EVS SA (EVS) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to EVS Full Year 2021 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Serge Van Herck. Please go ahead, sir.

Thank you. Good afternoon to everybody who's in this call. Today, we have the 3 speakers. So next to me, I have Veerle De Wit, our CFO; and I have Benoît Quirynen, our VP Strategy and Acquisition, who is with us to explain some of the topics that we will discuss today. But before we start, I'll leave Veerle to read our disclaimer.

Hello. Good afternoon. So we start by mentioning that this presentation next to 2021 performance numbers also contains some forward-looking statements. These statements are based on current expectations and management discipline of the environment we operate in. We do declare that these statements are subject to a number of risks and uncertainties that could lead to materially different statements in the future. We elaborate on some of those risks during the presentation, but there are also other risks that could affect our statements that we don't explicitly comment on. These risks contain potentially technology changes, market requirements, price pressure from competition and others. 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.

Thank you, Veerle, for that -- reading out that disclaimer. So on the agenda today we have the business update, we have a financial update. We will be talking about the outlook. We'll talk about conclusions. And we will answer all your questions that you will have at the end of this session. So let me go further to the next slide to give you indeed an overview of 2021, the highlights. And we're quite happy with the results of 2021. As you have seen indeed in our press release that we have announced that our revenue and our order book are at record highs. So that's indeed something that we're very happy with, of course. When you look to the revenues, evolution from '20 to '21, then you see an important increase going from EUR 88 million to EUR 137 million. So we've been able to increase dramatically after that COVID dip that we had in 2020. On the EBIT side, you see that we are able to generate again quite strong profitability figures, growing from EUR 5.7 million to EUR 37 million. So that brings us back to levels that you've seen a long time ago. On the order book, at the end of the year, we see again a nice further increase. It was already strong at the end of 2020 with EUR 53.9 million, now we go to EUR 63.9 million, so that's an increase of about 20%. And at the end of the year, our net cash position increased again quite remarkably from EUR 35.7 million to EUR 54.9 million. So those are quite strong results, and we're quite happy with that situation at this moment in time. So what are the main drivers behind that? Well, on the one hand side, we see the dynamic with our live services provided customers who would definitely in 2020 were able to catch up compared to -- sorry, in '21, were able to catch up compared to 2020. And we see that our LAB and LSP customers as a whole are indeed further increasing and accelerating the investments in our solutions. So '21 was a catch-up of the LSP investments, the Live Service Providers. So they were heavily impacted in 2020 by COVID. And then '21, there was definitely a catch-up effect on their side. And we are happy to see that with new accelerated COVID practices, remote production practices and HDR formats becoming the de facto standard, that this is helping to accelerate that growth. We have seen that our LSP customers are indeed willing to engage in longer-term contracts to renew their fleet of XT servers, typically XT3 servers going to XT-VIA, and that is definitely a good thing as we are taking advantage of our LiveCeption solutions. We see many LAB, Live Audience Business customers in the studio environment, some willing to renew the infrastructure and shift to EVS to do that, and that enables them to boost their productivity based on the different technologies that we bring based on IP, software capabilities and artificial intelligence. We see from some of these customers a strong appetite for hybrid workflows that are leveraging joint benefits on, on-premise and cloud solutions as our XtraMotion solution that is indeed a cloud-based service. And we see a progressively higher demand for OpEx-based business models. So those are some of the trends that help us go forward in '21. We also see that we are in a strong position to capture investments with, unfortunately, still a risk on that electronic component availability. We see a traction of our MediaCeption Solutions and broadcast centers who are modernizing their environment. So that is a very good thing that we've seen continuing in '21. We see us with Infra Strada entering the video routing markets. And there we see some strong references with some strong customers who are indeed taking advantage of our new Strada routing solution that comes with the acquisition of Axon that we did in 2020. We launched our new partner program, and we see that this is being received quite well by existing but also by new channel partners. So that helps us to further increase our coverage of our markets. The new on-demand business model to cope with certain customer constraints is definitely also which takes more -- which is enjoying more traction, and that is being offered as a software-as-a-service typically for big events. We see still challenging conditions on the market of the electronic components. So fortunately, in '21, we were able to mitigate those risks, but we keep on seeing that this might affect our capability for the future to deliver on time. We've been very happy with several awards that we have been receiving in 2021 for several products, and that shows indeed a clear mark of innovation that we bring to the industry. And last but not least, we have been at the heart of the major sport events in 2021, and we've been able to deliver a very successful events over there. Going to the financial highlights before I will leave the floor to Veerle to go more in detail on the financials later on, I will talk about Slide #5. Our financial highlights, revenue achieving EUR 137.6 million. That's very close to the record that we had in 2012, which was mainly EUR 200,000 higher. We see an accelerated growth in our LAB market pillar of plus 27% and also, of course, a major growth in the Live Service Providers, but that was mainly due to dip in 2020. We see backorders what we think our high revenue in '21 to strong back orders that we had at the end of 2020. And of course, part of the revenues in '21 are generated by our big event rental. On the profitability side, we are quite happy to see a gross margin of 69.6% resulting in a positive EBIT of EUR 37.1 million. While we see our operating expenses also growing, but in line with our business, growing with 11% and mainly explained by the Axon integration that we did in 2020, and we were fully accounted for in '21. In addition, we have some expenses supporting our business transformation strategy that we are currently doing. And bottom line net profit, we achieved indeed a EUR 34.9 million number, which is a quite a big increase compared to 2020. Benoît, I leave you to comment on some of the next slides about the successful summer events.

