Quadient S.A. (QDT) Earnings Call Transcript & Summary

Hello, and welcome to the Quadient First Half Year Results Conference Call. My name is Dan, and I will be your coordinator for today's event. Please note, this conference is being recorded. And for the duration of the call, your lines will be on listen only. [Operator Instructions] I will now hand you over to the CEO of Quadient, Geoffrey Godet, to begin today's conference. Thank you.

Thank you. Good evening to all of you. Thank you very much for joining this call to present Quadient's second quarter sales and first half results for the period ending July 31, 2020. Just to confirm, I'm Geoffrey Godet, CEO of Quadient. I will be joined today in this call by Christelle Villadary, our CFO; and by Laurent Sfaxi, our new Head of Investor Relationship. Throughout this call, I will be referring to the presentation that can be downloaded from our website, which complements the press release we issued today after market close. So starting with Slide 3. We, as you have all experienced, COVID-19 has impacted our lives and our economies in so many ways. At Quadient, as you know, our first priority has been and continues to be to protect its employees and maintain the full continuity of service, obviously, for our customers. We already covered this at length in our previous presentations earlier this year. In terms of prices, I think the Quadient community, and the teams truly exemplified our core values. I'm very proud of that with a lot of dedication from everyone. So today, going in through our H1 financials and achievements, I will highlight that Quadient has proved very resilient, and it is very resilient in this difficult economic environment. We remain profitable. We have generated strong cash flow and maintained a very robust liquidity position. And more importantly, we kept on executing our strategy to continue our transformation and prepare for the future, for which we are uniquely well positioned to benefit from the acceleration of digitization and increase in e-commerce deliveries. So to go through our agenda, I will first give you an overview of our key achievements. Then together with Christelle, we will comment both on our operating and financial performance and then provide you with an in-depth view of the multiple strategic initiatives we succeeded to implement across all of our solutions. And finally, I will share with you our guidance for the full year. After that, we'll be happy to take some questions. So moving to Slide 5. I have always thought that in difficult times that companies that have the opportunity to reveal themselves, and in particular, their strength. When the crisis started, we had already deeply reshaped our organization, and we were fully on track to deliver our strategic plan. During the crisis, and thanks to the effort of our team, we have demonstrated how strong our culture was, our agility and our capacity to adapt ourselves and cope with this situation. Thanks to our highly recurring business model, we showed a good level of resilience in the first half of the year. We contained the decline in our sales at minus 12.8% on an organic basis, and at minus 10.5% for our Major Operation. Our recurring revenue have greatly helped us mitigating the impact of the COVID-19 crisis. So if we look at it, the decline was limited to 5.9% on an organic basis and at a minus only 4.5% for Major Operation. The good news is that starting from May, we have seen the beginning of a gradual recovery and supported, in particular, by Business Process Automation and Parcel Lockers. On the financial side, thanks to a tight cost control, we have succeeded to generate cost savings of EUR 23 million. Consequently, the impact of our lower sales and recurring EBIT has been softened. We recorded a current income before acquisition-related expense of EUR 61 million. And I want to highlight here that our EBITDA margin reached 21.5%. And we generated a very robust free cash flow of EUR 76 million, showing that our highly cash generated model has been preserved during this crisis. This helped us, obviously, end the quarter with a further improved liquidity position of EUR 933 million at the end of July 31, which is EUR 35 million higher than at the end of January. Our leverage has slightly improved and remained very low at 0.8x, excluding leasing. On the business side, we had a very active semester across our 4 solution, and we redundantly continue to execute our strategy even in this challenging environment. And among the several achievement I wanted to share with you today, I wanted to highlight the following. The first one is where we have launched several new innovative products, such as the Lite Parcel Lockers, a new series for franking machine and a fully integrated document processing platform, cloud based, which has already attracted more than 140 new clients since the launch. The second highlight is that in Parcel Lockers, we have entered into new markets, including in new geographies with the U.K. residential sector, on the one hand, and new vertical segments in the U.S. with the retail sector and the latter being supported by a first landmark agreement with Lowe's, probably you have seen very recently, just the announcement, maybe some of you don't now know yet. It's a top -- Lowe's is among the top 10 U.S. retail chain, and this should lead us to the deployment of 1,700 lockers across all their stores in the U.S. across the 50 states. And we also signed an additional new agreement with our existing partner, Yamato, through our JV in Japan, for 3,000 new lockers as part of that extension in our contract. The third one is in the field of Customer Experience Management. We obviously secured some several promising distribution partnerships. And lastly, we obviously kept reshaping our business portfolio with the