow this presentation by a Q&A. Note that this presentation contains forward-looking statements with respect to the business, financial condition and results of operation of EVS and its affiliates. And these statements are based on the current expectations or 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 revision to these forward-looking statements to reflect events or circumstances after the date thereof or to reflect the occurrence of unanticipated events. So having said that, I will now turn the mic to Serge for the first introduction and agenda. Thank you, Serge.

Thank you, Yvan. Good afternoon or good morning to everybody who is listening to this business update for our first half of the year. I'm on Slide 3. So the agenda looks as follows. I will talk, of course, of our business update. We'll have a financial update. We'll talk about guidance. We'll present our conclusions. And then you'll have time to listen to your questions, and we will try to provide the right answers. Slide #4 shows the highlights of H1 of this year. Of course, H1 of this year has been very heavily impacted by COVID, and we'll talk a lot about COVID and our industry during our session. But all in all, we're not too unhappy with the final results due to the circumstances. When we look at the revenue, we had EUR 39.6 million. That's including Axon revenues that we acquired as from May 1. If we look year-over-year, that means minus 3.5%, with big event rentals included. And when we take out big event rentals, that means minus 4.8%. Those are the numbers including Axon. When we look to a similar figure without Axon compared to last year, we see that revenues are at 30.7 -- at EUR 37.8 million, which means a decrease of 9.3% year-over-year, excluding big event rentals here. So that's on the revenue side. Of course, COVID has a major impact on our industry on sport events, so we see an impact on revenues. But we are happy to see still some key wins even in Q2 which are feeding a good order book especially in our North American, Latin American region and then especially for our Live Audience Business market pillar. On the operations, we have no major impact on the cruise speed, meaning that we kept everybody on the payroll and that we continued our operation. We have 50% of our colleagues working in R&D, and they all did kept on working on development of new products. With COVID still, we have some significant OpEx savings. We will have more details on that coming from Yvan in a later slide. And when we look to our gross margin, we see that slightly decreased due to lower margin on Axon products, but profitability maintained, thanks to lower OpEx. Talking about profitability, for the EBIT figures, we see a result of EUR 3.3 million, which is minus 3.7% year-over-year. And this includes the figures from Axon as from May 1. Regarding the acquisition of Axon that we announced on May 1, and we feel that the integration is progressing well. We have passed the first integration waves, and Benoît, who is also on the call, will further give us more details about that later on. We have launched LSM-VIA in May, which is an important new remote control. We expect that to become the new de-facto standard as the replay controller in our industry. Up to now, we have more than 100 remotes ordered in the first week. And we see already the first ones being used for live production, and that's in the context of a remote production. We see, of course, the major contracts of big events, and we announced that earlier, have been shifted to next year, but we are happy to say that they are secured indeed for 2021. So those are some of the most important highlights for the first half of the year. Continuing to Slide #5, talking about the business update, and we'll talk about strategy. We'll talk more specifically about the COVID impact. We'll talk about Axon integration status. We'll talk about the first productions with the LSM-VIA. And we'll talk about the key contributions, key wins from different pillars. And that brings me to Slide 6, and I will ask Benoît to present the EVS strategy highlights.

Good afternoon, good morning, everybody. So as already presented during previous calls, EVS strategy is orchestrated around 4 axes. So we deliver standard live video solutions with the ability to deploy customer workflows to make operation easier. We want to grow our customer base, extend our footprint, mainly in news and entertainment solutions and also specifically for smaller customers, also increasing our sales through channels and different kinds of partners. We want to leverage software to transform our business model to more OpEx but with no price sacrifice. And we want to broaden the EVS portfolio. We consider the EVS solution blueprint that we have designed in the PLAYForward exercise. And we want to extend the portfolio, thanks to strategic partnerships and through acquisitions. So I now pass the microphone to Serge, who can address the impacts of COVID.