Yes. Thank you, Serge. So in fact, yes, 2021 was an odd year in terms of numbering, but it was a very successful year in terms of the events where we had the chance to work a lot and to have all the teams fully engaged to really deliver all the signals and creating all the emotion on the market with the big events that were played during the summer, this 2021. They were at the beginning numerous challenge for us. We had the COVID situation that was limiting the staff in the venue, very strict conditions for all the staff, for all the persons participating and supporting these events. And it was also the first event that we had with a new generation of products and solutions from EVS. For example, the LSM-VIA remote that enables to control the XT-VIA server. And in fact, it was also the first event where we had so many hybrid workflows where some of the equipment was actually located in the venue or the international broadcast center and some of the equipment was located in the cloud. So there were numerous challenges that were, in fact, successfully managed. And at the end, we have delighted customers, and that's enabled also to ensure that our products and solutions that were designed in the years before are now considered as events proofed. And in fact, that means that we can continue our innovation to bring new features and to solve some of the other problems that our customers are facing during these events so that we can be all proud of all the work that has been done by all the EVS teams to make this happen. And it was not limited to '21 because less than 1 week ago there was also a major winter event where EVS was also very active to support on-site and through this kind of service that we usually bring into these kinds of events. So very successful year in '21, and it's well started in '22 for this market pillar. Now if we take a step back and if we have a look at the Slide 7, we can see in fact that we continue our transformation. And so on the journey from product market leader to solution market leader, we now have a full website where all the portfolio is branded in terms of solutions. And that's not only that we reshaped the products into solution. We brought as well new solutions as the MediaInfra Strada, the MediaHub, so that means that every, let's say, now and then we create new solutions in order to solve the problems of our customers. On the journey from premium market to different market tiers, we created a new version of Xeebra, which is Xeebra Essential, which is very successful to implement the FIFA VAR Light. And we also onboarded many different channel partners through a new program, which enables us to sell the solution indirectly to different kinds of customers and even to new customers. Then on the journey from CapEx to OpEx and CapEx, we have new services that are now sold as a subscription model, and we also created in 2021, a new on-demand business model where our customers can buy EVS credits that they can consume by using our service, for example, XtraMotion just during a few hours during an event. So that means that, that kind of offering gives the full flexibility of our customers to increase, let's say, the capabilities that they want to use really live, so that they can really pay for what they consume. Of course, we continue the modernization of all the infrastructure, and we go from SDI to IP and we bring more and more AI solutions. For example, XtraMotion is one of the AI solution, but it's not restricted to that. 2021 is a very important year because that was the year where EVS enters the routing market. So with a new solution, which is Media Infrastructure Strada, which is an evolutive IP routing solution that helps our customers to cope with a smooth transition from SDI to IP. of course, it's a long time now that we are not only selling hardware but also software. And now we have a very impressive portfolio of software solutions that are purely deployed with software only. And because it's not only software, it's also about the cloud. And as I mentioned on the previous slide, for some of the major summer events, we had cloud ingredients, meaning that we supported hybrid workflows where some of the intelligence was on-premise and other parts were running in the cloud. So we continue our progress with LSM-VIA to support the challenges of our customers to ensure remote production. We also ensure the connection between the on-premise and the cloud, so that we have a full live-anywhere operation. And in fact, we continue our expansion from mainly sports to news and entertainment. We have more and more transverse modernization contracts, especially in NALA, but not only in NALA. And in fact, you probably saw on our website, the press release that we published last week about RTBF Flexible Control Room project, which is a true transversal concept of production of different kinds of events and different kinds of programs. So we continue our transformation journey that was initiated through the PLAYForward. And if we move to the Slide 8, we will see that, in fact, one important part of this is the combination of the different products to create perfect solutions. And we have 3 categories of solutions. We have LiveCeption, which is about live production, replays and highlights that elevate the fun experience. And on that front, we have seen in '21 large XT upgrade contracts as was published. We have the GameCreek deal, which allowed our customer to really upgrade the capability to produce HDR images. We also had a deal that was published about AMP Visual, but many other deals on that front. We have XtraMotion, which allows really an affordable hybrid workflow to create more emotion, in fact with very super slow motion images that are used without the usage of specific cameras, so which is -- which makes the solution completely affordable for many different kinds of production. We also confirmed the certification of Xeebra, our VAR solution, by the FIFA. And we have seen successes typically in Australia with Gravity and as well in CIS with Xeebra Essential, which is an implementation of the FIFA VAR Light program. Then on the MediaCeption front, it's about production asset management, and we have deployed during 2021 strong market references, especially in U.S. We continue to have, based on these very strong references, large market traction for modernization projects, leveraging all the IP, software and artificial intelligence. And we have also onboarded more solution components from different kinds of partners, which enables to extend the footprint of our solution. And then we have now big events proven media hub that will be offered soon in software as a service. And last but not least, the Media Infrastructure, which is, let's say, the fruit of the acquisition of Axon in 2020. During 2021, it was not only about, let's say, starting from the Axon product, it was about creating new solutions. And the Strada solution is a new evolutive routing solution. It's a very important one. And in fact, our customers have already confirmed their interest in this kind of solution, especially in NALA where we managed to secure very large contracts. And it's really a win from an M&A perspective because Axon was not present at all in NALA in 2020. And thanks to all the teams from previous Axon and from EVS, we have managed to design these solutions, and we are now up to deliver these solutions in -- to our customers. We also had huge success of Neuron in Japan. In fact, so that gives you a hint on the quality of the images that are out of this magic box that we have now on the market. And then in terms of Media Infrastructure, we see Cerebrum being deployed everywhere on all continents and again in NALA as well. We also secured in '21 the contracts for all the big events, the usual big events in 2022. So we know that the amount in 2022 is a bit lower than in 2021. And in fact, this is due to the different kinds of setups and the different kinds of events. We didn't lose any events on the way. It's just a question of configuration, number of stadiums and the requirements from the customer. So these solutions, in fact, we do our best to make them perfect. And in fact, this is not only our opinion that we must always improve. If we go on Slide 9, we see that's also the opinion on the market because we received several awards. For XtraMotion, we received IABM BaM Award about innovation in the creative category. We received as well the NAV best-in-market award for TV technology, and we received as well the broadcast production award in the production category. And it's not only about XtraMotion, it's also about our new innovative Strada routing solution where we receive as well an NAB Best in Market award and also DMW Award in the IP Broadcast Production category. So 5 awards that prove that the EVS solutions are really the best in market and very well appreciated not only by the customers, but also by our peers. So another important dimension that we can see on Slide 10 is about the new channel partners. So we have, let's say, modernized and renovated our channel partner program in 2021 to have better training of our channel partner, better support, better reward. We also have initiated a certification program, and we have a plan to really support our channel partners to sell the pure and essential solutions. And we have seen some successes already with the LiveCeption solution that we have designed for, let's say, nonpremium solutions, mid-tier solutions. Thanks to this channel partner program, we have 2 different kinds of successes. On one dimension we have more channel partners. And then on the other end -- on the other side, we have as well channel partners who are better engaged. We focus on sustainable relationship so that we can have long-term partnerships with these partners, and we can be fruitful on the market together and bring the right solution to our customers. So we have also -- to realize that 2021 was a year where they was still COVID. So if we jump on Slide 11, you will realize that, of course, we started to reparticipate to some events, but not yet on the IBC and the NAB in 2021, but we are definitely planning to come back in the trade shows when it is relevant and when it is possible, and we have the plan to go on NAB, let's say, in a more normal way, even if we want to adapt the way that we want to leverage these kind of shows. And in parallel, of course, we will not give up for all the meet-ups that we learned during these COVID years, and we will continue to leverage the efficiency of the remote interactions and of the webinar setup that we have created so that we can continue to train and present our solutions the best way to our customers. So this is about the market and, let's say, the evolutions that we engaged in 2021. And now I will hand over to Serge to discuss about some of the risks that we observed as well in this market.