divestment of the loss-making activity of ProShip, as you already know now. And more recently, as of July, the promising acquisition of YayPay, a leading U.S. fintech specialized in accounts receivable automation with an innovative cloud and SaaS platform. So as you can imagine, you've seen we've been very focused and continue to be very disciplined in our execution, and I believe it will positively contribute to our future. Lastly, I wanted to mention that we provided that the major economies, obviously, don't return into a severe lockdown mode. We feel a little bit more comfortable to share with you some guidance for the full year. We remain obviously prudent. We expect that our full year 2020 sales will decline at around minus 10% on an organic basis and implying improved revenue trend in H2 driven by the growth in BPA and Parcel Locker Solution. With our ongoing tight cost management, we estimate current EBIT before acquisition-related expense should land between EUR 135 million and EUR 145 million. And last but not least, we remain confident about our free cash flow generation as we expect it to exceed EUR 100 million this year. Moving to Slide 6. So if we take into consideration the impact obviously equated to our operation, the H1 performance reflected 3 different phases. The first one until mid-March, where we were in line with the business trend experienced last year. Meaning that our 3 growth engines were more than offsetting the decline of Mail-Related Solution and other legacy business. The second phase, which we discussed in May, that from mid-March, the lockdown measures have drastically changed the situation, severely restricting the sale of mail equipment, the consumption of consumables like the ink cartridge and the provision of on-site services as well as license sales. In the meantime, we, I think, quickly put some decision to protect our profitability in place. And obviously, also measures to preserve our cash generation. And I think of more relevance and importance for us today, from the end of May, we started to enjoy the beginning of a recovery. And despite the social distancing measures that were still in place in these vast majority of countries that we still operate into, Business Process Automation and Parcel Lockers have been back to growth at the end of the first semester. Moving to Slide 7. Our recurring business model with both software and subscription, as you know, our revenues on the one hand, and the leasing and rental revenue, on the other hand, help to mitigate impact of the COVID-19 crisis. It's, I think, important that everybody appreciate the recurring revenue today accounted for 75% of our sales and their decline was only limited to 5.9%. So as you can see on the chart, the gap between our H1 2020 and H1 2019 performance has been fairly low since the beginning of the year. Subscription and maintenance fees as well as rental income benefited from an increase of both license and hardware base in the previous quarters. And we also benefited from an increase in new SaaS subscription as work from home has been favored to use our digital solution. So on the other hand, now we've seen some revenues that are based on usage or even some on-site services clearly affected by the lockdown during the period of time. Obviously, this is a different story on the right-hand side of the slide for our nonrecurring revenue, which represents the remaining of the 25% of our revenue base. Nonrecurring revenue went down by 28.3%. But as you could see on the graph, the gap versus last year has narrowed from June onward. The placement of new hardware equipment and sales on on-premise license were impacted by the lockdown, as you know. But on the positive side, this environment has boosted volume of parcels and has been favorable to contactless delivery services, which is a good news for our Parcel Locker Solution. The last thing that I wanted you to pay attention to on the information we've shown on the chart is the improvement that we have seen from June has continued in August, which obviously bodes well for our H2 performance. We have added a performance by solution in August in the next slides as well, but I will not comment to it. So moving to Slide 9. After first quarter at minus 10.9% on an organic basis, our sales went down 14.5% in the second quarter, leading to a decline of minus 12.8% in the first half of the year. Major Operation did better at minus 10.5% only, reflecting a stable combined performance of our 3 growth engines, mostly driven by the Parcel Locker Solution growth and a 13.9% decline in Mail-Related Solution. Additional Operations suffered more at minus 28.9%. We had a very small negative scope effect due to the sales of ProShip and a very small positive currency impact, so on a reported basis, the change is pretty similar to the organic change at minus 12.9%. So moving to Slide 10, in Customer Experience Management. After a Q1 at 1%, Q2 went down by 10.6%, leading to a minus 5.5% on an organic basis for the first semester. Recurring revenue represents 77% of Customer Experience Management sales in H1. And you'll see that throughout each of our solution and a strong recurring proportion of our recurring revenue and they showed a very good resilience at only a minus 2.5% organic decline. And this is due obviously to having expanded our customer base previously and to the continuous increase of SaaS subscription and it's obviously at the expense of our license sales because it's the 2 options that our customer have. So on the negative side, we recorded a drop on on-site professional services. We have explained it, obviously, with the lockdown, some project has been delayed, and we also had a little bit less new logos compared to last year in the same period of time. On the license sales, at minus 14.4%, we suffered, obviously from the