Yes. Thank you, Benoît. So I'm going to Slide #7, talking indeed about COVID and the impact on our business and operations. So talking about impact on revenues, order intake and order book. We had the first quarter of the year which was quite strong. But then definitely, we saw the impact of COVID slowing down our revenues and order intake in the next part of H1. Most revenues from big event rental -- sorry, most revenues from big event Rental have been postponed to 2021. We see that the order intake over that period has reduced 7.5% year-over-year. But on the other hand, we see that our order book, which is also including Axon, on June 30 was at EUR 33.1 million, which is a 15% increase year-over-year. Of that EUR 33.1 million, we expect EUR 19.6 million to be recognized as 2020 revenues. Further we saw, of course, a slowdown from revenue recognition in H2 due to the COVID situation. But we see that certain orders are also covering larger multiyear modernization projects which are, in fact, also generating revenues for the next years to come. Another important topic is that we see a significant increase of working capital, and Yvan will further explain that in one of the slides later on, but here are some elements that are explaining that. We have some payment delays that have been afforded to a few customers, loyal customers who are facing cash challenges, of course, at this point in time. We see some projects being delayed due to the fact that we cannot go on site. And another topic which is important to note is that we've been securing inventory levels for the year before the crisis and for the major sports summer events. So that has increased indeed our inventory level. Impact on road map, what do we see? Well, due to COVID, we have taken decisions to reprioritize certain of our product developments and especially regarding remote production. And we'll come back to that just one slide later. Impact on operation. Nearly all company, nearly all team members have been working from home during more than 3 months. We're gradually coming back to the offices and making sure, of course, that we respect all health recommendations. On the R&D efficiency, we see only a minor impact. That was especially the case in the beginning, but seeing how everybody has been going through the situation, we feel that the impact is very low on the efficiency. But some engineers gave even a positive feedback on the possibility of homeworking, so I'm sure this will have consequences for the future. We see no major impacts on the manufacturing and supply chain. We continue serving our customers with normal delivery times. And last but not least, of course, the trade shows like NAB and IBC have been canceled and have been replaced by virtual shows and by remote demonstrations. Going to Slide #8, we'll talk about remote production. You've been hearing us talking about remote production for many years, but in this case, I have to show you the different flavors of remote production. And due to COVID, we have to know that there is an additional flavor to remote production. So on the left, you see the distance remote production, where the equipment is still at the event site but the production is in a central site, typically a broadcast center. In the middle, you see the centralized production where all equipment is also at that central facility. That is what you typically saw until a few months ago. But on the right-hand side, you see the latest new flavor of remote production, which is the distributed production situation where typically a staff is working from home and where you have equipment that can be in the venue, that can be in the broadcast center, but really, it's being operated remotely by operators from home. So this -- definitely, this COVID-19 situation has accelerated this case. And also on our R&D road map, we took some decisions to make sure that our customers were able or will be able to use this kind of distributed production in a more efficient way. Going to Slide 9. NAB and IBC have been canceled. But in the meantime, we took the opportunity indeed to do remote interactions with our customers. We've built several setups so that we can demonstrate our technology in such a remote environment. And in fact, we are not too unhappy with the result that's coming out of that. I'm sure that what you've been learning here, we will be using that for many years to come. On the right-hand side, you can see that more than 1,000 engineers in the meantime have been trained on Cerebrum. Cerebrum is one of the technologies that we have acquired with Axon and that it's typically used for monitoring and control of customers' infrastructure. So we are also quite happy to see that many people, that many engineers have been trained in such a short notice on the Cerebrum technology. Going to Slide 10, I will pass on the word again to Benoît.

