EVS SA (EVS) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the EVS Broadcast Equipment H1 2022 Results Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Veerle De Wit. Please go ahead.

Thank you, Sarah. Good afternoon, good morning, everyone. So welcome to these results of first half 2022 for EVS Broadcast Equipment. I will take you through the agenda just after this opening statement that you see on the slide. We start by mentioning that this presentation, next to our first half 2022 performance, also contains some forward-looking statements. Obviously, these statements are based on our current expectations and management's assessment 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 a materially different statement in the future. We will elaborate on some of these risks during the presentation, but there are also other market risks that could affect our statements that we explicitly -- don't explicitly comment on. These risks potentially can contain potentially technology changes, market requirements, price pressure from competition or any other risks. If we go to the agenda, we have the following points. First of all, we will start with the business update. Some highlights will be presented by Serge, our CEO; and Benoit, our Senior Vice President of Strategy, will provide some additional information. I will personally present the financial update and the outlook. And Serge will conclude with some conclusions. Obviously, as Sarah already mentioned, there will be a question-and-answers right after the presentation. So Serge, let me hand over to you to present the highlights of our first half 2022 performance.

Thank you, Veerle, and let me also say good afternoon or good morning to everybody who is joining this call. Let's have a look to our main results for our first 6 months of the year of 2022. We are quite happy with the progress that we are making. So in a nutshell, you can see that our revenues compared to last year are really improving nicely with about 10%, going to EUR 67.7 million. We see that our EBIT is at the same level of last year. So we're not -- we are quite happy with that result, seeing also the additional OpEx that we have. We see that our order book is increasing very nicely. So that's, for us, a very good indicator for the future growth that we are planning for. And you also see that our net cash is further improving. So overall, quite happy with those -- this progress. When we look a little bit more in detail, we see that we have solid customer investment to anchor new practices in a post-COVID world. What does that mean? Well, we see that many of our LAB customers are willing to renew their infrastructure to boost their productivity based on the benefits brought by our new technologies that are based on the new IP, software and artificial intelligence technologies. We definitely see that most of the greenfield projects at our customers are based on IP, with more and more software. So definitely that transition from SDI to IP is happening as we speak. We see a growth of the LSP investments, so our Live Service Provider customers, and their willingness to engage in long-term contracts to renew their fleet of XT service based on our rock-solid solutions and our future -- our feature-rich LiveCeption solution. So that's definitely an important element to note here. We also have launched our balanced computing approach, supporting workflows that also were partially in the cloud and that is definitely getting traction with our customers. And last but not least, we see that our new OpEx-based business models are getting more and more interest from our customers. On the right-hand side of our slide, you can see that, indeed, we capture the investment of those customers, but we still refer also to the risk [ it will ] try to combat and that's the issue with component availability. First topic here is definitely that major contract that we announced a few days ago, that $50 million contract over 10 years, with a big tech player in North America. You'll see that this announcement or this contract is excluded from our numbers here. So you will not find them yet back in our order intake, but they are taken into account in our revenue forecast for the rest of the year. But definitely, this has been a major achievement, which we are quite proud of, and that will have -- that will definitely echo into the future, and we'll talk about this contract as our big tech '22 contract for the months and years to come. On the MediaCeption, we are working -- we are deploying some key references as we speak in various broadcast centers around the world and that is to enable indeed the modernization and the transformation of those broadcast centers. We see more and more LSPs deciding to commit on longer-term contracts and to refresh their portfolio of replay services. That's definitely something that helps us increase our revenues. We see the first important successes in video routing markets. Remember that with the acquisition of Axon and the transformation into Media Infrastructure, last year, we announced the launch of MediaInfra Strada solution. And we see in that environment, definitely, the first success is happening also in North America. We see with our focus on channel partners, more and better structural relationships with those large integrators and channel partners in various regions of the world. Earlier this year, we have announced an important partnership with the RTBF to reinvent the way production is being done in the news studios, and that will be a product that we will be launching over a few years, but with quite some input from RTBF. As I said before, we continue facing challenging conditions when it comes to electronic components, so both on availability, but also on pricing, we see that this market still has not yet stabilized. We are happy to say that EVS stays at the core of the major 2022 events and we have 1 major coming up later this year. And there, again, we'll use that event to show some of our latest technologies. And last but not least, for the H1, we're quite happy with the successful hiring that we've been able to realize over that first period. So definitely, our brand reputation helps us to attract new talent and help us prepare for the future. Going to the next slide. We continue, of course, to support the value or the value that we bring to our shareholders by supporting, of course, the policy that we announced before, but also by increasing the guidance of revenues for the rest of the year. So starting with that guidance, initial guidance that we provided at the beginning of the year was revenues between EUR 125 million to EUR 140 million. While at this moment in time, we feel confident that we can announce an upgraded guidance of between EUR 140 million and EUR 150 million, which still is subject to availability of components and the possibility or the capability to do some production cycles. But at this moment in time, we feel, as I said, confident enough to increase that guidance. And in order to be clear and complete, we have added here again the promises we made regarding dividends. So you can see that the base dividend of EUR 1.1 for '22, '23 and '24 is, of course, confirmed. And that for this year, we provided an additional dividend, remember, that's a promise that we made before, of EUR 0.5, and that brings the total dividend in 2022 to EUR 1.6. Going to the next slide. Again, new products used for big winter events. So we had already major winter events beginning of this year, where we were introducing new products despite the COVID challenge, quite happy to do so. And later this year, we'll be indeed supporting another major event that is happening in the Middle East. There we have prepared everything, everything is being shipped as we speak. We've been doing tests with the customer over the last weeks, which was quite successful. And for the first time, we're also including some Media Infrastructure solutions for this big event. So we're quite happy to be able to do -- to integrate also our Media Infrastructure products to this setup this winter. Going to the next slide. [Audio Gap] We are definitely continuing on our journey... [Audio Gap] first dimension and going from a market product leader to a solution market leader, we continue working on that. We see more and more customers who appreciated -- who appreciate the solutions that we're bringing. We also see some key references that we've been winning for those new solutions. The second dimension, going from a premium market to different market tiers, and we are happy to see that our XT-GO server is a success for smaller OB vans and that it's also helping to onboard some key channel partners around the world. Third dimension, going from CapEx-only to more OpEx and CapEx. There we see some very good progress as well with, SLA and OpEx that continue to increase. That big tech '22 contract that we announced recently is a very nice example of that. And we also see that our EVS credit system for on-demand business model is increasingly being used. Fourth dimension and that [indiscernible] to IP total cost of ownership optimized media solutions. There as well, we see a very nice evolution. We announced earlier an important deal with FOX that is based on the IP Media Infrastructure. And another important project is indeed RTBF, where indeed, we see that there was a focus for transversal approach for new production methods. That's what we call our FCR, our Flexible Control Room of the future. Fifth dimension, going from our own hardware to not only our own hardware, but also software-based solutions on the commercial, off-the-shelf or even cloud environments. That is also moving forward with our XtraMotion that is being used more and more and is being used in our balanced computing environment. We see also more and more major events integrating our cloud solutions like MediaHub. So definitely, we are making good progress there. Dimension #6, from on-premise live production to live anywhere. There also we see more and more of that, thanks to the fact that our products are being designed more and more for also enabling remote production. Our customers are adapting to those type of solutions. And with the balanced computing approach, that is definitely something that is very well received by our customers. Last dimension, but not the least, mainly in sports going into news and entertainment as well. There we see more and more transverse modernization contracts. And a good example of such a contract is RTBF, where indeed we are working on the Flexible Control Room of the future. So all in all, we are happy to see that we're making good progress on all of those dimensions that we defined in our PLAYForward strategy at the end of 2019 and we start seeing indeed the results of that strategy being translated into results. And here I will pass on the floor to Benoit, who will take us through the next slides.