shift from -- to SaaS model from a high comp -- and also from a high comparison basis in Q2 last year. I just want to point that out. In particular, for the main European countries and in the international segment that performed very well last year in Q2. On top of this, we obviously have the acquisition of new customers with a little bit more difficult because of the social distancing context. But we have, however, managed to continue to gain, I think, 22 new customers, including in new verticals, as we mentioned, we wanted to go after those newer verticals in government, in telcos and utilities. And by region, I think this is, I think, the most contrasting aspect of the performance of CXM in the first part of the year. North America recorded a strong, very strong double-digit growth, reflecting very good business momentum and also a favorable comparison basis compared to H1 last year. And on the other hand, we have a strong decline on the other region, which was also amplified by high comparison basis. Now if you look at August performance has been good also and driven still by North America. So when you look at the charts, our lead generation -- but I want to make sure we share this here, our lead generation process has been impacted by those social distancing measures. And we think that it will continue to impact our short-term sales for CXM when we consider H2. So I still expect CXM to be declining as a result in H2, driven by the continued delay of professional services, some lowered license that will naturally be offset by continued increase in our SaaS service subscription and maintenance revenues. Moving to Slide 11. We enjoyed a slight organic growth in Business Process Automation of 1.1%, reflecting a 4.9% growth in Q1 and a small decline at minus 2.5% in Q2. Recurring revenue, I want to stress that, were up 13.2% and stood at 88% of our total revenue for H1 for this solution. Again, we benefited here from the previous rise in our customer base in the previous quarters, combined with an increasingly growing proportion of SaaS subscription. Now if we look specifically in the COVID-19 context, we continued, obviously, our marketing campaigns and have further accelerated the acquisition of new SaaS customers in all regions and in particular, in North America. On the other hand, now we have recorded a decrease in the volume-based revenue, and in particular, for the property management sector in France, which we have explained, I think, at the end of May, but we have seen this trend to start to reverse itself at the end of H1. License sales, even if they represent a small portion of Business Process Automation, were strongly impacted at minus 43.9%. And this was mainly due to the shift to the SaaS subscription model but also to the lower traction from our bundled offers, which is one of the synergies that we have across our solution with the Mail-Related Solution in this COVID-19 context, as we place less equipment, when you have a software attached to the hardware, that's the natural impact. Moving to Slide 12. So if we talk a little bit about Parcel Locker Solution, we have, obviously, to the benefits of the strong organic growth that we have achieved in the first quarter at 27.2%. Our Parcel Locker Solution ended the first semester at an organic growth of 9.4%. And so despite the slight decrease that we recorded 1.9% for the second quarter. So something if we look by category of revenue, recurring revenue for Parcel Locker represented now 64% of the Parcel Locker revenue, and this was up 35.2%. And obviously, they benefited from a strong growth achieved in 2019, but also in early 2020 in our Japanese installed base, which provide us with a steady rental revenues. But we also benefited in the U.S. from an increasing proportion of lockers generating themselves subscription and maintenance fees as well as usage-related fees, okay? And on the other hand, when we look at the hardware sales, they stood at minus 18.3% because -- and mostly because of delayed installation, right, due to the social distancing measures where sometimes it's difficult to be able to schedule installation and whether it's property managers or university in the U.S., they've been delaying those installations at times. So -- and just as a quick reminder, we did had a pretty high comparable basis for this solution in Q2 last year. So moving to Slide 13 and to our Mail-Related Solution. Within Major Operation, we have Mail-Related Solution that declined organically by 13.9%. In the first semester, that 13.9% behind it, we did see a gradual recovery from the lows that we have shared with you in April. Recurring revenue for MRS represented 77% of Mail-Related Solution. It went -- they went down by 8.7%. Most of the recovery streams, whether leasing, rental, maintenance, postage financing or other services are supported by multiyear contracts and were therefore not affected by the downturn. The revenue from consumables, on the other hand, is driven by usage of the machine and was impacted in that COVID-19 context even though we have seen some gradual recovery in June and July as the usage started to reach out. On the hardware sales, they declined by 27.6%. The placement, so here of our new mail equipment was affected by the lockdown situation, especially in the production mail segment, which is the high end of our own segment, both for mailing system and for those insurers. The decline continued to be far more contained in North America than in Europe. And we've seen a noticeable difference between the regions. But like in other solution, we also have recorded a progressive rebound in June and July from those low level that we shared with you in April. So this quick review concludes my H1 operational highlights, and I'm now handing over to Christelle for the review of our H1 financial performance.

