Kudelski SA (KUD) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Kudelski Group Half Year Results 2020 Conference Call and Live Webcast. I am Sandra, the Chorus Call operator. [Operator Instructions] the conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to André Kudelski. Please go ahead.

Thank you. Good afternoon, ladies and gentlemen. It's a real pleasure to present to you today the first half 2020 results. And I will just start by a short introduction with key highlights. First element is, if we take the key point, the total revenue and other operating income are at USD 320.1 million. One of the key points of this first half is the operating free cash flow is at USD 37.7 million. We must recognize that the COVID-19 global pandemic affected the group first half results, mainly due to project delay and cancellation of orders. Measures taken to mitigate the COVID-19 impacts and the short-term group costs base reduction have been a key element. If we take the further points, we have seen a resilience of DTV recurring revenue, mainly coming from advanced economy clients. We have also seen Kudelski Security that have delivered a strong performance in EMEA. We have innovation to address specific COVID-19 needs in public access, including element to detect people that are potentially contaminated. So the full year 2020 outlook is now with an expected EBITDA between USD 45 million and USD 55 million. In summary, if we look at the key figures for 2020 first half, revenue and other operating income, USD 320.1 million, or OIBDA at USD 4.9 million. Operating free cash flow at $37.7 million compared to negative USD 11 million last year. And I would just like to take the opportunity now to pass the floor to Mauro Saladini that will give you a much more detailed presentation of, how to say, impact and financial, how to say, performance of the group during first half.