Thank you, Serge. Good morning, good afternoon, everyone. So yes, in fact, we have the 3 solutions categories that we have. We have the LiveCeption, MediaCeption and MediaInfra and the 3 categories that are... [Audio Gap] So we have the LiveCeption, which is focused on elevating the fan experience. So we observe a large upgrade contract that continue to be signed. And one of the examples, definitely is the one with the big tech contract that was announced last Friday. And it's mostly in IP. And sometimes, it's a bundle of MediaInfra Strada solution plus the XT upgrade. So we see also a benefit of bringing the different solutions in to the same customers. We also see examples of balanced computing with XtraMotion, where we still bring unbelievable quality of slow motion based on standard broadcast cameras. This is a typical example of a balanced computing because we have some solution elements that are in the OB van and some other solution elements, here XtraMotion, which is actually residing in the cloud, and we ensure that the whole workflow is going through to leverage the resources on both sides. And then we have the LSM-VIA, which we announced 2 years ago and which is being delivered already and making some big events, but we don't stop there. We continuously enhance the feature set of this LSM-VIA to bring more value to the EVS operators, to the community of operators using EVS for replay. And on top of that, we help them to automate all what they can automate. In the MediaCeption category, we are deploying strong market references, especially in U.S. These references, we earn them and we won the deals in the previous years. And now we are deploying these projects. And in parallel, we are also answering to our customer because we see a large market traction for the modernization projects, not only in U.S., but also in Asia and in EMEA regions. So we have also more partners that are bringing, let's say, their contribution to the deal and they are bringing, in fact, some solution components and they help us to support these large deals and to design broader solutions that -- than what we could have designed with just our hands. And last but not least, on this solution category, we have the MediaHub. The MediaHub has been largely used in the last 5 years for the big events. But now we put it available even beyond the big events in a SaaS mode and we have our first customers that are enjoying the benefits of this solution. On the last category on the slide, last but not least, we have the Media Infrastructure, which is the result of the acquisition of Axon in 2020. And then it's about control and processing of all the media workflow. Then we designed last year, as we announced, a new solution in the routing domain, the Strada solution, and we continue to win. And we have announced at NAB this year, a major multimillion deal with FOX Sports U.S. in this category, which is really a proof point that our solution gets traction and are interesting major customers. At the same NAB '22, we won an award. I will come back on that in the next slide. And then we have also -- we see an adoption of Neuron in Japan as well, which is a very demanding region, as you know, for products of very high quality. And so that's also a sign and recognition of the quality of our products. And then we see Cerebrum, in fact, which is our control system, which is being deployed everywhere. And especially as part of the Strada solution and as well, we see serious traction in U.S. where it was not present at all when it was under the Axon flag. Now that it is under the EVS flag, thanks to the sales synergies, we can see the real benefits, and our customers can enjoy the benefits of Cerebrum and they recognize the value of this unbelievable product. And we have as well in the same category, the partnership that we signed in January this year with RTBF, where we have this Flexible Control Room and we co-developed the solution where we go much beyond the replay, that is, the let's say, the traditional EVS domain, and we go with a full control of the user interface for the lighting, the audio, the video and all the aspects of the infrastructure that will reside in the news studios of RTBF and of many other customers in the future. If we go to next slide, in fact -- so in terms of official recognition, then at NAB 2022, we received an award for the Neuron Protect. So Neuron is a platform, in fact on which we can deploy different applications. We have the Neuron Bridge, we have the Neuron Convert, the Neuron Shuffle and now the Neuron Protect. And with the Neuron Protect, in fact, we bring reliability and security to our customers. So all the nonfunctional features that sometimes are ignored, but which are very important and are part of the DNA of EVS. Our customers face some challenges on the security side, on the reliability in terms of IP, and Neuron Protect will definitely help our customers to achieve their results and to sleep well during the night because they have the right solution components. In April last year, we were at NAB. And if you remember, we were just exiting the COVID period. So it was still unclear and some people did not do the trip to Vegas to attend the NAB , let's say, large and -- trade show. Now we go in Amsterdam and -- on early September. And there, we expect to meet all our customers there. And because we see that people will get back on the floor and it's very good that we can demonstrate in life, in real life, our solutions on our booth and ensure that our customers can have the right conversations face-to-face again to better understand and view and see in real life all our solutions that we will demonstrate, but that doesn't prevent us to continue to leverage the digital methods to address our customers. So we continue to do webinars, we continue to have remote demos when we can so that we can also improve our efficiency in terms of communication towards our customers. And I will then hand over back the slides to Serge.