Thank you, Geoffrey. Good evening and good afternoon. So moving to Slide 15, you find here the summary of our H1 performance. So our total sales amounted to EUR 485 million in the first half, i.e., contained decline of 12.8% compared to last year. Major Operation, which contributed about 90% to total sales, declined 10.5% year-on-year, while Additional Operations were down 28.9%, suffering from the lower level of recurring revenues in their portfolio. The group current EBIT before acquisition-related expense amounted to EUR 61 million in the first half compared to EUR 93 million last year. And looking at Major Operation, the current EBIT amounted to EUR 65 million, down from EUR 96 million, whereas Additional Operation EBIT remained overall stable, reaching minus EUR 4 million versus the minus EUR 3 million of last year. Moving to Slide 16 and as a summary for Major Operation, we can say that total operations benefited from the resilience of the recurring revenue that were only down 4.5% organically compared to last year. The performance of our 3 engine was solid in the context, with combined recurring revenue up 8.1% year-on-year, driven mainly by Business Process Automation and Parcel Locker Solutions, whose recurring revenue grew double digits. Conversely, as Geoffrey explained, the lockdown and the social distancing measures due to the COVID crisis impacted our sales of hardware equipment and license, which were down 25.8% year-on-year. Looking now at the different geographies. So you see that North America recorded a moderate 6% organic decline year-on-year and was much more resilient than Europe, which suffered from a 17.6% decline. Indeed, the later on the lighter social distancing measure, combined with the strong double-digit growth in the Customer Experience solution helped our region North America to better perform than Europe, where we really suffered from tougher restrictions, which weighed on the business activity mostly impacting our hardware sales and supply in Mail-Related Solution as well as in the professional services activity in Customer Experience Management. Lastly, international organic sales growth was good at plus 4.8% year-on-year, mainly driven by the strong increase of Parcel Locker Solution in Japan, which more than offset the impact of the high comparison basis in H1 last year, of course, Customer Experience Management, which benefited from 2 large deals in Q2. Looking now at the profitability, the current EBIT for Major Operation was EUR 65 million in the first half, mainly reflecting the lower revenue from Mail-Related Solution. We will discuss that later on, but active cost management measures help us to mitigate the revenue decline with EUR 23 million of reduction in operating expense realized during the half, while allowing the group to maintain our continued efforts in investment to support the implementation of our strategic initiatives. Moving to Slide 17. Additional Operations revenue declined 28.9% organically to reach EUR 48 million of sales, reflecting several trends. So first, the lower proportion of recurring revenue compared to Major Operations, which is around 55% versus 77% for Major Operations and also a tougher impact of the social distancing measure on Mail-Related Solutions in the Nordics and in Australia compared to Major Operations. The impact of the same measures on the graphic business also explains the decrease as well as well as on the export activity which also faced for this -- for the latter, a high comparable basis in H1 2019, notably due to a significant churn activity last year. Our continued efforts to improve those loss-making activities that help us to offset the revenue decline as reflected by our stable EBIT at minus EUR 4 million versus minus EUR 3 million last year. Moving to Slide 18. Here, I would like to provide you with a quick update on the cost optimization measures we have been implementing to mitigate the impact of the lower level of activity on our profitability. As already explained, when we released our full year results end of March on our first quarter say at end of May, we have launched a number of cost reduction initiatives in response to the COVID-19 impact at both cost of sales and operating expense level. So starting with the cost of sales, we kept having a tax management of our supply chain based on the current activity. And as you remember, we have a pretty variable cost base with 90% of our mail equipment volume and 100% of our automated parcel lockers being outsourced. As a consequence, we succeeded in maintaining a stable gross margin over the last -- versus last year. Regarding the operating expenses, you remember as well that in order to reduce the employee cost we implemented in all sites, partial employment and time reduction measure. This measure concerned approximately 30% of our employees worldwide during the first half and are almost over by now. In addition to the measure, we already presented, i.e., overtime reduction, salary freeze, stop of external contractors, tax management of travel and marketing expenses, we are cushioned from further effort extending compensation reduction across the group. And the launch of our smart working program is aiming at streamlining our real estate footprint and promoting remote workforce. On the other hand, the group maintained its R&D and innovation effort for an acceleration of our new solution deployment to support the future growth. Those measures allowed the group to achieve the EUR 23 million savings before impact of the bad debt to protect