Thank you, André, and good afternoon, everyone. COVID-19 affected first half results of our different segments in different ways. Let me start by giving you an overview of the impact of the pandemic by segment and of our key mitigation measures. In Digital TV, several customers across regions temporarily put on hold their paid content offer. The pandemic is hitting, in particular, emerging market operators, translating in a slowdown of business activities in Asia and Latin America. We expect most emerging markets relevant for our Digital TV business to continue to be distressed in the second half. On the other hand, European and North American customers show a stronger resilience. In the European market, we expect a number of projects originally scheduled for the first half to be executed in the second half. In Cybersecurity, the European business maintains a strong momentum with virtually no negative impact from COVID-19. In the U.S., the challenge to engage face-to-face with potential new customers led to a slowdown in new customer acquisition. Acquisition of new business through virtual channels is proving more challenging with the new prospects compared to the generation of follow-up business with existing customers. COVID-19 is also affecting the delivery of services provided in person, including, in particular, the installation and integration of third-party cybersecurity technologies. Public Access was mostly affected by COVID-19. Several large customers, including airports, shopping centers and stadiums are delaying new installations. Service business also suffered a slowdown as the usage of car parks declined, resulting in less demand for this infrastructure. For example, in April and May, service volumes were down by 75% compared to the previous year. While this impact affects all regions in the Public Access business, we are starting to see first signs of recovery in several European markets. So for example, at the end of June, service volumes in Europe recovered to 90% of prior year, while other regions were back to 75%. Measures to mitigate the impact of COVID-19 include cost cutting, reduction of investments, working capital optimization and securing of financing. From a cost perspective, our key lever is personnel cost. Whenever meaningfully available, we introduced partial unemployment measures. Overall, this led to a reduction of 489 full-time equivalents as of end of June compared to end of December of last year, the vast majority representing a temporary reduction. We also reduced travel cost to less than half the amount spent in the first half 2019. We lowered insurance and vehicle costs to close to half of last year's amount, and we reduced marketing cost by 40%. Second, cash flow used in investing activities is down from $10.1 million to $2.9 million, as we're taking a very selective approach to 2020 capital expenditures. As a reminder, no internal R&D investment is capitalized. All such investments are directly expensed through P&L. Third, and as you will see in our cash flow statement, we released $36.5 million of cash from working capital. In particular, through a series of measures aimed at accelerating the payment of outstanding invoices. And finally, we're benefiting from COVID-related loans for a total amount of $22.2 million, securing our liquidity this year and beyond. Let me now move to the full -- and let me move now to the revenue by segment. In the first half 2020 group revenues in constant currency declined by 18.6% to $316 million. The Digital TV segment generated 18.8% lower revenues compared to the first half 2019, a 17.5% decline in constant currency. In this period, several operators reduced discretionary spending, delaying noncritical projects Cybersecurity segment was down 11.5% in constant currency compared to the first half of last year driven by a shrinking technology reselling business. IoT is still in an early development sales, generating small service revenues from our IoT Center of Excellence. In this first half, IoT generated $1 million revenues. And finally, Public Access segment revenues were down 22% in constant currency. Total first half revenues were at $121.6 million. As already noted, the parking business is strongly affected by the COVID-19 pandemic. The net revenues for the first half decreased by 19.9% to $316 million. Other operating income decreased to $4.1 million, reflecting, in particular, lower billing of services related to an M&A transaction booked last year and a $1 million one-off earn-out, also accrued in the first half of last year. Margin after cost of material increased from 70.9% to 75%, reflecting margin improvements across all segments. In the first half, we reduced personnel expenses by $22.1 million, in particular through the ongoing rationalization of Digital TV operations as well as the implementation of partial unemployment measures, both at SKIDATA and in Digital TV. A snapshot of full-time equivalents as of end of June shows 3,031 full-time equivalents compared to 3,520 at the end of the previous year. The 489 FTE reduction mainly reflects temporary headcount reduction measures. In Europe, we lowered the number of FTEs compared to the end of December of last year by 336, with Austria driving this reduction at minus 179 FTEs and Switzerland at minus 102. American FTEs were down by 110, mostly in the U.S., representing a minus of 77 