Thank you, Benoit. So just go forward here in the presentation. Next topic that we would like to talk about is our main risks. And indeed, we would like to talk about the scarcity of electronic components and of course, also rising inflation. So on the components side, we keep seeing the difficulty to get components on time and with the right volume. So that stays an attention point. Up to now, we've been able to always cope with that, but it's no guarantee that we will be able to continue doing so. But up to now, we've been able indeed to do that. We've also extended our delivery periods over time, where some years ago, we were at 4 weeks standard delivery time. Now we have extended that to 20 weeks. And even with that extension to 20 weeks, we see our revenues going up and our order intake, of course, also going up or at least our order book, I should say. So all in all, we are happy with the fact that we've been able to solve all the issues that we've seen in the past about availability. But again, it's not a guarantee that we'll be able to continue doing so. We've also seen on the component side that prices go up and even more rapidly than inflation is going up. So that's definitely something that we take into consideration and that we try to balance, of course, by the appropriate price increases. Second point, of course, is rising inflation that is increasing our, mainly our remuneration cost, of course, because that is the biggest part of our operational costs. But also other elements of our costs are increasing with inflation and we look closely to how that affects our bottom line. And as I said before, we try to indeed reflect that into price increases that we can pass on to our customers. Those are the main risks. And we'll continue living with them over the next months for sure. We don't see yet a slowdown in any of those, but we try to make sure that indeed we limit the impact on our bottom line as much as possible. And that brings me to our financial update. Veerle, the floor is yours.