our group profitability. Moving to Slide 19, where you can see a bridge highlighting the evolution of the current EBIT before acquisition-related expense between the first half of 2019 and first half of 2020. Several trains explained the bridge. First, a EUR 2 million positive impact related to the divestment of ProShip; the EUR 52 million impact resulting from the volume effect associated with the drop in revenue; EUR 2 million slightly negative change in gross margin, thanks to our built-in flexibility cost base and our mix effect; and the EUR 23 million positive contribution from the cost savings we already mentioned; as well as the EUR 4 million increase in the bad debt, mainly due to hedging deterioration, but with no change as of today in the actual defaults on bankruptcies of our customers. Moving to Slide 20, a snapshot of our net results. So the net income group share amounted to EUR 21 million versus EUR 47 million in H1 2019. The below current operating income expenses decreased by EUR 6 million versus last year, mainly due to 3 items. First, the lower interest expenses benefiting from the refinancing operation, which occurred in 2019 and 2020. The lower taxes, mainly due to lower profit before tax and specific protective measure adopted in the U.S., which allowed the group to benefit from tax loss carryback scheme, partially offset by additional restructuring measure we took at -- aiming, sorry, at optimizing our cost structure. Moving now to Slide 21. So you can see that the group enjoyed a strong cash flow generation during the half, with a cash flow after CapEx reaching EUR 76 million versus EUR 21 million last year. The group continues to enjoy a high level of profitability in H1 with an EBITDA margin at 21.5%, thanks to our tight customer management. And the EBITDA totaled EUR 104 million versus EUR 137 million last year. We can see also that the change in working capital generated a net cash outflow of EUR 25 million in H1 compared to a net cash outflow of EUR 55 million last year. This mainly reflects the lower level of activity as well as the postponement of some of social and VAT charges to H2 2020 for certain countries. The group recorded as well a higher decrease in its lease receivables, with a positive impact of EUR 54 million in our cash flow due to the lower placement of new equipment in the current context. Interest and tax paid totaled minus EUR 16 million compared to minus EUR 37 million last year, again, mainly thanks to the positive impact of the refinancing operation and a lower tax paid during the first half. Moving to Slide 22, where you can see that the level of CapEx decreased by EUR 10 million versus last year. Again, this reflects a lower investment related to maintenance and reduced investments related to the Parcel Locker Solution in Japan, mostly due to a high comparable base in 2019, as well as in some rented mail equipment. As already emphasized, we strategically decided to maintain our R&D investment around EUR 16 million in order to accelerate the development of new technologies and the launch of new products. Moving now to Slide 23. During the first half, yes, the group benefited from strong cash flow generation, which translates into a significant decrease of the net debt under lower leverage. Indeed, the net debt decreased by EUR 82 million to reach EUR 586 million. Our leverage ratio, net debt over EBITDA slightly improved by 2.3x versus 2.4x. Excluding leasing, the leverage ratio remained low at 0.8x versus 0.9x at the beginning of the year. The group net debt is backed, as you know, by our future cash flow generated from our rental and leasing activity, EUR 613 million of leasing receivable in our balance sheet. And we expect more than EUR 200 million of cash flow coming from our contractual rental activities, reinforcing the low leverage profile of the company. The shareholders' equity amounted to EUR 1.2 billion at July 31, and the gearing ratio decreased from 48% to 54% in January 31. So moving to Slide 24. The key message here is to remind you that the group has a robust liquidity position of more than EUR 933 million at July 31, of which EUR 533 million in cash and EUR 400 million in -- with our undrawn credit line, which is maturing in 2024, as you know, and with no major financing in the short term. As a reminder, you know that Quadient has continued to perform an active debt management policy during the first half of 2020 with a EUR 15 million buyback of our 2021 bond in February as well as the extension of the maturities of our Schuldschein financial debt of EUR 42 million as well in February. In September, the group decided as well to proceed with the repayment of all borrowings contracted under our USPP, U.S. Private Placements, for total amount of $115 million. That is to say that on top of the monetary repayment of $30 million, which was due in September 2020, we've decided the early repayment of USD 85 million of debt maturing in 2021 and 2022. This operation is the straight continuation of the group policy, I mean, at managing the balance sheet in a dynamic way and optimizing our financing resources. The impact of this operation on the group cost of net debt will be slightly positive over the remaining term of the early repayment of borrowings with a EUR 1.8 million cost impacting H2. So as a summary, and as of today, you see that the group benefits from a very robust liquidity position, notably thanks to our business model and the active cost of cash management that we deployed. So Geoffrey, I give you back the floor.