Thank you, Serge, again. So we presented Axon during the previous session, but I will make a very short summary here. So the Axon products are about media infrastructure with sign-ups. And Neuron, being especially around stream processing, Neuron is really a very strong platform with 100 gigabytes, and it's really ready to go with the future trends in the domain. It implements a kind of virtualization already on hardware resources. So it's about power and flexibility. But we have as well acquired, through the acquisition of Axon, Cerebrum, which is a very powerful and flexible control system. So globally, we are really well equipped in the domain of media infrastructure, thanks to the products. Axon customers has the same profile as EVS customers. However, Axon was mainly present in Western Europe and APAC; and in APAC, mainly in China. With EVS, now of course, all these wonderful products have access to the broad reach as well through EVS sales force. And especially, we expect synergies in U.S., where Axon was not present or with very low presence. The Axon sales are -- were implemented before with channels and integrators much more than in EVS. And we are learning on this side as well because, as part of our strategy, we want to grow our sales through channels and partners. And so we are learning in this domain, thanks to the addition of new colleagues who are experienced in this domain. And Axon presence is in the OB vans is very strong. It's only a few percent behind major players. But if you consider the fact that Axon was limited in terms of geographical coverage, then they were certainly above competitors in the region that were currently served by the product. So very good company with very good products. If I move to the Slide 11. In fact, these products are complementing the solution blueprint designed by EVS during the PLAYForward exercise at the beginning of 2020. They had the media infrastructure and some key elements within the production platform and the modular infrastructure with the stream processing and the control system and the capabilities to support the customer the same way EVS does really with high quality of service and high quality of support. During the last session, we presented you the Axon integration plan with different waves. So the Wave-1 aims to define the interim behavior and the macro planning. So this wave has been completed. We are now in the middle of the Wave-2, where we prepare the Virtual IBC impact, and we integrate the first element of the solution. And then the Wave-3 after that is for the preparation of the year-end, where Axon's CEO and CCO will leave EVS, as was planned initially. And the Wave-4 is dedicated to have a lean operation and an integrated system especially considering the EVS ERP transformation program. So if I move to Slide 13, So the first steps have been executed with an excellent team spirit from all team members on both sides, so it's really a pleasure to see it and to lead that. There is a very strong desire to win and to contribute to the customer success with new solutions addressing all the challenges of our customers, the challenges of the industry. And during Wave-1, we have executed the plan according to the timing, and we have even beaten the budget. So we won a key deal, let's say, with the last push from EVS because the customer can now trust, let's say, EVS in terms of financial robustness more than they could trust Axon before, so that can ease some of the needs. In the days after the acquisition, we already answered, we've consolidated -- if I answer to a customer and we made joint presentations to the customer after that, thanks to a very fruitful collaboration, we collectively unlocked all barriers preventing EVS sales force to sell new media infrastructure solutions. So that means that now EVS sales force can already start promoting the solutions and even making the first orders of Axon products. Some first synergies have already been materialized especially in terms of purchasing. And the team integration as one organization is really progressing, with some key people already positioned in the updated org chart. So we are in the middle of the Wave-2, which is on track, and focusing on the joint value proposition so that we can prepare the Virtual IBC. The team of NALA has already been strengthened and is now as well in the starting block to deliver the Cerebrum control system everywhere in North America and Latin America. Of course, if I move to Slide 14, the Axon took some of the energy, but it didn't impact the fact that we could have some success in the market. If we take the Live Audience Business, we won some key deals. And the first one is a deal with Cerebrum and Neuron, so the products from Axon, at Canal+ France. So now these 2 products are in the core of Canal+ France media center. We also during the first semester had some significant deals with, for example, AftonBladet, a Swedish newspaper. And we also have DYVI as the core switcher of an eSports facility in Western Europe. But besides that, we already collected large multimillion modernization contracts based on the VIA platform where we fully leverage really the micro-services architecture and the technologies that we have developed during the previous years and also all the IT