Thank you, Serge. With regards to the financial update, we'll have a couple of topics that we want to go through. First of all, there is the 1H '22 financial highlights, some more information around the revenues, so -- as well a geographical split and a split by destination or by market pillar, as we also call it. We'll have an overview of the consolidated income statement, a specific topic on IAS 38, which is the application for R&D developments, a topic on team members. And finally, 1 or 2 slides around the balance sheet. If we go to the 1H financial highlights, I think what is very important to mention is the record order intake and the historical revenue performance. Our order intake in first half was of EUR 88.7 million, growing actually 17.3% year-over-year. But excluding the BER, the growth is actually of 30.8% year-over-year. So for us, that is a very strong indicator that we are actually gaining traction in the market and that we are on our growth path and our growth ambitions that we want to see achieved. Our first half 2022 revenue is of EUR 67.7 million, that is an increase with 10%. Our main driver is in there the LSP market, because we're benefiting there from very large upgrade and transformation projects, as already mentioned by Serge and Benoit. And our LAB, though declining year-over-year, it's performing in line with our expectations. We have a difficult compare with first half '21 because first half '21, we had a delivery on some major projects or some several major projects. And we're actually working, as already mentioned as well, on some new major milestones in this area as to consolidate future growth. We had important big events revenue since first half 2022, thanks to some important winter events as well. Looking at the overall profitability, our gross margin is actually declining, and this is primarily following the investments we did to support our growth. Those are investments in support organization and operations. The control of our price of components and inflation is actually solid. We see those prices increasing, but we also see that we correctly modeled our price increases to avoid a bottom line impact. So the impact in terms of gross profit margin is 1.2 points compared to last year at a 67.7% gross profit margin. Our EBIT performance is strong at 23.3% of our revenue and a total of EUR 15.7 million. And as a consequence, our operating expenses, they are growing 8% and it's primarily fueled by post-COVID spending patterns. We see that we travel a lot more. Again, we're back to levels that of 2019. We invest a lot more, again, into events and fairs. And yes, this is obviously also to make sure that we continue that growth path in the future. Our net profit is of EUR 15.4 million. It is a slight decline of 0.9% compared to last year, primarily fueled by more taxes that we pay in 2022. And we have a diluted earnings per share of EUR 1.15 per share, which is exactly flat and in line with 2021. If you look at our first half revenue, you will see here the revenue performance of the past decade. And you'll see that the revenue performance actually of EUR 67.7 million is a historical performance, best performance actually in a decade. We were close by in [ EUR 66.6 million ] at 2016. But so definitely, looking at the past years, this is a very strong performance. This is obviously fueled by higher back orders that we had at the end of 2021, but also still continued strong order intake in 2022 and obviously, Big Event Rentals, that impact that result as well. Before I go into the explanation of the different market pillars, and I think Benoit already explained at high level, so I won't dwell too long on this slide. This is a definition actually of our market pillars. So we follow up on our market pillars in 3 different pillars. So we have the Live Audience Business. This is actually all the revenue from customers that are leveraging EVS products and solutions to create content for their own purpose. So you see a couple of examples there. It could go from broadcasters to stadiums, to governments and institutions, et cetera. We separate that from the Live Service Providers. Live Service Providers are those clients where they generate actually revenue leveraging EVS products and solutions to serve LAB customers. So these are all the rental and facility companies, production companies and things like that. And finally, we have the Big Event Rentals, which is the revenue from major non-yearly Big Event Rentals that we have generally every 2 years that generate revenue. If we look now at the revenue by market pillar, you will see that there's quite some change compared to 2021. The LAB market is actually taking a lesser share than last year. So last year in first half, it represented 53% of our total revenue, excluding BER. Right now, it only represents 41.2% of our total revenue, excluding BER. This is primarily because first half '21 was benefiting from some major projects that actually came to an end and for which the revenue recognition could be activated. And that LAB business, just for your information as well, is a business that is much more project related, so where revenue recognition is much more spread over time than, for instance, our Live Service Providers business where revenue recognition is much more instant. As mentioned, we're working on some new major important milestones and some important projects and we're confident that, that LAB business will demonstrate a growth on longer term and as to consolidate actually our future growth as EVS as well. Life Service Providers, as a consequence, is gaining, obviously, in markets -- in performance when compared to Life Audience Business. So we grew from 47% in