FTEs. Our headcount in Asia decreased by 43, including a reduction of 37 FTEs in India. Other operating expenses decreased by $11.4 million, including, in particular, an $8.2 million reduction of travel expenses as well as an $1.8 million reduction of insurance vehicle and other expenses. So for the first half, we report a positive EBITDA of $4.9 million, down $10.6 million from the previous first half. Depreciation and amortization decreased by $5.3 million, reflecting the reduction of capital expenditures of the last few years and the full depreciation of our Swiss buildings. The reported EBIT loss for the period is at $18.8 million compared to the $13.5 million loss in the first half of last year. Let me now give you an overview of the performance by segments starting with Digital TV. Topline development in our Digital TV business was weak across regions. The European Digital TV business posted an 18% revenue decline in spite of the resilience of most large customers. The number of projects were postponed to the second half or into 2021. In addition, we experienced a negative impact from the closure of retail markets affecting, in particular, our Italian revenue base. On the positive side, we continue to strengthen our cooperation with large operators, Vodafone, as an example, keeps expanding its footprint across European markets, leveraging our NAGRA SSP platform. American DTV revenues were down 9.9%. North America was substantially stable in this first half. In the U.S., the erosion of Dish TV subscribers is tapering off with 40,000 subscribers lost in the last quarter compared to a loss of 79,000, 1 year ago. We also continue to expand the scope of our partnership with Altice, including, in particular, the deployment of our analytics suite in the first half 2020. On the other hand, our South American business delivered a weak first half, with Telefónica and América Móvil generating, in aggregate, a revenue decline of more than $10 million compared to the first half of last year. Telefónica, in particular, stopped acquiring new satellite TV customers. Asia Pacific and African sales are down 14.6% to $26.5 million. In particular, StarHub revenues were down $6.5 million, following a strong first half 2019, where we completed a large project, including the sale of hardware components. Digital TV gross margins went further up in relative terms from 89% to 92% as the hardware share of DTV business continues to decline. Operating expenses in the Digital TV segment were $24.3 million lower than in the first half of last year. The main driver of this reduction relates to the $13.7 million one-off restructuring costs booked in the first half of last year. As previously announced, we are not booking any restructuring cost in 2020. Digital TV generated $36.9 million EBITDA, down $3 million from the first half 2019. For the second half, we expect segment revenues to be materially higher than in the first half, resulting in a higher segment profit compared to this first half. Gross revenues in the Cybersecurity segment declined by $9.7 million from the comparable period of last year, reaching $63.2 million. Net recognized revenues were at $38.7 million, down 11.1% from the previous first half. As mentioned, the European region maintained its strong momentum, growing net revenues to $11.3 million, up 46% year-on-year. European business is benefiting from a strong momentum, not only in Switzerland, but increasingly in other markets, including, in particular, France and Germany. Americas, on the other hand, were down 23.5% to $27.4 million. The overall revenue decrease reflects, in particular, the shift -- the ongoing shift of business mix from the lower margin technology resell business to the higher value business lines, advisory, managed security services and proprietary technologies. Our managed security offer, in particular, continues to gain traction. This first half, we also completed an extensive sales transformation effort, restructuring and retraining our U.S. sales team to better address higher added value segments. Early evidence of the impact of this effort include a 35% increase of the total pipeline compared to a year ago. As a result, segment gross margin materially increased from 43.3% to 56.6%. In absolute terms, gross profit was up 15.6% to $21.9 million. Segment EBITDA loss increased by $0.8 million to $11.5 million, reflecting one-off expenses incurred in relation to the changes to the U.S. sales organizations I just mentioned. In the second half, we expect Cybersecurity revenues to grow, both in the U.S. and in Europe, compared to both the first half of this year and the second half of last year. As operating expenses are expected to remain roughly at the same level as in the first half, we expect a material EBITDA improvement from the first half. IoT. In the first half, we hired a new Head of IoT, Hardy Schmidbauer. With Hardy joining our company, we are enriching our end-to-end IoT solutions portfolio, delivering technologies and services aimed at solving specific business problems in different industries. As a result, our IoT opportunity funnel increased by more than a factor [ for ] compared to June 2019. We expect second half revenues to be a multiple of the second half of last year and expect the momentum to continue into 2021. In the first half, we generated $1 million revenues and focused our spending