transformation. We won a very significant deal in a major U.S. media group's broadcast center. We won 2 deals in APAC with large broadcast center as well. In Benelux, one key sports broadcast center, a news center. We have as well won studios in another country in Western Europe. And we are equipping for the moment as well a large Western Europe parliament infrastructure. So all these contracts and orders have been taken or are being progressively implemented currently and in the next month. In U.S., we also won a deal with a very important U.S. sports league. And this league will now benefit from the XT-VIA technology for producing with 1080p and 4K. And in China, a very important player is also trusting EVS for delivering 4K and equipment of its infrastructure with the XT-VIA. If I move to the Slide 15. In fact, we see here some key facts and deals with the live service providers. Of course, H1 has not been easy for live service providers, with a lot of OB vans in the parking due to the lack of sports events. But before the COVID in U.S., we supported the Super Bowl with one of the largest setup ever deployed, leveraging all new technologies with 1080p HDR for battery [indiscernible]; with XNET-VIA, the new [indiscernible] to transfer the media between servers and -- between the server themselves. And then we also had the [ Extra Motion ] which creates unbelievable AI-based super slow motion replays based on cameras that do not have this capacity to have more images per second. And in this case, it was the pylon cams that are on the different sides of the pitch. So we have seen as well mainly in Q1 that the live service providers are continuing to upgrade their installed base with XT-VIA to address the 1080p and 4K production workflows. Then we have seen the start -- the COVID starting. And then we accelerated, in this context, the development of some mechanics to support our customers for, let's say, forced remote production in the model that was described on the previous slide by Serge. In May, we had the launch of LSM-VIA, the new replay and highlight controller. And in the first week, we already got 100 units orders. And in the summer, in this summer, this new remote has been used in real-life production. And cherry on the cake, this production was already a remote production. So it is now sales proven in the most challenging conditions. If I move to Slide 16 to better explain what is LSM-VIA. So the creation of LSM-VIA is a major step forward for LSM. LSM-VIA is the new version of the legendary EVS remote that you see on the left. And you see this picture on a lot of OB van pictures. If you have a look to newspapers, in the media and entertainment, you will see a lot of these devices and a lot of pictures because it's running in most of the live sports replay center and much more in the news and so on. So LSM-VIA is the best of the regions with exactly the same feeling for the operators because we have the same job, the same lever, the same functions, the same robustness. But of course, we add a lot of features which are -- which have been developed to cope with the constraints and the challenges of the industry today. So that means that we come with IP connectivity that facilitates the remote production, with scalability, with the touch screen as well on the remote so that we can have shortcuts and we can program different functions really to address the challenge of remote production. And we can customize the workflows for faster highlights and more efficiency globally. If I move to Slide 17, you will see that, in fact, this is -- this LSM-VIA is the fruit of significant efforts by all EVS team. And this effort is not only by EVS, LSM-VIA is being co-designed with EVS operators. The slow motion and replay operators are often freelance and operating the LSM on behalf of broadcaster or live service providers. And as a result of a long process initiated in 2017 with 3 steps, where we first identified the practices, collected the requirements, the pain points. And we did that all over the world because the way the operators manipulate this kind of device is different in different geographies. And then we had a first prototype. We discussed the use case and priorities. And then now we have the final product which is very appealing for the operator community. We get a lot of traction and feedback and already a lot of orders with this first software version. And then we will have, of course, continuous updates and enhancements of the product in the future. Of course, we have seen efforts and key wins on the LAB. We have seen that we have made progress with LSPs as well even despite, let's say, the conditions. And of course, now we are working to reschedule, let's say, the 2 big major summer events: one is the multi-sports event in Asia; and the other is a Europe-wide tournament with a leading sports federation. And these events have been postponed, of course, during the summer and has been postponed to next year. And so we are working with all broadcasters to continue the support of these events and possibly operating in very special conditions. So that means that this is something which is currently discussed, but we support our customers as well in this domain. And now I can transfer the microphone to Yvan for the financial part.