first half '21 in terms of composition of revenue to 58.8%. And that is because Live Service Providers is definitely benefiting from some important upgrade cycles and transformation projects. I believe that our LSP customers are definitely embracing the new EVS solutions and they embed actually the new practices in their production environment. You can also look at BER, which is completely outside of this number. The BER is growing from EUR 4.5 million to EUR 5.7 million in the first semester of 2022 and that is a growth of 27%, thanks to major winter events in Asia. If we look at our revenue performance by geography, we see the following picture. First of all, we see North America and Latin America. And that slide is in U.S. dollar. So you can't add them up to come to EUR 67.7 million, but it's to show a relative performance. So -- but the NALA performance is really, really boosted by very important contracts, obviously also boosted by a strong U.S. dollar. But to put into perspective, I think the base growth in NALA in the first half of the year is of 48%. There is a benefit on top of that, a growth of 15%, thanks to the strong U.S. dollar. But I think the base growth is definitely already worthwhile mentioning. EMEA, we see the revenue declining. It's a short decline or a small decline, 9.7%. But we're actually very confident for the full year because in terms of order intake, they still stand very strong. And so longer term, we're less concerned about EMEA. APAC at a first glance might be showing an important decline. Well, they are declining for sure in terms of numbers. But looking into a little bit deeper into the APAC performance, we see that the decline is primarily linked to the situation in China. So the COVID situation, but also the geopolitical situation. Excluding China, APAC is actually performing really well, with definitely regions like Australia and New Zealand performing considerably well. As mentioned, the BER growth is of 26.7%. We already confirmed that just earlier on. If we go to the secured sales and the order book, I believe the secured sales at the end of first half '22 is definitely showing a nice growth. It's growing with 28% to EUR 126.4 million. And so that is the revenue that we already secured for the year 2022. Excluding BER, that growth is even more important. It's an important -- it's a growth of 37%. Obviously, it is a reflection of longer delivery times. But it's definitely not also linked to that. It's also a demonstration of our base business growing at high rates. If we look at the order book, the order book for 2022 is growing with 60%, including Big Event Rentals. And Big Event Rentals is declining 55% in that number, so with EUR 4.7 million year-over-year. So as a result, that means that our base business is growing dramatically, growing with EUR 26.7 million in order book, which is a growth of 95%. And obviously, we're very positive around this tendency. Of course, this is partly a reflection of better anticipation of orders, as mentioned already in the secured sales as well, but again, also a demonstration of our increased base business. Our order book of 2023 and beyond is also showing nice growth, even though it might not appear at first sight, so it's growing 3%. But excluding the BER, the Big Event Rentals, the growth is actually 39%. Again, this does not include any of the revenues that may come in the future of the big tech 2022 contract. So already without that contract, we show an important growth in our future order book. If we look at the consolidated income statement, first of all, you see a comparison of H1 '22 compared to H1 '21 and a year-over-year comparison. The revenue performance, as mentioned, is at EUR 67.7 million, which is actually a 9.5% growth and of which the revenue excluding Big Event Rentals is growing at 8.3%. For us, a clear demonstration that we're gaining market share. Our gross profit, as mentioned, is slightly declining from 68.9% to 67.7%, which is a decline of 1.2 points. And as mentioned previously, this is primarily a drop as a consequence of our investments actually into our operations and support organization to fuel our future growth. We see limited impact of our cost price increases for components and inflation, but primarily because they have been well modeled and we have been able to offset those increases through price increases towards our clients. Looking at the OpEx. The OpEx is growing with 8% and this is actually entirely linked to post-COVID spending patterns and inflation. We do have to note that we made also further investments into our R&D department, but those investments have been recognized as intangible assets under IAS 38. I will come back later on this point as well. If we look at other revenue and expenses, they increased with EUR 0.8 million, primarily because of accounting treatments. So we had to change actually our accounting bookings for share price -- share options and we also had to consolidate some bad debt. Finally, we have an impact year-over-year of the taxes, with nearly no taxes booked in first half '20 year and EUR 1.9 million of a cost booked in 2022 or first half '22. Luckily, this impact was offset by an important result in hedging. So we did some proactive hedging. We benefited from the dollar position and we realized a gain in financial results of EUR 1.6 million. All of this resulted to a diluted earnings per share of EUR 1.15, which is exactly equal to last year's performance, first semester. A small word on IAS 38 application that we did because this is quite a change for EVS. I think EVS in the past, we have never activated depreciation for R&D spending, primarily because in the past, we had difficulties extracting