Thank you, Benoît. So that brings us to Slide #12, talking about risks of the past and the risks for the future. So in 2021, one of the main risks that we had was linked to the scarcity of electronic components. So fortunately, we've been able to go through that crisis without any -- without too much problem. So it did not hurt our capability to deliver. It has lengthened somewhat our delivery periods for our customers. But all in all, we were able to continue delivering our products. That still remains a concern for this fiscal year 2022. As in some cases, we are not fully sure that we will be having sufficient components to deliver to our customers. So that is something which is high on our agenda and that we try to manage the best way we can by redesigning both or looking for other suppliers of certain components. So that's an important one that we keep a very mature focusing on. Another risk is of course linked to inflation, which, of course, will have an impact on salaries for colleagues wherever they are in the world. But we also see an impact on prices of components. So that inflation is something that is a risk that we try to take care of, that we partially try also to cover by our own price increases to our customers. But still, we are not fully clear how that inflation will evolve over the next weeks and months and especially with the fact that we've seen today of Russia invading Ukraine, and that's giving additional unclarity about the future, of course. But we try to take those risks into consideration and to cover them as well as we can. Going forward, I'll leave the floor to Veerle, our CFO, which will go through some of our financial topics in more detail. Veerle, the floor is yours.

Thank you, Serge. So on Slide 13, you will see the topics that we will quickly cover in this financial update. So first of all, we have a financial highlight slide. We will then go a little bit further into revenues and order books. We'll also show some numbers on geographical split of our performance as well as its split in terms of market pillars. We will quickly cover the income, consolidated income statement, and we will provide you as well an overview of our team members, the evolution of our team members over time. We will end the session, the financial update, with a glimpse of our balance sheet that remains very strong. On the next slide you will see the financial highlights for EVS in 2021. It's the same slide that Serge presented earlier on, but I think it's important that I personally repeat the message. I think 2021, as Serge mentioned, was a record year in terms of revenue. So we made revenue of EUR 137.6 million, and that was a growth of 56.2% year-over-year. That growth was accelerated by growth both in LAB and LSP, LSP primarily recovering from COVID in 2020. It was also a result of an important back order at the start of the year 2021. And it was absolutely also a result of a good year in big events. As Serge already mentioned, we had a very healthy gross profit margin. It was at 69.6%. And actually it demonstrated that until now we were able to fairly limit the impact of the increase -- the price decreases that we see with regards to the shortage in components market. We had a very positive EBIT at EUR 37.1 million, which is 20% -- 70% EBIT margin, which is obviously a very nice accomplishment. And our operating expenses, as Serge mentioned, they grew 11%, that's partly explained obviously by the Axon integration and also expenses linked to the overall performance. So for instance, variable remuneration, but we also have some expenses supporting our business transformation strategy. Our net profit in the end was EUR 34.9 million, a growth of 386% compared to 2020, obviously boosted by a higher revenue. The next slide shows a historical view of our revenue performance. I think you will see there that it is equaling actually the performance of 2012. And as mentioned, it was a record-high revenue, thanks to the back orders end of 2020, thanks to big events rentals, and also thanks to a strong order intake in 2021 with in-year revenue conversion. The next very positive thing is our order book for 2021, till end of 2021. Our total order book has increased from EUR 53.9 million to EUR 63.9 million. That's an increase of 19%. And also looking at the order book over time, we are both growing our order book for the current year and the order book for the years beyond. You will see that the orders book at the year start of 2022, growth was 16% from EUR 44.1 million to EUR 51.0 million. That growth is primarily on our base business, so big event rentals, the client sources declined compared to year-over-year, but the biggest growth in our order book is in our base business. For the years 2023 and beyond, we also see a significant increase of our long-term order book. So it's growing 31% from EUR 9.8 million to EUR 12.9 million. This is primarily helped by longer-term contracts in the live business. Just to come back on the market pillar definition before I show you in the slide of the performance of the market pillar definitions. We'll just give you again a quick summary of how these each divide our market, and that is Slide 17. We, first of all, have the live audience business. So that covers everything, which is broadcasters, stadiums, house of worship, corporate media centers, et cetera. And that is the revenue from customers leveraging actually EVS products and solutions to create contents for their own purpose. Next to that we have Live Service Providers. They are rental and facility companies, production companies, freelance operators, et cetera. And they actually have revenue from customers leveraging EVS products and solutions to serve LAB customers. So they use the content of EVS to serve action live audience business. Next to that, we always have our big events rental. And, yes, basically, normally, there is a historical trend to that, but thanks to COVID we were benefiting also in 2021 from this portfolio. If we then look at the performance by market