Thank you, Benoît. So financial highlights, as Serge mentioned, about -- just shy of EUR 40 million of revenue in H1, which is minus 5.7% excluding big event rental and in constant currency. But we had a really strong first quarter, of course, impacted all region more or less in the second part of the semester due to the COVID-19 situation. We maintained though a strong order intake in the NALA region and the U.S.A. market. In terms of profitability. Gross margin at 68.2% and operating expenses for the first 6 months of the year declining 5% year-over-year mainly due to lower marketing expenses, travel expenses and also lower provision for reduced variable bonuses, which means an EBIT of EUR 3.3 million or 8.3% of revenues, which is similar to the data last year at the same period; and with the running, it's 3.7% compared to last year. In terms of net profits, with the positive contribution of tax item, we are at EUR 3.3 million of net profit, which is minus 11.5% last year. If you look at the split, and Benoît mentioned that briefly already, by market pillar. So we see a strong LAB business and continuing to grow, including some of the Axon numbers in there as well in 2020. And we see, as Benoît mentioned, the live service provider suffering, more of these are impacted by the COVID crisis in the first half of the year and having some fewer investments. Some of these companies, their trucks are sitting on the parking lots for a couple of months during the peak of the crisis as no events were produced live and, as we see now, resuming some of these sporting events all over the world. Slide 22. If you look at the geographical split, so we mentioned a fairly strong order book in NALA and that translate as well in relatively solid revenue for H1 at about EUR 13 million of revenue, which is minus 3.4% compared to last year. In EMEA, we have revenue about similar level as last year, EUR 18.2 million, which is like more or less flat compared to last year, which includes, again, a big part of the Axon revenue are in EMEA. And on Slide 23, the second part of the Axon revenue are in Asia Pacific. And still there, they were the first hit by the COVID crisis at the beginning of the year really, and so their revenues end up in H1 at EUR 7.3 million, which is minus 16% compared to last year. In terms of big event rental, although it's an even year, we have only EUR 1.1 million which are coming from event that took place at the beginning of the year with the Winter Youth Olympics Games. On Slide 24. So looking at the cost-to-income statement, I think we covered most of the points. Just one note on the tax level. So I mentioned that the taxes are positive, not even flat, because we are benefiting from some tax incentives mainly around R&D investments. And these incentives are not directly linked to the level of revenues. So that's why despite a lower level of revenue, we still have some tax relief in our P&L. And then that translated at the end of the semester in a basic earnings per share of EUR 0.24, which is a bit less than -- 10% less than last year. In terms of headcount, on Slide 25. So data evolution, we have 75 headcount FTE, full-time equivalent, increase compared to the same period last year, which are mainly coming from the integration of the team members from the Axon acquisition. That brings now today the total number of employees for EVS at 532 employees at the end of June. If you look at the balance sheet. So balance sheet remains fairly strong. Of course, there are a lot of impacts from the Axon acquisition throughout the balance sheet. So there is some goodwill. And I will remind you that this purchase price allocation is preliminary. So that's the first, and we are refining it, and we should close that by the end of this year. But so far, we have booked about EUR 2.8 million of goodwill from the Axon acquisition and 2 other intangible assets that have been recognized, and that would be amortized. They are related to the customer-related assets for about EUR 5 million, and EUR 2.5 million related to the technology. On the land and building, there's a small increase as well coming from Axon again and the implementation of IFRS 16 within Axon. And again, as well on the deferred tax assets, we have an increase of about EUR 2.4 million mainly coming from the deferred tax asset increase in Belgium for EVS Belgium but also coming from the Axon integration. We spoke earlier and we'll come back to that one on the inventory level, so increasing of EUR 8 million, EUR 2.3 million of which coming from Axon. And on the receivables side, which is declining by EUR 6.5 million despite EUR 2.2 million coming from Axon, also decreasing because Q4, traditionally, at the end of the year, with a strong increase on accounts receivable, but that didn't decline as much as we expected and will come back on our working capital. And finally, on the cash and cash equivalents, about 44 -- EUR 54 million of cash available. And the variation has been explained by the acquisition of Axon, of course, net of the cash balance that we acquired and offset partially by the proceeds from the new borrowing. So we mentioned that we would finance this acquisition by debt, sorry. We have only used a partial funding of the debt, and we'll open the credit line for the remainder but have not used it so far. If you look at the working capital on Slide 27. This one is definitely impacted by COVID-19. So total working capital increased by EUR 13 million compared to the same period last year, not compared to the end of the year, mainly coming from inventories. This -- although there are some increase from Axon inventory that we are now including into our numbers, but of course, we have also some inventories increase coming from securitization of supply that has been -- orders have been placed at the beginning of the year before the crisis, and these have been delivered during the crisis; and also impact because of all the big events -- the sporting big events of the summer being postponed until 2021. We have the equipment foreseen for these events, and we are recycling them between cohorts to resell them, and then we take some new one next year. But that will take a bit more time. That's impacting mainly our inventory. On the trade receivables side, so that includes an increase of EUR 6 million, EUR 2 million of which coming from Axon. We are discussing with some of our customers where we are renegotiating mainly around the LSPs, which are the most heavily impacted by the COVID, some payment plans with them. We have also some delays in payment because some customers' projects could not be finalized because the site was not accessible due to the crisis. And that translated into some increase in trade receivables. And trade payables increased as well mainly coming from the inclusion of the Axon numbers. And we are following up these 2 levels, mainly on the receivables side and the inventory side, to bring these back to more normal level. So on inventory, that as I mentioned, recycling some of the equipment that we have built for the big events to sell them to normal customers. And on the trade receivables, besides a specific discussion with key customers, it's also a more closely follow-up with our customers. I remind you we have codes -- software codes that if they are not -- if customers are not paying, they cannot use the equipment basically. And as we'll resume to some production environment, then they need the equipment to be useful, so they need the code. So they need to pay us or at least pay a portion of the trade receivables if we have some plans to discuss their balances and reschedule some of these balances as we do with some of our more loyal customers. If you look at the liability side of the balance sheet, our net cash position at the end of the day is EUR 33.5 million. Also there, you will see the impact coming from the integration of Axon numbers, mainly on the deferred tax liability, which are payment to the intangible assets that we have recognized following the Axon integration -- acquisition, sorry. We have the impact on the debt, as you mentioned, taking some of the debt with BNP and some of the IFRS 16 debt. And then on the short-term portion of debt, I'll remind you, this is the last tranche for the building debt that we will have completely paid off by the end of this year. And then we would be left only with the debt from the Axon acquisition. And the other amounts payable includes EUR 4.2 million of accrued charge and deferred income from Axon and from other large projects. So if you look in terms of guidance and order book on Slide 29, so I'll give you an update on the order book, and then I will let Serge conclude on the outlook. Slide 30. The order book amounts at the end of June to EUR 45.8 million, which is made up of a little bit less than EUR 20 million of revenue to be recognized, some orders that will translate in recognition revenue in 2020, which is minus 12.9% compared to last year or minus 10.1% if we exclude the big event rentals. It also includes in this order book EUR 13.5 million of orders that will translate into revenue for 2021 and beyond, which is an increase -- a significant increase of 95.6% compared to last year. And it also includes EUR 12.7 million for the big event rentals that should take place in summer 2021.