with a $2.6 million OpEx reduction compared to the first half of last year. As a result, reduced our EBITDA loss by $2.6 million to $8.9 million. Public Access. As mentioned in the introduction, the COVID-19 pandemic heavily affected Public Access business. European revenues declined across the board with a particular strong impact on Southern European markets. So for example, Italy was down $3.6 million; France, $1.9 million; and Spain, $1.8 million. Northern countries were also affected with Germany, down $2.5 million; and the U.K., $1.4 million. Overall, European SKIDATA revenues were down 15.6% to $70.6 million. In the American market, SKIDATA is going through the turnaround of its U.S. operations, while also taking a hit from the pandemic. Out of the $16.2 million revenue decline, $10.3 million relates to our U.S. market. South American markets, similarly to Digital TV. And here, including, in particular, Brazil and Chile were also affected, losing more than half of their first half 2019 revenue base. Asia Pacific and African revenues were down $8.3 million from the first half 2019. Australia, traditionally a strong market for SKIDATA, lost $3.6 million compared to the first half 2019. SKIDATA gross margin improved by 2.1 percentage points to 61.5% due to a lower share of new equipment sale in the overall revenue mix. Operating expenses decreased by over $10 million to $79.3 million, mainly driven by the savings from the COVID-related cost reduction initiatives. While these measures allowed a swift reduction of SKIDATA cost base, they also led to delays in the implementation of the structural measures announced late last year. Further structural cost reductions are expected to materialize over the next few months. Overall, segment EBITDA was down $9.2 million, resulting in a loss of $4.5 million in the first half. Continuing on the group P&L. At $4.8 million, interest expenses are $0.3 million lower compared to the previous first half, while net finance expenses of $6.5 million mainly reflect net foreign exchange transaction losses. The positive tax result reflects the capitalization of SKIDATA tax losses. Overall, we report a $27.1 million net loss compared to $20.4 million net loss in the first half 2019. On the balance sheet, total noncurrent assets decreased by $22.8 million to reach $673 million. Tangible assets decreased by $2.7 million to $124.1 million, and intangible assets were down $20.4 million to $387 million. The low level of new investments and currency effects are the main drivers, reducing the net value of these balance sheet items. Inventories increased by $8.7 million, including a $7.1 million increase at SKIDATA. The project aimed at streamlining SKIDATA supply chain is underway and is expected to result in a substantial reduction of SKIDATA inventory balance. Trade receivables decreased by $42.7 million. SKIDATA receivables are $26.7 million lower compared to the end of the previous year, reflecting the high seasonality of the business with significant revenues booked in the last months of the year and cash in -- and cashed in during the first quarter of the following year. We also reduced our Nagravision receivable by $9.7 million, reflecting concerted efforts to preserve cash in the context of the COVID pandemic. Contract assets were down $7.1 million, thanks to improvements in SKIDATA invoicing cycles. And finally, cash -- at $85 million, our cash position at the end of the period was $10.4 million higher compared to year-end. Total equity decreased by $66.4 million, mainly reflecting negative net income for the period and $16.8 million currency translation adjustments. Total noncurrent liabilities increased by $34 million. And long-term financial debt is $17.3 million higher. Here, as a reminder, in addition to the CHF 200 million bond maturing in 2022, the CHF 150 million maturing in 2024, and $24.1 million long-term SKIDATA loans. This also includes a CHF 20 million COVID-19 loan granted to Nagravision. Total current liabilities decreased by $16.8 million to $286.8 million, short-term financial debt decreased by $14.6 million to $59.1 million. Cash flow. In the first half, cash flow generation was strong. Operating free cash flow improved by $48.8 million from the first half of last year to reach $37.7 million in this first half. Specifically, cash flow from operating activity was at positive $41.9 million compared to negative $2 million in the previous first half. This reflects, in particular, a substantial improvement in working capital. The first half cash flow from the reduction of receivables and contract assets amounts to $49.7 million. Improvements relate not only to the Digital TV business, but also to SKIDATA, gradually removing working capital weaknesses cumulated over the previous years. The group also managed to reduce capital expenditures compared to prior periods. Cash flow used in investing activities was down from $10.1 million in the first half 2019 to $2.9 million in the first half of this year. Finally, net cash used in financing activities was at $28.4 million compared to $13.7 million in the previous first half. This cash out -- the cash outflow includes $8.4 million of payments of lease obligations, a $10.2 million dividend paid to noncontrolling interest and a $5.7 million dividend to Kudelski SA shareholders. And with that, let me give the mic back to André.