Okay. Thank you, Christelle. So moving to Slide 26, I hope by now that you appreciate that we have a very strict discipline in place regarding M&A and a strong commitment, obviously, to exit from our non-strategic operations, especially the ones that are loss making. Just as a quick reminder, in the past 18 months, we have made the acquisition of Parcel Pending early in 2019, and we recently added YayPay. So on the integration of Parcel Pending, I'm happy to share that the integration has gone according to plan. And as you can see in our strong and continued delivery that we have delivered a solid growth, strong synergies, and obviously, it has offered us the opportunity to also enter new markets with some of the most recent examples of some of our contract signature that we just shared with you. YayPay fits very well within our Business Process Automation offering, and I'll take the time to explain why and clearly expanded -- expanding, sorry, into the automation accounts receivable markets was a key objective for us that we shared during our Capital Market Day, and we're happy to have been able to deliver on that with this acquisition this summer. Regarding the reshaping of the -- of our Additional Operation, we are on track with our growing proven exit strategy, with divested Satori Software, Human Inference and ProShip, we shut down Temando, and we transferred our international Customer Experience Management business as well as Packcity Japan within Major Operation, considering the business confidence that we had as a result of what they've done last year. The size of Additional Operation has been therefore significantly reduced and losses contained. So overall, the launch of our -- since the launch of our strategic plan, we paid $120 million for acquisition and divested for a total of $90 million. So that is leading to a net amount of $30 million invested in M&A so far. And we continue, obviously, to screen for additional acquisition opportunities, but with the same discipline and maintaining our same strict financial discipline also even in this current environment. So moving to Slide 27. I'm not going to spend too much time on each one of it. I'm happy to address more question during the Q&A. Just wanted to give you a brief overview of some of the market trends that we see happening. So on the left side, moving to Slide 27, IDC, one of the largest industry analyst, just released a report a couple of weeks ago indicating that 70% of the small and midsize business surveyed are accelerating their digitization rates and, obviously, to address the change now associated with the pandemic and the most digitally mature small business will be able, obviously, to respond faster to changing market condition and grow their revenue. And that's obviously saying a little bit the obvious considering what we have all experienced. Furthermore, the need to help building a remote working environment through digital product is also a top priority for the small and those midsize businesses. And that's been closely followed by their need for automation of their business processes. This confirms what we hear directly from our customers. Clearly, the urgency for them to further digitize their communication. But for many of them, the need is also to drive a stronger customer experience. And companies today don't only compete on product and price, but they compete on the experience and the digital experience also that they give to the customers and the flexibility of the service they give to those customers. There's an additional research also associated with the importance of customer experience, especially during the pandemic, digital experience and customer journey mapping are top priority items as companies must create those deeper and more emotional personalized engagements and especially through what we call omnichannel digital communication. To give you a little bit more color on the trend that we see in -- for our Parcel Locker business, moving to Slide 28. The COVID crisis has led, obviously, to a big increase in e-commerce around the world. Consumers and many, obviously, even in lockdown, have been turning to online shopping in large numbers. What we've seen from April to June this year in the U.S. is that the numbers of our parcels have increased tremendously. USPS saw an increase of 49.9% or 50%, USPS reporting increase of 65%. And the surge of parcel deliveries is consistent across the globe. If we look at our own installed base of Parcel Lockers, we have seen the usage increased significantly in parcel deliveries since March and, in particular, in the U.S. and Japan, and much faster than the increase, obviously, of the lockers installation. And we continue to hear from our customers and the users, the value that they receive from those lockers that they get from Quadient. And we do expect that the shift from e-commerce to become prominent as consumers increasingly demand more flexibility. And while the Parcel Lockers have increasingly and efficiently addressed the issue, I think, of the last-mile delivery, what we see now is that in the work -- in the environment where you work from home, and that's a social distancing world that we all are experiencing now. Those -- our solutions, they also manage to make package collection even safer and more convenient. If we move to Slide 29, a few of the business update that I wanted to share with you for Customer Experience Management. So one of our goals for CXM is to continue to establish strategic partnership that are more meaningful, obviously, to our customers. So the first one I want to share with you is that Infosys will leverage and supply Quadient solution to provide businesses with our flagship Inspire platform. We'll work together obviously with them to jointly develop innovative solution in the CXM space, and