the research phase from the development phase. And we also had difficulties to demonstrate per feature what the economic benefit was in the future. And this is the reason why it was never used in the past. We were quite challenged on this by our auditors on a quarterly basis actually. However, now in 2022, for the first time, we were able to document that we actually comply with IAS 38 and this is the guidance around intangible assets. And this for 2 major developments. So 2 specific developments, we were able actually to demonstrate to Ernst & Young that we have actually creating or we will be creating an intangible assets following the development efforts that we do, that we will have a future economic benefit. So we modeled the revenue that will be linked to those intangible assets based on very clear assumptions. We clearly demonstrated that there are 2 different phases and that we could separate the development phase from the research phase. And we also demonstrated that we have a reliable cost tracking in place to make sure that we can comply with this guidance. Finally, we've demonstrated a return on investment analysis for these developments. And in both cases, the return on investment is starting in -- as of 2024. As a result of this and for the 2 major developments, a total of EUR 3.9 million was recognized as intangible assets with future economic benefits. This to demonstrate actually that the investments we made in R&D, we've capitalized them for future economic benefits. Going to the next slide, we see also the team member evolution. Serge already referred to this in his introduction. We had a very strong hiring pattern in the first half of '22, actually despite the war for talent. So that demonstrates actually the attractiveness of a brand like EVS with a very strong inflow. And next to that, we have a very low outflow, which, on the other hand, demonstrates EVS' strength in employee engagement. So overall, our headcount grew by 62 full-time equivalents at the end of first half 2022 compared to first half 2021. The net inflow in the first half of '22 -- sorry, it's for 43 team numbers. This means that we have an average headcount increase of about 40 FTE year-over-year. Finally, some words on the balance sheet. We continue to have a very strong balance sheet, with a net cash position at EUR 44.2 million. You will also see that we have a total equity versus our total balance sheet of 74.6%, which is obviously a nice situation to be in. Further to be noted is the creation of other intangible assets, which demonstrates the internal development costs that we capitalized during 2022 according to the IAS 38 that we just explained. We have lands and buildings that mainly include the headquarters in Liège as well as our offices abroad and this is the IFRS 16 norm. We further invest into inventory. So our inventories are up to EUR 30.2 million. And this increase is actually a reflection of our proactiveness that we try to build into our supply chain model as to make sure that we cope with the delivery delays and uncertainties of electronic components. Our cash and cash equivalents reduced with EUR 11 million if we compare it with end of December 2021, but this is primarily a consequence of the cash used in our financing activities, and this means the dividends and the investing activities, which is IAS 38 norm. Looking at the evolution of our working capital. Our operating working capital is at EUR 63.8 million, an increase of 17% compared to end of December '21. And that is obviously a result of, first of all, higher inventories. We increased our inventories a bit, around EUR 3 million in the last 6 months. Again, this is a deliberate measure as to make sure that we limit the impact of the shortage of components in the market. We also have higher trade receivables. They grew with EUR 5 million. This is following, obviously, the revenue achievement pattern that we're demonstrating and the growth that you see. And we have some investments also in operating working capital for MI -- for MediaInfra, which is also growing EUR 2 million and which is also a reflection of higher inventories. It's margin -- it's offset by marginally higher trade payables, so above EUR 1 million, again also demonstrating the higher volumes of our business. If we go to the outlook and the guidance for 2022, I think we can conclude that we have all the fundaments to support actually an upgraded guidance. We have secured revenue that is at EUR 126.4 million at the end of June, growing 29%. We have an order book that is at a record high, so a total of EUR 88.7 million, out of which EUR 54.9 million is to be recognized in revenue in 2022. That is 70% growth and excluding Big Event Rentals. EUR 3.8 million to be recognized in revenue in the second half of 2022 for Big Event Rentals for events that will take place by the end of this year and EUR 32.2 million to be recognized in revenue in 2023 and beyond, which is a growth of 39%. Based on these strong fundaments, we are confident that we can increase the guidance. The guidance initially in the beginning of the year that was given was of EUR 125 million to EUR 140 million. We have upgraded that guidance to a new range of EUR 140 million to EUR 150 million. Again, that upgraded guidance assumes that we have no issues, not in availability, nor in price, with the supply chain to produce the final production batches of the year. At the same time, we upgrade our operating expense guidelines as it is important to continue and fuel our future growth. And that upgrade in that operating expense guidance has been moved up from 12% to 15% growth compared to last year 2021. Serge, I hand over to you again for the conclusions.