pillars on Slide 18, you will, first of all, see the composition of our revenue in the different market pillars how it's evolving actually year-over-year. So you will see that from -- in 2021, the Live Service Provider business grew from 34% to 38% relative performance within 2021. That is obviously boosted by the recovery of the Live Service Provider performance. And after a difficult COVID year, you will see that the gradual percentage of live audience business decreased from 64% to 63%, and that's the big event rentals increased their portion of share, obviously after also a lot of events being canceled in 2020 and actually being postponed to 2021. In terms of numbers, Live Audience Business and Live Service Providers actually grew, and they not grow -- they don't only grow compared to 2020, but more importantly, also with a comparison to 2019. Live Audience business realized a growth of 28%, where the Live Service Provider realized a growth of 72%, obviously again after the COVID year 2020. Next to the revenue by market pillars, we definitely also want to show the revenue by region on Slide 19. Because for us also very important here is that the success for EVS in 2021 came through success in every region. Every region actually grew in comparison to 2020, but also grew in comparison to 2019, which for us is much more of a reference point. In NALA, the growth was primarily boosted by some very large LAB contracts. In EMEA, we definitely had a catch-up in terms of LSP growth, that is primarily supporting the growth over there. LSP action, what we see in the market is that LSP is actually embracing the new challenges that the world provides actually, in terms of hybrid production, also a little bit boosted by COVID. And basically, our BER revenue, so big event rentals revenue, was very strong in 2021 at EUR 13.5 million. If we look at the consolidated income statement, you'll see the numbers for '21 and 2020. We obviously, as mentioned already, both record-high revenue performance, growing at 56%. Our margin is also very solid, growing 3.1 points year-over-year and is positively impacted by big event rentals. Gross margin performance in 2021 shows actually very limited impact of the cost of components increasing following the shortage on the market. And this is thanks to a very proactive management at all levels throughout EVS. Our OpEx is increasing 11%, as already mentioned, and this is following the acquisition of Axon, and some also more normalized spending patterns after COVID. I think in third -- fourth quarter, for instance, we saw an increase in our travel expenses. And yes, with a short flare of more travel during a couple of weeks at least followed by some lesser travel immediately after that throughout the month of December. This increase is also linked to performance of 2021 because obviously, with such a good performance, also our variable remuneration to all our team members is increasing. And then finally, as mentioned already, we discontinued some expenses to support our business transformation strategy. So the EBIT was up 37.1% as -- EUR 37.1 million, sorry. As mentioned, it was 27% EBIT margin. And after reduction of our financial result and taxes, it resulted into a net profit of EUR 34.9 million. Basic earnings per share were at EUR 2.6 per share compared to EUR 0.53 last year. If we look at Slide 21, you see the team member evolution for EVS. You will see actually that overall head count at the end of 2021 has barely increased compared to the year 2020. We ended the year with an average -- with a total FTE at 551 versus last year at 550. You do see, however, an increase or on acceleration of hiring in the second half of 2021, obviously, fueling our growth and fueling our future perspectives. From an average standpoint of view, we are -- see an increase of 33 FTE year-over-year, obviously, as a consequence of the Axon integration in May 2020. Looking at our balance sheet, we also obviously see some movements that are obviously boosted by the good performance of EVS in 2021. In total, our assets increased with EUR 30.2 million. This increase is primarily a consequence of higher inventories, so inventories increased to EUR 3.4 million. And this is a voluntary investment, an investment in building up our inventories to ensure we gain maximum flexibility in a market where the shortage of the components is increasingly becoming a problem. It's obviously also influenced by a higher order book in 2021. Next to inventories, we see an increase of our trade receivables. It's also a reflection of a continued good performance of the year 2021. Trade receivables are growing EUR 8.7 million year-over-year. In total, we generated an increase in cash as well and cash equivalents of EUR 19.5 million. From a liabilities point of view, we increased our liabilities with EUR 8.5 million, primarily as a consequence of higher trade payables, an increase of EUR 4.7 million and amounts payable regarding remuneration in social security, an increase of EUR 3.7 million. The remainder of the results contributed to the overall equity with an increase of EUR 21.3 million added to our consolidated reserves. Our net equity at the end of 2021 is up 73.3% and our net cash position is at EUR 54.9 million. Finally, we have a word on our working capital on Slide 23. The working capital is actually increasing in comparison to last year. We had a working capital -- an operating working capital at EUR 54.2 million. This is an increase of 14.4% compared to last year, and is actually a consequence of, on the one hand, higher inventory. And as mentioned, this is a proactive measure to limit the impact of the shortage in components markets on our supply chain and higher trade receivables following a record high revenue achievement. This is partially offset by higher trade payables, also a reflection of the higher volumes in our business. And this closes out the financial update of 2021 for EVS. And now I think I give the word back to Serge. We don't have Serge anymore on the line?