Thank you, Mauro. So the elements that I would like to present to you now is a question of the group update. So first element to come back to the way we run our business, we have 4 segments. Two segments are today in normal circumstance. So if I'm excluding COVID, generating profits and cash flow in order to help us investing in new business opportunity. You have digital television that has been for years, an activity, that is not only profitable, it's a key engine for cash flow that has been shrinking for some years. We have taken measure to get something better going forward. We have, however, suffered with the COVID, and I will give you some more detail regarding that. We have Public Access. It has been growing for the last few years its activities, that is today impacted by the COVID and gradually coming back to normal. Cybersecurity is one of the important business initiative going forward. And Internet of Things, it is a little bit following Cybersecurity, in terms of maturity, but has a very high potential going forward. Now if we look at how each of this segment has been affected by the current crisis. First element regarding Digital TV, the large customer, and especially in mature markets, have shown really resilience in terms of number of subscribers and indirectly in terms of our revenue. So most of these clients are in the mode that is a mode of service where we get recurring revenues. At the same time, in difficult time, number of operators have decided to lower the price for, how to say, a limited period of time of the subscription in a way to lower the churn in this volatile time. At the same time, and that is what has impacted in a quite important way, our revenue during first half this year is that scheduled projects have been delayed or canceled. Some have been delayed to second half; some have been delayed to 2021. And we have the revenue from emerging markets that have been particularly impacted; two reasons for that. One reason in the emerging markets are more sensitive to this crisis, but also the business model that we have in this market is less recurring than the one in developed markets. Public Access. We have seen a large customer, including airport shopping center and stadium postpone the order and project. We have seen the volume of service that has gone down to 24 -- 25% of the normal volume in April and May during Q2 shutdown, but this is gradually recovering. Today we are in the range of 75% to 90% compared to prior year volumes. Cybersecurity. We have a differentiated situation between Europe, where we have been able to continue our growth and in the U.S., where we have more, how to say, service and offer that are directly related to the ability to engage physically with clients. We have also had an impact in the U.S. due, also, to the nature of the revenue that resell equipment as an important part of our business and targeting some clients that have been quite impacted themselves by the pandemic in term of their own operation. And that was a very important element, a real growth at 46% compared to first half 2019 in term of our operation in Europe. And in a way, the European operation of Kudelski Security are much like what we want to expand going forward. Internet of Things. We have had some delays due to some projects, how to say, delay. We have short-term surprises, has had an impact on the industry in terms of technology. But at the same time, new opportunity are coming. So our measurement long-term perspective are just better than they were 6 months or 1 year ago. Fundamentally, despite the current situation, our strategy is considered as being the one that we will pursue going forward. Now if I'm taking specifically to the question of the Digital TV segment. First element is, despite of all this challenging time, we have continued to expand our relationship with our key clients between Telefónica, Vodafone, Altice Corp, Canal+, Discovery, NOS and others. So just to say that in such a situation, we have continued to grow our relationship, and that is a very solid base going forward to expand back our business when the situation will be better. At the same time, we have expanded our activity in the streaming protection. We have a multi-DRM solution that is not only allowing operator to start the operation, but fundamentally having different level of protection against theft of services. And one of the interesting element is that important client of ours have already adopted this solution, Airtel in India, Altice, Telefónica Vodafone and the list is just expanding every day. Regarding our Insight Analytics platform. This platform has really performed extremely well in terms of performance, enabling our clients to really mitigate their own risk during the COVID crisis. So Insight, as an advanced analytic platform, based on intimate pay-TV business knowledge, data and artificial intelligence is really able to provide recommendation to our clients on business action to not only increase the business performance, but -- to not only reduce the churn, but also potentially help having the right pricing in order to maximize the added value and the value creation for this client. Today, major clients have adopted this platform, including Canal+, Altice USA and Claro in Latin America. Now Public Access. It's a segment that, by definition, has been hit by the COVID lockdown. But at the same time, there are real opportunity to really develop new solution that will really help manage the post-COVID era. As an example, solution for parking that are for shopping mall, hotel, airports, any type of place where people need to come, where you don't need to have any physical contact, where you want to enter the parking, pay or exit the parking. And this is an element that has shown a real favorable, how to say, feedback from the market. But our innovation in terms of Public Access for post-COVID is including much more other pictures. Some very simple elements, like, for example, a pedestal to allow -- to enable scanning with social distancing. We have automatic temperature check in order to prescreen people that are entering in public places, but also possibility to have some follow-up and to be able to track people that have been potentially infected by some people. We have a promotion of existing functionality. And finally, a new project is a health gate that is an element, that is really allowing to enforce some of the security measures that are necessary in the post-COVID era. But at the same time, and that is one of the key elements regarding Public Access is that we have initiated in 2019, the transformation and cost optimization. So short term, we have to address the COVID-19 impact and to act as proactively as possible to address the challenges, but at the same time to work to improve the operation and process to enable the structural cost reduction, in parallel with the temporary cost reduction that were related to the COVID issue, including the lockdown and having in mind the structural cash flow generation improvement. And what we have seen during first half this year, is just showing the element in the right direction. Now regarding Cybersecurity, there are some pretty interesting evolution going in this space. First, and it's just to remember you, we have 4 subsegments in Cybersecurity. Advisory service, technology resell and integration, managed security services and innovation and R&D. Three of these subsegments are high-added value, advisory service, managed security service and innovation and R&D. If we look at the short-term impact of COVID, advisory service, we have seen some delays simply because for advisory service we need to have some contact with the client, especially the ones that are new clients. If you take the technology resell and integration, we have seen some delays, especially affecting our U.S. market since not only that was requiring some personal contact also to install the equipment because you have some hardware that is related, but also to have some question about getting product on time, at least during the first half. Managed security service, on the other side, has really evolved in a very positive way during this period, and that is one of the key driver of the growth that we have seen in the European market. And finally, innovation and R&D, with a high potential going forward, but some slowdown due to the complexity of the mergers that were imposed to the team, especially at the client side regarding the COVID lockdown. So in summary, regarding Kudelski Security, some short-term impact due to the difficulty to meet people face-to-face, but at the same time the opportunity to grow our pipeline and an increased interest going forward for our solution. Now in parallel to what we are doing ourselves in term of direct sales channel, we have just made an agreement with Techdata as a way to expand our footprint and to be able to have additional sales channel. Some of our products are really very best in class. And just to sell them through our direct sales is a limitation. And fundamentally, through such type of alliance, it's allowing us to expand our footprint geographically and to address also segments that are, maybe, a little bit smaller in terms of size clients. One element that has been a constant improvement over the last few years, is a recognition by the major analysts in the sector. Both Forrester and Gartner have gradually considered that you are really key players, both in Europe and globally, in terms of Cybersecurity as an example, for the Cyber Fusion Center. Now Internet of Things. First element that we have made as an evolution is coming from really now a strategy that was looking at securing purely IoT. We have expanded to a full end-to-end approach to IoT. And we'll see gradually starting with second half this year, the benefit of having an approach that is much more comprehensive in terms of IoT offering. Globally, in the IoT, we come with solutions that are, on one side, asset tracking, that can be applied to automotive, medical, cold chain, industrial, fleet management and construction, and services that allow to device design, security assessment keySTREAM is our key IoT platform and managed services. So that was the element I was interested to share with you to show that despite of this challenging time, we are looking forward to come stronger after this crisis, and it's not because COVID has happened during first half this year that we have not continued to work how to better develop our group going forward. So now the best is to pass you the floor and please ask your question. We'll address them as quickly as possible. Thank you.