Thank you, Yvan.

Thank you.

So let me continue here -- yes, I'll continue here with Slide 31, outlook and guidance. So we confirm that due to the COVID-19 situation, we're not able to provide a revenue guidance for the rest of the year. On the OpEx side, excluding Axon, we expect that the OpEx will decline with mid- to high single digits. And when we take the integration of Axon OpEx into consideration, we expect that our total OpEx will increase with mid- to high single digits in later. Going to Slide #32, our governance, Board of Directors. So we have Johan Deschuyffeleer, who has joined us during the last General Assembly in May 19. He has become director and Chairman of EVS. He brings quite some international experience and knowledge from the technology environment, and he's been working for many years also with HP, has been working many years in the U.S. So at this stage, he's also Chairman of the Board for Orange Belgium and some other companies like GIMV. So we're quite happy to have him on Board and leading on Board of Directors. So conclusions, going to Slide #34. When we look to the activities for the second half of this year, we expect to further organize remote demonstrations, and we are working to provide a successful Virtual IBC in September. We continue, of course, with the integration of Axon with the same mindset, as Benoît has been saying before. And we are focusing effectively on cross-selling and selling Axon products in the Americas. We continue to manage, of course, the specific conditions due to COVID, and we're trying as much as possible to support our customers in order to get them through this difficult situation. We are trying to optimize the inventory, and we continue tight follow-up with our customers to manage the working capital. We are delivering the first phases of key projects that we won in H1 and that will start to be delivered in H2 of this year. And last but not least, we continue to materialize on our PLAYForward strategy by aligning the solutions on the blueprint, strengthening our solution product portfolio through strategic partnerships and acquisitions when relevant. So Slide 35, conclusions. For sure, the major COVID impacts are on our revenues, and that's for a few months, but we see no major impact on the profitability compared to last year. And we see no major impact on the cruise speed in terms of operations. So despite COVID, technically, we feel that we are strengthening our positioning in our Live Audience Business market pillar, and that's especially in NALA. We see that the Axon integration is on track. We're very happy with the successful launch of our LSM-VIA remote that we launched in May. We have already the first live replace completed this summer, and that's also in a remote production environment. We are happy to see even in this very special conditions a strong total order book compared to last year. And as a conclusion, we are so happy to say that our ship remains solid in the middle of the storm, of course, thanks to a solid cash position. So that concludes this first part of this presentation, I will be happy to take your questions.

Thank you, Serge. If we can take questions now.

[Operator Instructions] And we have questions that came through, sir. And we'll now take our first question.

David Vagman. There's a few questions from my side. Could you explain, sir, the type of clients and products sold in H1 and in particular in Q2 that we have seen? And I know you explained the good resilience of sales, of orders in H1 versus what we could have feared. I would say, if we look back in time, I know it's been a long time ago, but during the financial crisis in 2008, 2009, we saw a dramatic and really stable growth in EVS back then. And then when we consider this good resilience, let's say, of sales in H1 and Q2 in particular, what is kind of the momentum we should expect to see in H2? Should we expect what we saw in Q1 and Q2 in particular to accelerate what we're doing so? Is it really actually kind of the replacement cycle that we were hoping to see back a few years ago, taking some -- accelerating a bit? So that's -- yes, that's my first 2 questions. And then third question will be a bit -- yes, a bit more complicated. But about 2021, what are the deals so far? I'm talking about, yes, the big events. And in general, I know you don't provide guidance, but what would be driving your thinking when -- yes, when thinking about 2021, what would you have in mind?