Yes, I am. Thank you, Veerle. Good. So let's go forward and have a look at indeed our outlook and guidance for '22. So on the financial outlook for '22, we are quite happy to see that we started quite well the order flow with the highest order book in our history with a figure of EUR 63.9 million, which is about 20% more than the year before. We see EUR 41.8 million to be recognized as revenue in '22, EUR 9.2 million will be recognized in '22 for big events rental and EUR 12.9 million will be recognized in revenue for '23 and the years beyond that. For this fiscal year, we expect to be in a range -- revenue range of EUR 125 million to EUR 140 million based on our current indicators. We see an increasing impact of the worldwide shortages in the supply chain of electronic components, and that may impact to meet our revenue generation. Our operating expenses will continue to grow mid- to high-single digits because of inflation and additional hirings that we continue to do to support our growth. Further evolution of the inflation can potentially impact our assessment. Going to the next slide, where we explain our dividend proposal. So for the year '21, indeed we confirm EUR 1 per share. But next to this for '21, we also foresee an additional EUR 0.50 gross dividend, and that is to honor our past dividend promises that we made in the past. After difficult market conditions in 2020 due to the pandemic, of course, we want to make sure that our shareholders get that dividend that was also promised before, so that's why we'll be paying EUR 0.50 in '22. And that we also foresee to pay an additional exceptional gross dividend of EUR 0.50 in May '23. For the future years, from '22 to '24 onwards, we make newer proposal for future dividend policy. That means, of course, to be also approved by our ordinary general meeting of shareholders later on. But the proposal will be that from -- for the fiscal year '22 until '24, we'll have a baseline that will be at around EUR 1.10 every year, so that is indeed giving clarity to all shareholders what we plan to do on our dividend part. Going to the next slide about -- next focus and conclusions. I'll jump to Slide #27. There you can see the focus for '22. Our number one of course is delivering the large multiyear modernization project that we have won with many customers around the world. Second important topic is that we will continue to promote, of course, the benefits of our new solutions that we have launched in 2021. We will continue also to expand our EVS solutions offering organically through acquisitions and strategic partnerships. And last but not least, of course, we'll further prepare and deliver those '22 major events, one of them that we have already recently done. Those are always important events, not only for the revenue generation, but even more so for the commercial impact that they have as they are very good way to promote our latest solutions. Going to Slide 28 on the conclusion side, well, we come back on that record high revenue and order book, so that's definitely something that we are very proud and very happy to see happening. And that is thanks to, of course, those major summer events that have been delivered successfully. And thanks to continuous and even accelerated growth in our Live Audience Business market pillar, and thanks to the catch-up and the growth in the live service provided -- Live Service Provider market pillar. And that is mainly based on confirmed XT upgrades. Some other important points to remember. Our evolution is based on our PLAYForward strategy as we have defined at end of 2019, beginning of 2020. And that is supported by new attractive solutions in all our categories. It's addressing premium and mid-tier markets, and it's based on direct and indirect sales channels through our channel partner program. For this year, we expect that our gross margin will be negatively impacted by the rising level of prices of the components and due to inflation. We expect that our OpEx will continue to increase in the mid- to high single-digit numbers based on that inflation of manpower costs and that increased component cost as well as some higher investments that we foresee to support our profitable growth. Overall, we give a guidance for the year of about EUR 125 million to EUR 140 million revenue-wise. The dividend effectively will be EUR 1 in '21, increased with EUR 0.50 this year and another EUR 0.50 next year. And then for the next year we foresee to meet that EUR 1.10 dividend from '22 onwards. And that gives indeed an overview of the main messages we wanted to pass on today. So we'll be open here to answer your questions.

[Operator Instructions] The first question comes from the line of Matthias Maenhaut from Kepler Cheuvreux.