[Foreign Language]

So regarding question of bond repayment to '22, I will give the floor to Mauro to give some information regarding the strategy here.

Yes. We the plan for -- the question is, could you share any more details on your plans to address the 2022 bond repayment at maturity? We have open credit lines as well as loans that, together with the operating cash, that we expect to generate between now and the maturity of the bond, are expected to be sufficient to repay the 2022 bond. There is obviously also a -- there are backup plans, there are contingency plans, that include, for example, putting mortgages on buildings that currently do not carry any debt. And with these additional sources of cash, we believe that we're going to have enough liquidity to repay the 2022 bond.

Questions from Mr. [indiscernible]. What kind of contracts were postponed in DTV? Can you give one of the examples? How do you expect free cash flow to develop in the second half 2020? And last question is can you please provide one of the robust products you want to resell [indiscernible] in Cybersecurity.

So fundamentally, in the examples of Digital TV projects that have been postponed in our client base, we have clients that were more smart card based, that go in direction of IP with our architecture that is full IP. And clients have made commitments to do this migration. Some of this migration were expected first half this year and are postponed to second half and/or next year. The reason for that is it's something that is adding important features and that is adding flexibility to the client. But when they have to fight in COVID time, they prefer to just look at the short-term element. So that our overall commitments that have been made, it's just a question of when this is happening. Other elements include some adding of features that we have with our typical clients. So that is true for a quite important client. We have also some elements where you may have some upgrade of existing infrastructure, where the timing was decided for this year and they just prepare to wait next year. Said in a different way, we have three category of main revenue in digital TV. We have, on one side, the recurring revenue that are typical of large clients in advanced economies. We have important revenue-linked with project and they are all projects that are happening with large clients in advanced economy and/or in developing markets, where you have all new features or upgrade in terms of platform. And finally, you have and that is more the case in the emerging economies, some sales related to new subscribers. And this has been impacted by closing of retail center and elements that have an impact short term, but once element are back in operations, that's something that should also resume. Now regarding the cash flow, the development for second half, I will just give the floor after to Mauro. And if I'm taking the typical element that we are offering full tech data in terms of Cybersecurity, one of the key solution is our Cyber Fusion Center that is allowing to protect the security of clients. So we have been today selling just indirect. Directly through Techdata, we'll be able to touch much smaller clients. Having said that, Techdata is just one example. We are today working actively with our client in Digital TV to have some offering also to sell to smaller clients that are today clients of the ISP part of our typical Digital TV client that will be also very interesting in this field. There are some other products that will be announced soon, that will be also sold through Techdata channel. Now Mauro, regarding the cash flow development, please.