we're going to make demonstration available in their innovation hubs and Infosys technology. Infosys, it's important because they haven't established CXM as a center of excellence. And obviously, with our multiple Quadient success stories, including one with an insurance company in Australia. Our second recently signed partnership within the CXM space is with Kitewheel. The goal here is to offer an enriched solution for managing the most important step that we see and the interaction within the customers' journey. And with this partnership, we've got obviously a pretty strong commitment to innovation here because we think we can deliver a more complete and more robust mapping solution, which is the addition of a unified management of their own customer communication touch points and very rich analytics. Last but not least for CXM, is that the Quadient Inspire platform continues to receive recognition, obviously, from the leading analysts in the industry. In 2020 alone, we've obviously thanked all our employees and customers for securing the leadership position in IDC, in Celent, in Novarica, and in Aspire. And we were also very excited to get our customers to give Quadient high scores on the Gartner Peer Review site. It's pretty rare to have only a very positive grade and so many of them. So as of today, I think that we consider Quadient Inspire is by far the highest-ranking provider in the customer communication management space. Moving on to Slide 30 and to talk a little bit about Business Process Automation where we've been fairly active in those recent months. The Quadient team was very busy. We obviously took a lot of time and care to produce Impress, and we did a major product announcements on it. So Quadient Impress, if we take a few seconds together, is a cloud-based and user obviously are friendly outbound document automation platform. And the goal is to automate customer communication workflows like we've done with Inspire for the large customers, we're doing that with Impress for the small and midsized one. Overall, it's a comprehensive cloud-based platform, and it provides the flexibility, obviously, to prepare and send or do a batch transactional documents right to customers and we have the capability to do that through a combination of channels. We could do that on prints, we could do that on digital, or it could also be outsourced. And that's where I think we're uniquely positioned with this release. It's a major new offering that we bring to the market. So it's a major milestone, and it's obviously fulfilling our ambition in this domain to consolidate and streamline our independent Business Process Automation solution into one platform, whereas before, we are covering the same scope but with many platform. The Quadient Impress suite of application works independently or seamlessly together, right? And it enables the small and midsize business basically to future prove their business so that they could evolve calmly and expand at their own space and easily adapt to the change from physical to omnichannel communication. We've done that organically. Now we have developed that solution organically, and we have taken to market a major application very quickly and very cost effectively. And we've been able to do that not only because we've got a stronger strength in our research and development team, but also because we've been able to releverage the investment that we've made in our other solutions. And in particular, Quadient Inspire, which is our award-winning management CCM platform. So since the announcement, we already acquired more than 140 new customers that've been relying on us for their digitalization need. And it helps, obviously, the workforce of our customers to work remotely. We also introduced a new partnership with Premier Inc., which is a leading health care improvement company. So in this social distancing environment where virtualization of nonessential staff and no touch protocols are driving supply chain and all at the point of hands to seek solutions for document handling and patient communication. The cloud-based application are going to be integrated into Quadient Inspire platform. And so they offer health care providers, basically a very comprehensive solution that saves them time, very simply, reduce costs and errors. And at the end, improve the patient's experience. And last but not least, and I'll emphasize that on the next slide, moving to Slide 31, Quadient acquired obviously YayPay, an American FinTech that is specialized in SaaS and accounts receivable automation solution. When we talk about YayPay, it obviously expand our business process automation offer and it's consolidating customer data and payment information from an end-to-end perspective in one platform and ultimately to optimize the cash flow of our customers. A few information on YayPay, they were founded in 2015. They obviously provide a combination of automated invoice delivery capability, paired with the collection management, helping customers do the collection. Do the credit assessment because, obviously, we have a lot of good data to be able to understand how the customers of our customers are paying them with frequency, which one is late, et cetera, the payments and integrating with different third-party here and all the Cash App solution. And that basically is why we have now a comprehensive single cloud-based platform and that serve already more than 3,000 users globally. I think that one of the strengths and differentiators of the YayPay solution is that combines real-time reporting with basically artificial intelligence. And that basically provide companies with insights and it's super important for them into the future of how their own customers are going to pay them and how that could impact their future cash flow. And therefore, I think we can