Maybe 2. First one is actually on the gross margin. You mentioned inflation, component shortages. Also looking at the mix, what can we expect for the gross margin for next year? And then a second question is actually on the R&D strategy. I think you recently announced some changes towards the management of your R&D department. I was just asking myself what we can expect in terms of changes in terms of the R&D strategy.

Good. Thank you, Matthias, for those 2 questions. I'll suggest Veerle will take that question on the gross margin and I will come back on our R&D.

Yes. I think on the gross margin, we foresee a slight decline of our gross margin percentage compared to the current year performance, so 2021 performance. We expect that to be in the range of 1 to 1.5 percentage points. And it is obviously potentially fueled by price increases and by inflation, even though that we have also recently announced a price increase, it was started actually or announced for February 1st. And obviously that is an intent to offset that impact in 2022. We will continue to closely monitor the evolution of the inflation and of the increase in the price component. And we'll see if further actions are required in near future. But for us, at this point in time, we expect that a price increase should sort of nil out that effect. We do see a little bit of reduce in the margin in terms of the mix, so the mix of our solutions. But as mentioned, we expect the overall decrease to be minimal and limited in current conditions.

May I have one short follow-up on this. The magnitude of the price increases you implemented, can you elaborate on?

Serge, do you want to take this or should I take it?

Yes, I'm okay to take that one. So on the price increases, indeed we have already implemented the beginning of this year a price increase in -- throughout our product portfolio, and that is ranging from a few percent up to 10% or sometimes even more percentages. So all in all, we are looking at an average price increase which is in the range of 5% to 7%, that is the one that we have now implemented just a few weeks ago, okay. So coming back, Matthias, on your question about R&D. So effectively we've announced some changes in strengthening in our leadership team recently, so on the CTO site, who is indeed in the lead of our R&D departments. We have now a new colleague who took the responsibility of that CTO role, that is Alex Redfern. Alex is with EVS for more than 15 years, have been working in the U.K., in the U.S. in the field support, in the solutions architecture roles. So has been in his last role a VP Solution Architectural Worldwide for designing some of the most complex solutions and workflows for some of our big customers. So indeed, he has now become our new CTO. Alex took over from Axel, our previous CTO, who has done a tremendous job in transforming our R&D team into a more agile organization. So there has been over the last year, some important work that has been done to transform our R&D team to work more efficient in an agile way. Now that the transformation has been successfully concluded, so we took a decision indeed to bring somebody in the lead that will help us to further reduce our time to market because that's essential for us. As you know, we have about half of our human resources -- half of our team members in R&D. So it's important that we further accelerate the rate of development and the rate of innovation that we bring to the market. In that respect, with such a background, such a good understanding of our products, such a good understanding of our customers, such a good understanding of the broadcast industry, we think that Alex is the right man to take up that role and also to take a more public role towards our industry to support our thought leadership objective that we have towards the market and our customers. I hope that answers your question, Matthias?

The next question comes from the line of David Vagman from ING.

I've got a couple of questions. First of all, on the -- let's say, the dynamic for 2022 and maybe beyond, the order intake is very solid in Q4. I think if you could help us quantify. But I estimate it's -- the monthly order intake is really very solid. In the end you are -- obviously you're quite cautious when we look at the dynamic in recent quarters. You're quite cautious on 2022. And my question is basically so how much -- how have you modeled what you label as being the biggest uncertainty for 2022, so the component shortage? Or if you modeled it, how much cautiousness have you built? What would you have achieved? What would have been the guidance, basically, if I may say so, without component shortage? So that's basically to -- in the end, overall to understand a bit better the underlying trends, let's say, beyond the component shortage. And also, yes, if you can help us to better understand what could be the trend beyond 2022, it's also very much welcome. Now 2 quick questions. The first one on CapEx. It seems quite low in 2021. What could be the reason? And two, could you give us a normalized level for the coming years? And third one, on R&D because of a follow-up. So there was quite a step-up in R&D spending in H2. I think you've partially answered that there was a normalization. My question is, should we expect roughly twice that amount of EUR 15 million in 2022? What is driving that step-up? And how should this evolve basically, the R&D budget going forward? What is the bit to understand? What should we have in mind?

Okay, David, thank you for those questions. So coming back to our outlook for the year and how the component shortage is impacting us. So in our eyes, if there will be -- if we can manage the component shortage, we should be at the high level of our estimations. If we get rather impacted, we'll go to the lower end of our estimation. So that is our -- at this moment in time we estimate that impact of the shortage of components. It is a very difficult question -- or very difficult situation because this is something that evolves week after week. So it is not easy to make predictions where before we could rely upon our suppliers to be correct in the delivery dates. Now the world has changed. It is really very difficult to make predictions. Sometimes a week before, we need to get the delivery that was promised more than a year ago, has been shifted for 6 months, for instance. So it's really a very difficult situation to take care. So this is a day-to-day exercise, and weekly it evolves. And fortunately, up to now, we've always found solutions between -- we cannot guarantee. And it's indeed very difficult to make, to answer that question in a very well-calculated way. So I must say a little bit in the fork, if I may see it like that, concerning the exact calculations, which are behind that. But I can only say if we have -- if the impact will be very limited, will be on the high side of our revenue estimations. If those impacts are starting to hurt us, then we'll go to the lower part of that estimation. All right? Then for the CapEx question, I'll leave Veerle to answer that one.