Yes. Question being, how do we expect cash flow to develop in the second half? Let me start by reminding you the first half cash flow development. As mentioned in the presentation, operating free cash flow for the first half was at $37.7 million. The main driver of this -- actually very strong cash flow development relates to the release of working capital and specifically, the reduction of receivables and contract assets that generated $49.7 million. And in the second half, we expect the different business lines to pick up some momentum, resulting in a substantial improvement, both from a top line perspective as well as from a profitability perspective. Working capital, however, is not expected to improve in the second half to the same extent it did in the first half. And in fact, with the strong seasonality, in particular of the SKIDATA business, we do not expect a further material improvement of working capital in the second half. What does that mean for second half operating free cash flow? We expect a second half operating free cash flow to be, again, positive, however, not to the same extent it was in the first half.

I would just add a small detail regarding the blockbuster, regarding Cybersecurity. One element today that is pretty clear due to the rating that we have got from Gartner and Forrester as an example for our Cyber Fusion Center, that's really an opportunity to have very good sales in this field. And one of the elements that we have seen, for example, in Europe is a large number of new prospects that we have not even directly contacted, that have contacted us to get some proposal regarding Cyber Fusion Centers. So there is a very interesting momentum here.

Thank you. Next question is from Andreas Müller from ZKB. What was the size of reprieve for monthly support and maintenance payment you gave to some customers, any impact on the P&L.? Second question, what is the share of service revenues in PA and the share of project-driven revenues? And can you indicate the size of the additional COVID-related business such as safe care solutions or touch-free buttons at parking systems. And last question is, can you talk about the profitability in DTV, which helped -- held up fine, besides the cost containment where the special mix effect that helped margins that might be related to COVID?

So I will let Mauro address these questions.

Okay. Starting the -- with the first one on the COVID-related discounts affecting support and maintenance payments in the Digital TV space. So in Digital TV, we're talking about a low single-digit million amount overall. And we're talking about temporary effects. So temporary discounts are not expected to affect the second half. The second question related to the share of service revenues and the share of project-driven revenues in Public Access. The rough distribution of Public Access revenues is such that around 2/3 of Public Access revenues are equipment related. And this is half-half between new installations and so-called refreshment projects. And the [ remainder ], that is the remaining 1/3, relates to services, maintenance as well as consumables. A remark here, we have a different split of services among the different regions. Specifically, European markets tend to be more mature than both emerging markets and the U.S. markets. And as such, they tend to have a higher share of refreshment projects compared to the new installations. So we also -- this is one of the factors that also explain that the U.S. market was more heavily hit by the COVID pandemic and certain European markets, as new installations tended to be more affected by COVID than refreshment of existing installations. On the question of the size of the COVID-related business, including touch-free buttons for parking systems, we are talking about a new set of projects, a new set of products, a new offering, that is -- to a large extent, that represents an upgrade of existing installations. The size of the business in the first half is really limited as we just introduced these products. So we're talking here about a very -- actually an amount, a revenue amount that in this first half is still negligible. On the profitability of Digital TV, the question is, can you talk about the profitability of Digital TV, which held up fine? And whether there is any special mix effect that helped margins? So yes, Digital TV did hold up fine, reflecting, as I mentioned in the presentation, the strong resilience of large customers, in particular the North American market, where we actually booked even a slight growth of revenues compared to the first half of 2019. As mentioned before, the negative impact of COVID relates to, to a large extent, to projects that were delayed to the second half or into 2021. Having said that, that hasn't led to any material change in the revenue mix. The only change I would mention and -- relates to the lower share of hardware-related revenues that translated in an improvement of margin after cost of material relative to total revenues compared to prior years. This is actually a trend that we've seen over the past few years. So I wouldn't necessarily say that this is related to COVID. This is more of a structural trend that we expect to hold up even post COVID.