Thank you, Veerle. So let's indeed go to the conclusions. But before doing that one, let's also focus on those next activities for the rest of 2022. So what we are looking at for the rest of the year is, of course delivering those large multiyear modernization projects that we have won and that we are in delivering phase as we speak. So a lot of effort goes into that from different teams going from R&D to customer service teams, of course. We continue, of course, further promoting those existing solutions and continue to enhance the workflows through new solutions. We definitely focus heavily on that. Third topic is that we continue to expand our EVS solutions offering. We do that organically, but also through strategic partnerships. And we hope that in the future, we can continue our acquisition strategy, if indeed we see the right opportunities appearing. And last but not least for this year, we are working to deliver that next major winter event that will come later this year. So the next slide brings us effectively to the conclusion. We are happy to see a record high revenues and order book, no doubt about that. We're happy that we've been able already to deliver those major events at the beginning of the year with important winter activities. We're happy to see the growth of orders and revenues for our Live Service Providers customers. As you've seen, we see a decrease compared to last year, but that was at a record high already, of our LAB revenues, based on the mix of projects and the impact of revenue recognition, but we are still quite positive about the future of this LAB customer pillar. On the PLAYForward strategy, we definitely continue implementing our strategy as we have been defining it before at the end of 2019. We see the solutions that we defined in the last 3 years making [ headway ] on the market, including Media Infrastructure, very happy to see that happening indeed. We're also addressing next to the premium market more and more mid-tier markets. And next to our direct approach, we continue focusing on improving our channel partner program. Talking about the gross margin. You heard Veerle talking about that. We feel that's under control, both from an inflation point on -- remuneration part and cost part of our components. We see the gross margin is impacted through further investments in our support and operations departments as to fuel our growth. There is no doubt about that. OpEx is expected to increase 12% to 15% for the full year based on the inflation of the manpower and components as well as higher investments to support that growth that we're looking for. In addition, as Veerle explained, post-COVID spending patterns fueled the growth of that OpEx as well. The guidance is indeed increased on the revenue side to a range of EUR 140 million to EUR 150 million. And last but not least, we confirmed our policy regarding dividends. So that means that next to the EUR 1.1 for this year, we'll add that EUR 0.5 so that we will be paying EUR 1.6 per share for this year. And that in order to honor the past dividend policy promises that we made. So that brings us to the next chapter in our presentation and that is to answer your questions that you might have.