Yes, fine. Thank you, Serge. I think CapEx -- we had pretty limited capital investments in '21. So they're around EUR 40.3 million. So it's pretty limited, a much more normal rate which probably will be approximately that is double, a number that is double. Why was it so low? There's a couple of investments that we took in operating expenses this year, that we potentially usually have shown in CapEx. But for accounting reasons, we're not always able to show those investments into CapEx needs. But yes, we do expect that as well, a little bit again over time and going forward, that is going to look a figure that is one double of that number.

Okay, thank you, Veerle. And I'll come back then to the R&D step up, what is driving that. Well, clearly, it is an increased level of business, new products that we are launching. And if you look at our ambitions for the long term, we definitely want to continue generating profitable growth. But in order to do that, we are also extending our product portfolio. And that also, in this case, requires additional R&D capacity. So that is why you see indeed that we are stepping up and increasing our R&D capabilities. And just to name just one that is public now is indeed the contract that we have with RTBF that is indeed requiring additional colleagues to build that new solution and that we agreed to with them. I hope that answers...

Yes, it does. And maybe just a very quick follow-up. You say that in 2021, there was quite a bit of catch-up, especially in LSP. Should we get more cautious on the -- again, coming back on the underlying dynamic, sales dynamic, excluding the component shortage, if we try to exclude that to remove the focus, even if it's complicated, but would you say that your AP with the underlying trends, especially the success maybe of new products, the LSM-VIA, the replacement cycle, media infrastructure, et cetera.

Yes. Thank you for those questions. So indeed, in general, we're quite happy with the progress that has been made. So if you take LSM-VIA, our new controller that we launched during the pandemic in 2020 and '21, we saw really a very good tick-up ratio. Most of our sales now is done with LSM-VIA on the service side. So the feedback that we get from operators is very positive. And that was indeed a major accomplishment. And if you remember, our previous LSM was more than 20 years old. So we were very cautious in going to a new model that our operators also like to use. And I think we can say that is mission accomplished. And it's becoming the new standard in our industry. So that's a good thing. On Media Infrastructure, so we see very positive signs on our commercial pack further increasing. Remember, one of our objective with the acquisition of Axon is that we would open up the U.S. market for their products. And that is exactly what we're doing at this moment in time. We see some really nice orders coming in from North America for their -- for the products that we acquired with them, but also with the new products like MediaInfra Strada that we launched last year. So that is -- we're quite happy with seeing that progress. And that really brings us in that new environment of routing, video routing in IP and HDI format. So that's something for us that will be a growth generator definitely over the next years. With MediaCeption, so the production asset management solutions that we bring to the market, we see definitely a very good progress there. We see some customers switching to EVS, customers which were using other brands before and who took a decision effectively to move away from those other brands and rely upon EVS for modernizing their studio project. So we are seeing very nice progress on that site. And then projects like with RTBF that will help us to bring in the future, new products on the market because here we're talking about products that will really be mature in '25. So here we are also creating the sources of future revenue growth. So all in all, on that side, we're quite happy to see that moving forward.

The next question comes from the line of Guy Sips from KBC Securities.

Two questions from my side. In your opening remarks, you stated that clients who are coming to EVS, is that indicating that you're gaining market share? And then second question is on the famous Slide 7 with the evolution journey from 2015 to 2025. You already indicated for 2021, the main focus was on the router segment with the Strada product. Can you indicate a little bit what will be the focus for 2022 in that -- from that slide?

Yes. Okay. Thank you, Guy, for those questions. I'll take the first question, and I'll let Benoît comment on the second question. So are we gaining market share? We think we do. It's difficult to put numbers on that because you have to see the numbers of our competitors and not all of them are [indiscernible]. So it's not always easy to understand how they do. But we feel that some competitors are suffering. We also see that by the number of colleagues that we are hiring from some -- who come from competitors, and we hear feedback indeed that we are in certain domains clearly gaining market share. So our feeling is effectively that we are gaining market share in some important markets. And that is, of course, a way to be able to grow by taking market share away from certain competitors who are in a bigger difficulty apparently to bring the right solutions to the market. And for the second question, I'll let Benoît.

Yes, so we will, of course, continue to create new solutions. And the press release of last week with RTBF is a proof of that. In fact where we speak about flexible control room, which is a new kind of solution that will come in the coming years. And we are preparing hardware solutions as well that are not yet public for the moment for obvious reasons.

The next question comes from the line of Michael Roeg from Degroof Petercam.

Yes. I have 3 questions. First one is on the big event activity that is expected to do EUR 9 million in sales this year. I had a look at previous years with Winter Olympics, and then it was EUR 13 million and EUR 14 million per year. So my question is, is there something missing this year in terms of events? Or is the interest for the Winter Olympics shrinking? That's the first one.

Okay. Okay. So in fact, no, we didn't lose any business. In fact, the volume of business linked to the event depends on several factors. And typically, if you take 2018, last time it was the World Cup in Russia. So it was a very -- so where we had several sites. We had 12 news, I think, and spread all over Russia. And you see Russia on the map these days on TV, it's quite big, even quite large. And in fact, this year it's in Qatar, so much more a country with only 8 venues. So that means that some of the equipment can be moved easily from one venue to the other, and there are less venues globally. So that's kind of -- that's one of the factors. Second, in fact we have as well some of the workflows that are moving into the cloud and we are engaged more, let's say, traditional business with events with the solutions in sport. And usually Winter Olympic year is smaller than Summer Olympic year because in fact the number of sports and the number of events is usually smaller and the coverage is usually a bit smaller as well. So these are the reasons why the revenues are globally smaller than we have in 2018 or 2014. So that is nothing alarming. Nothing alarming in that.