Now I would just add that one of the specificity of the recurring revenue that they have structurally better margin and as they have been extremely resilient. So that is something that has helped in this situation.

Next question comes from Mr. [indiscernible]. You mentioned the resilience of the recurring revenues in Digital TV. Can you give us more details how large the recurring Digital TV business? And how much did recurring revenues decline in first half 2020? Regarding to Public Access, more structural cost savings measures are being announced in the second half. Do we have to expect restructuring charges? And are these included in the new EBITDA guidance range? And last question is given to the lower EBITDA in 2020 and likely lower free cash flow, how do you see Kudelski being able to repay the outstanding CHF 150 million due in September 2022?

So I will let Mauro address most of this question. I would just say that as we have announced earlier this year, that will not be -- any separate elements regarding restructuring costs, any elements, for example, the transformation and some cost saving measures in Public Access elements, that will not be disclosed separately and are just part of the existing guidance. I will let Mauro address the other questions.

Yes. Let me start with the last question relating to the repayment of the bond, and let me start just by correcting the question. The 2022 bonds is actually the CHF 200 million bond, not the CHF 150 million bond. We have a further CHF 150 million bond that is due in 2024. How do we expect to repay the -- this first 2022 bond? As mentioned before, we expect the cash related or necessary for the repayment to -- actually, we expect to get cash from 3 sources. One, the existing cash position plus the free cash flow that we expect to generate between now and the maturity date. Second, and as mentioned, we have existing unused facilities in place that, if and when necessary, we can tap on. And thirdly, we have room for obtaining further facilities relate to -- further financing related, for example, to buildings and other assets that today are not pledged. That includes, for example, and in particular, our fixed assets, our buildings and land in Switzerland. On the first question, related to the resilience of recurring revenues in Digital TV, and how large is the recurring Digital TV business, we don't really split up recurring versus nonrecurring business. And there is also a gray area between what is recurring and nonrecurring. What I would -- so for example -- if you take, a good example would be the Dish TV business, is to a very large extent, recurring. So the decline of this type of business is a good measure for -- the decline of this type of businesses is actually the decline of the number of subscribers in each of these businesses. Here, let me mention, again. The latest developments we've seen -- in the U.S., in particular, we see the decline of the number of subscribers at Dish tapering off again. And this is public information. If you look at the latest Dish subscriber numbers in the latest reported quarter, Dish lost 40,000 subscribers. That's the -- that's half the subscriber loss in the same period a year ago. So we're talking about a yearly decline of subscribers in the low single-digit percentage range. And if you want a kind of directional answer to your question, related to the rate of decline of recurring revenues, that range is actually a good approximation. And on the second question, as already mentioned by Andre, we -- any restructuring charges that we may take in relation to the restructuring of our SKIDATA operations, will be reported as OpEx. There is no plan to break out restructuring charges separately. Having said that, we also do not expect material restructuring charges. And by material, I mean charges in the same order of magnitude that we had in the past 2 years.

The next question are from Ms. Jolanda Stadelmann from zCapital. Public Access expectation for second half and 2021. For your bond maturity 2022 trades at 75 today and the bond maturing at 2024 at 55.5, how do your customers react on these bonds' prices? From today's perspective, Kudelski will not be able to repay the bond 2022 from cash flow. Which measures do you plan? And last question is what payback time are you expecting for Cybersecurity and IoT.

I will let Mauro address these questions.