Benoît. I can first answer your first question, and then we go along. So which kind of deals we win in the H1, so typically, we had less sales with live service providers because, in fact, they were not in a position to order or there was no need to order for them at this time. So the major deals that we won are really based on XT-VIA and the new VIA platform, in fact, which comes with all the kinds of services to support production asset management. And so it's about renewal and/or enhancement of large broadcast centers, either in the news section or in the sports area or for, let's say, general broadcast centers who will renew their infrastructure. And some of these projects were discussed for a month before. Some of them were quite new sometimes. But globally, these are projects which take time to be closed and time also to be delivered. And so that's also why you will see that we have a large order book for this year. And that goes beyond 2020 and extends to 2021 because we will take some time to implement some of these projects. So second question about H2. So for live service provider, we do not expect that they will order much more than they have done necessarily in the first part of the year. So they will still certainly be careful with their investments. And for what concerns the LAB, they will probably continue at the same pace. Some of the projects could be delayed because, let's say, the priority is not necessarily on focusing on parts replacement. But some projects still are in the pipeline to be ordered in the second part of the year because in 2023, 2024, these guys, they will finish the audiences to serve, and they want to renew their system, let's say, and renew their equipment and their broadcast centers. So this is the answer to the 2 first questions for 2021. So we don't provide any guidance. So perhaps I can leave the floor to Yvan but -- yes.

What we see, what we hear, that will depend, of course, on the evolution of this COVID crisis, so maybe continue slightly to impact the LSPs at the beginning of the year and then with some recovery in the rest of -- remainder of the year. But we don't expect a major replacement cycle, as we mentioned, that we were heavily expecting. So the replacement cycle, whenever it happens, it's -- as we mentioned many times before, it's replacement part of the investment cycle of our customers, but there is no definite triggers like the SD to HD transition that would trigger a huge mass investment cycle or replacement cycle in the industry. So it's more ongoing transition to IP, to 4K, to remote production, which is maybe generating new needs and changing a little bit of part in there, but we don't expect a major big bank as we've seen in the SD to HD transition.

Okay. And what is -- you would say, what is difference this time versus, let's say, the last financial crisis or compared to 1, 2 years ago? Do you feel like a sense of urgency from your clients to actually invest a bit strong [indiscernible], I would say, given that they have [indiscernible] including under the figures with severe pressure?

So I don't think they are -- so they are not investing heavily. They are -- yes, they are suffering, of course, from the advertisement constraint that's happening in the middle of the crisis, where that was stopped. So now we see people -- and I mean, with the relaxing of the measures and reopening of shops, so that starts up a little bit. So they have not stopped totally the investment because that was part of the investment cycle, that was part out of their building their next generation. When they are building a studio, you are in the middle of building your studio, you don't stop that immediately. When you are a big network in the major countries, you continue that type of investment, and that's what they are doing. But you're thinking about it maybe slightly differently. As we mentioned, should I be prepared to do some of the production remotely and to invest into some of these solutions, the LSM-VIA is one of the element that allows that remote type of production, for example. So...

And through this year, you do not expect a softening of the momentum in H2?

A softening of the momentum in H2, no. As Benoît mentioned -- we mentioned as well and Benoît mentioned on the LSP side, there are -- we don't expect a strong recovery there; slowly potentially but not a major one. And on the LAB side, we have funnels, we have projects. We have discussion with projects, so there might be a timing impact, but we continue to work on these solution proposal for our customers. And we hope to close deals as we have done in the first half. So we don't expect major softening there.

David, this is Serge. I'll also talk about the difference between now and a financial crisis. So this time, this crisis has an impact on the workflow of our customers. Now with that remote production, they really need to change the way they produce. So this might also trigger some future investments. And also with having new technologies or new solutions as with LSM-VIA, we think effectively that this might help certain upgrades or transformations of certain customers' infrastructure. So this crisis might indeed trigger some new investments that were not the case like with the financial crisis. That was not an impact on the workflow of our customers.

And we will now take our next question.