[Operator Instructions] So we'll now take our first question. This is from the line of David Vagman from ING.

So I've got 3. First, on the -- and first, congratulations for the very strong sales momentum and strong order intake. On the sales momentum, you previously alluded to the replacement cycle in LSP. So how much do you think this replacement cycle has sort of to go, to how many clients can still [indiscernible]? What is -- how long can it last, basically and in particular, taking into account a potential economic slowdown? So that's my first question. So more on the top line. Second, on the R&D capitalization. Could you tell us or give us a feel of the amount we should expect in H2 and going forward? I understand that it's tightly related to 2 projects. Could there be more, et cetera? So overall, how will R&D, let's say, all included, so including OpEx and CapEx, can evolve in percentage of sales or -- so a bit of an idea? And my last question is on the gross margin. So I understand that the limited pressure we see is mostly on support staff. So could you -- why did you have to invest, given that I understand that your installed base is mostly stable, means that base of the -- especially in LSP, in live replay solution, so -- or is it related to something else, I don't know, more services you're providing? So can you -- how do you indeed monetize these investments given that, first, actually, we see some pressure on the gross margin?

David, thank you for those questions. So here's Benoit, who will start answering your first question about the replacement cycle of XT-VIA.

So thank you, David, for your questions. In fact, in this upgrade cycle, that's not something which is linear. So that means that typically, we see some different phases. So it's -- we don't want necessarily to communicate on a percentage, but we are well engaged in this upgrade cycle. And there is still more to come than what has come before. And so -- but it's not a linear curve in terms of delivery. And typically, we can expect, because we have an end-of-life announcement soon of the previous version, that now there is a momentum with a specific, let's say, volume that will be replaced in the next 2 years. In fact, that's what we expect. But after that, it will continue, certainly for many customers, because that's what we observed on the previous generations as well, even in the last decade. And so that means that it's not necessarily something that is very easy to predict. It depends on the investment cycles of our customers. It depends on as well the push of the market to go to 4K or to other technologies. So -- but okay, we are definitely in a momentum where there is an appetite from our customers and that is pushed by the fact that we have a very good product and because as well we have announced the end of support of the previous server for next year.

Yes. Thank you, Benoit. Let me add to that we continue developing new features and new capabilities of the XT-VIA server generation. So we keep on adding, I would say, reasons for customers to upgrade. So that effectively helps us to convince certain customers at some point in time to upgrade to the latest version of the XT server. Second question was on R&D capitalization. And there, I think that Veerle will start answering that question.

Yes. Thank you for that question, David. So R&D capitalization, we don't expect to capitalize further R&D projects. So we will limit it to the 2 projects that we identified right now. Basically, because for those 2 projects, it's much more easier, they're quite isolated. Their future economic benefit is pretty easy to dissociate from our base business. So we will not capitalize any other projects at this point in time. Our full year assessment in terms of capitalization is approximately similar to the first half. So it's going to be a little bit less. We think about EUR 7.5 million on a full year basis. And as mentioned, we expect those economic benefits to start in 2024.

Okay. Thank you, Veerle for that answer. Then the third question was about the gross margin and support staff, why are we investing in that, assuming that our installed base would be stable. Let me answer that one. So I would like to say that our installed base is not stable. We see it growing. We also see, for instance, Media Infrastructure growing, the acquisition that we did in 2020. We see, for instance, products like Media Infrastructure Strada, where we are providing routing solution to customers. That is, in fact, a new product, a new solution that is taking off and that requires also more support, more services, installation services. And that's why, indeed, especially in North America, we've been adding quite some new colleagues to our team in order to be able to also support the wave of opportunities that we see coming. So definitely, we've been adding staff in that department in order to be able to cope with the projects that we have at hand, but also the projects that we see coming. So that's really in order to support that future growth. And again, it's not just to support the installed base, but also to support extended base of other products that we are adding to our product portfolio. So David, I hope that this answers your questions.

Yes. Maybe for 2023 on R&D, do you still expect like EUR 7 million of capitalization? Or should it [indiscernible] gradually slow down?

It will probably slow down a little bit, but not dramatically.

We'll now take the next question, and this is from the line of Guy Sips from KBC Securities.

Yes, I have 3 questions from my side as well. First, can you come back a little bit on the different dynamics in LAB and LSP for the second half of this year? Is it fair to presume that for LAB to be year-over-year quite flat, while for LSP, we would see a little bit like the same year-on-year growth as we saw in the first half of the year? And the second question is on the order book and the big contract of EUR 50 million. How will you handle that? And how will you communicate on that and the evolution of how it is delivered in your order book and in your communication? And the third question is on the IBC conference. There is rumors that EVS will introduce a new MediaHub software as a service content exchange. Can you comment on that?

Okay. I'm not sure I've captured all 3 questions because I lost your line for the second question. I'm looking to my colleagues if they have heard the second question. Okay. Looks okay. So it was me. So the first question is about LAB and LSP, how we see that going further this year? Benoit, do you start answering that one?