Okay, that's clear. No, okay. So it's a scope issue for the World Cup in general. That's one of the larger things, so nothing to get worried about. Good. Then the second question is on the OpEx guidance. If I take the half year 2 costs for SME and R&D, and I use those 2 numbers for this year as well, then I get to OpEx growth of 10%, and then I have not even included inflation and growth of the workforce. And I noticed a LinkedIn article with 100 people in demand, which would suggest 10% growth of your workforce. So I have a bit difficulties in reconciling your OpEx guidance with the H2 cost level and the growth of the workforce. So can you please help me how I should model that? Will it go down versus H2, for instance, during the year?

Veerle, will you take that question?

Yes, okay. Yes, I think H2 is probably not a good basis for the guidance of the next year due to multiple effects. First of all, we really accelerated some expenses in 2021 linked to our business transformation, which are, in a lot of cases, taken in OpEx. So this is something we will definitely continue our business transformation. But the expense is linked to it, so we'll be cognizant, especially because we have actually our go-live our ERP that is scheduled for 1st of July. So expenses will reduce there. Second of all, don't mind that expense and especially in second half, we have taken our provisions obviously for everything, which is linked to variable remuneration into the performance of 2021, which is something that we obviously do not immediately expect to reoccur. If it would reoccur, we would be extremely glad. But that's not foreseen in the model at this point in time. So yes, there's a couple of things that need to be corrected in the second half base to make sure that we get a new baseline for 2022. I think in addition, when you look at 100 colleagues, this is a net hiring position. It is not -- it's an overall hiring position that we expect, it's not a net hiring position, obviously. So net-net, I think we are looking at approximately 40 colleagues to be added in 2022.

Okay. And if those extra costs for 2021 should be, the base is a bit lower, that's especially in SMA, I assume, right?

Yes, yes, exactly.

Okay, clear. And the 100 being 40 net also makes quite a big difference in all kinds of calculations?

Absolutely, absolutely.

Good. Then I guess the third question is also for you, Veerle. Working capital, I'm not looking at the operational working capital because I also have that in my model, but I just take all the working capital. And then I see that as a percentage of sales, it was lower at year-end than halfway through the year. And that's usually the other way around. So is there something in the working capital that will reverse in 2022? Are there some kind of delayed payments, VAT or something that can reverse in 2022 and will lead either to a cash inflow or an outflow?

I don't look at working capital in terms of percentage of sales, to be honest. Do I see a catch-up effect to be booked in 2022? Not immediately. So I'm afraid that at this point in time I will have to skip on that question.

Okay. So nothing special foreseeing in terms of working capital?

Exactly.

The next and the last question comes from the line of Matthias Maenhaut from Kepler Cheuvreux.

Two short follow-ups or housekeeping questions. I just wanted to know any guidance on the tax rate you can provide. And I just wanted to know if there are any important exposure in the order book until Russia or Ukraine? That were my 2 follow-up questions.

I think in terms of tax rate, we definitely expect that to go up. This year, we still benefited from big fiscal agencies in terms of taxes or reductions for innovation and restitution for investments, maybe that did come from prior years have only been able to be allocated to this year. So obviously that will be corrected. In addition, we benefited from a restitution in Hong Kong of approximately EUR 500,000. So honestly, if I look at a more realistic tax rate for next year, I think we will be more around about 15% than the 7.5% that we see right now.

Okay. Yes. And the second question?

I can answer that one, regarding Russia and Ukraine. So overall, we've a good spread of customer risk. The biggest customer that we have is even far less than EUR 10 million, so that indicates that we have a very well balanced mix of customers. And in this respect, definitely, we have no major projects at hand or foreseen in the near future in Ukraine or in Russia. So we -- on that -- in that respect, we don't see any major impact for Ukraine or Russia. But that doesn't mean that there are no other projects in Eastern Europe, which might be affected, of course. That's something that is, for the moment, difficult to assess. But for Ukraine and Russia itself, we don't have any impact or major impact on the order book as we have it today.

Thank you very much. There are no further questions. Now I'd like to hand over back the conference to our speakers for closing remarks.

Good. Well, thank you indeed for attending this session today. And you see that we have made quite some progress in '21. We are quite happy to see those type of results after a difficult year, 2020. We definitely were able to benefit from a catch-up effect in '21. But when we look to the results of the order book at the end of '21, we also quite are cautiously optimistic for '22. So as long as those component shortages, inflation and war in Ukraine are not impacting too much our activities, we are indeed cautiously optimistic for 2022. And with the guidance of EUR 125 million to EUR 140 million, we hope indeed that we'll be more at the higher side of that estimation if everything goes well, of course. So all in all, we're happy to see the progress that we're making since 2 years with the whole team and with our customers. So that brings us indeed to that -- those 2 words, being cautiously optimistic for the future. We have the ambition to continue growing the company in a profitable way. And we think that we are building the solid foundations to do so. So I think that is the main message that we wanted to bring across today. And if you have any other questions, we will be happy to answer them, of course, at a later date.

That has concluded our conference for today. Thank you for participating. You may all disconnect. Have a nice day.

Thank you. Have a nice day.

Thank you very much. Bye-bye.