It's Guy Sips, KBC Securities. I have 2 questions. One is, in your press release, you're stating orders covering large multiyear modernization projects. Can you elaborate a little bit on that? What is behind that? And the second is on the split between LAB and LSP. So I presume that most of Axon business is included in the LAB business, Live Audience Business. Will you split it up going forward so that Axon is the fourth pillar of EVS? Or will you stick to the 3 pillars? And then -- and even if you, let's say, correct for the EUR 1.8 million that Axon contributed in the first half, you saw even an increase half year-on-half year in LAB, and the decrease was only in live service providers. How do you see that evolving in the second year?

So answer to what is the large multimillion modernization project impact, so you have to imagine that some our customers, they have set up equipment and piled equipment in their premises and so on for years. And now the new technologies are coming, that's not something which is replaced from one day to another. So they are typically a delivery of a set of equipment with different phases of transformation, and it means that you have a Phase 1 where we transform a part of your system, but we'll need to ensure that during all these transformation of all your projects at any time, in fact, the systems are up and running for the production. So this takes time for the transformation, and so it is multi-year. And it's multimillion because the quantity of equipment that we have to renew. And we don't renew it, let's say, system per system, we really redesign the solutions with our customers so that we can benefit from the assets of the new technologies that are embedded within our products. So that's something as well that takes time to design the system and co-construct the solution with our customers.

And to answer your second question on the LAB, LSP, so yes, the Axon business is, I would say, about 2/3 is including in the LAB for this reporting period. So it's only 2 months. Again, so that also have an impact, and the rest is in LSP. We will not provide a fourth pillar because the customers that are being addressed by -- with the Axon product, which, by the way, we'll keep integrating in -- as we mentioned, in the complete portfolio of solution from an EVS point of view, it's addressing the same type of customers. So it's not -- it's market destination, it's market pillar, it's not product destination, then we would need to look at the product side to have the Axon contribution. But if we look at the market pillar, the destination market, then we will continue to stick with the LAB, LSP and big event rentals including Axon going forward. And indeed, as you mentioned, if you exclude these 2/3 roughly from the LAB, yes, LAB is increasing compared to last year. And as we mentioned, LSP is the one suffering the most. And we expect this to slightly continue certainly in the second half of the year due to the situation there. They have lost -- keep in mind, these LSPs have lost a couple of months of revenues because their operation services were totally on halt -- on hold for a couple of months. So they need to recover that and then start rethinking upgrading their infrastructure, their environment, their solution for service, including, again, as well there some remote production solutions. But that [ will be a little bit more time with ].

And in the order book, do you see the same evolution in LAB and LSP? Or is there...

Correct. Yes, it's correct. So as we mentioned, I think the order book for H2 is the same. It's -- the order book for the remainder of the year is stronger on LAB than on LSP, that's for sure.

And the last question on, let's say, in the longer term, is post COVID-19 and contribution of Axon of EUR 20 million plus, is that exaggerated? Or would that be reasonable?

So far seems reasonable, yes. [ Yes, at the time, we have worked out some clear plan ].

And we will now take the next question.

This is [ Walter Dubber from Bank One ]. I just had a very small question regarding the order book. Is it -- Axon included, right? And are we comparing apples-with-apples, I mean, since Axon is not included in last year's numbers, I guess?

So yes, Axon is included in the order book. The Axon business has a smaller lead time. So when they get the order, they usually deliver it pretty quickly, depending on the complexity of the software to be installed on some of the systems, but it's ranged between 10 days to 6 weeks, I would say. So there is no update in this order book, so there is no like immediate long orders to be delivered on multiyear projects, as Benoît mentioned before. So that contribution is in the order book, and it's a shorter amount of time. So the amount of the contribution of Axon is smaller in the order book in LAB.

And no further questions that came through at this time, sir. You may continue.

Thank you very much. So if there are no further question, we'll conclude now the conference call. So just to let you know that we'll be in virtual road shows, in [ publicly listed ] calls on September 15, most probably. And in Amsterdam, the ABN conference on September 16. And there should also be certain virtual session for London and Brussels, but we are still finalizing dates. So I thank you all for your time, and I wish you a really good rest of the day or rest of the afternoon. Thank you very much, and have a good day. Bye-bye.

Thank you. That concludes our conference for today. Thank you all for participating. You may now disconnect. Speakers, please stand by.