help them reduce their write-offs and improving their DSOs, which is the numbers of days of sales outstanding. A few other points I want to share with you on YayPay. It's obviously a team that was mostly based in New York, more than 60 experts we have acquired here, very digital team, very agile. We are obviously very happy to get them. They're super passionate, and I think they will fit very well into our Quadient family. Just in a nutshell, why did we acquire YayPay, right? First, the YayPay solution was purposely built for mid-size to large companies since it is one platform that is easy to use and easy to configure. The second point is that we already began targeting, obviously, our hundreds of thousands of existing MIS customers so that we could expand the value of the solution and how they can leverage YayPay with their current solutions. So I'm talking to you about their strategic differentiation on cross-selling into our existing customer base. The third point is that YayPay, obviously, on itself, is one of the best platform we found in the industry. We obviously have been very disciplined at looking at a lot of different players in the market. They've been obviously also recognized and recently positioned as a major player category by ADC, but we felt that they had a very strong platform and technology. The first point is that we are currently working with YayPay to establish a strategic partnership with some very known consulting and technology companies and hopefully, we'll continue to make progress on that in the coming months. And finally, and I think it's not the least, right, is that the integration with Quadient team has just took the time to describe to you before to really give us, I think, a key differentiator in this market because we're having capabilities across the value chain. So when you look at the document that our customers send to their own customers, as you know, the invoice is already one of the key documents, 50% of the invoice is what goes through our traditional mailing and for those in sale of the equipments. So moving to Slide 32. The integration of YayPay and Impress basically will help new and existing customers, right, with the automation of the accounts receivable, that 50% of their communication already go through -- is processed by Quadient. So we believe we can help those customers that processes invoice now with the AR solution and all the invoice related communication. Obviously, it's also a solution that has connectors with most leading ERPs and financial systems. So I think we're able to take those outputs. And obviously, also from a digital perspective, what is created to distribute it also in a traditional way and automate the entire process. Moving to Slide 33. A few key updates on parcel locker business because we've been also quite busy in that area. We heard from customers that they simply don't have the real estate footprint for standard local installation. So if you look at some of the pictures, just some of pretty large installations. So in June, we have announced a new product line to address specifically the needs of those customers in the market. What we call our new Parcel Locker Lite solution has been proven to be very cost effective. It is battery powered, which is a huge differentiation in the market, which can easily scale to match the parcel volume in specific location in terms of size and different type of requirements, so you don't have just a one type fits all solution. Moving to Slide 33. Sorry, staying on Slide 33. The first time, I think we could say, in the history of our parcel locker business, our integrated teams did a tremendous job, I think, by simultaneously launching the same product in 4 different countries; the U.S., Japan, the U.K. and France. And I think this continues to demonstrate our team's commitment, right, and our synergies across all our solutions, and across all geographies within Quadient. So with our team commitment here, we're also very excited to be able to announce and share with you 2 substantial contracts for Quadient. The first one is with Yamato. You know it's our traditional partner in Japan, who has made a long-term commitment to install 3,000 lockers in 3 years. And I believe that this new contract with them confirms our partnership and validates the market demand for a solution in this country as well. The next one, which I'm really delighted to and welcome to share with you is to welcome Lowes within the Quadient family. They just announced a strategic initiative to install more than 1,700 parcel lockers nationwide in all their stores by the end of 2021. Lowes as you or some of you may know, is a fortune safety home improvement retail in the United States and Canada. And underwent a thorough evaluation process, obviously, and selected Parcel Pending by Quadient because I think of our innovation, our thought leadership in this domain. And I think we had a pretty strong shared vision on customer experience. This partnership is significant for Quadient, obviously, and I feel very honored by the choice they made. So I encourage you to read the press release by Lowes emphasizing the importance of these initiatives for them. So in summary, if we look at those 2 were major contracts, but also a few other recent ones, it's more than EUR 60 million in the retail and carrier sectors that is under a multiyear contract that has been signed. In addition, to launching Parcel Locker Lite in the U.K., we also launched the Parcel Pending solution to the U.K. market. So this is a first and, I think, major step in the international expansion of Parcel Pending technology. And obviously, we're going to be focusing on the residential and corporate office segments. If we move to Slide 34. In June, and we talked a little bit about Mail-Related Solutions, we announced the availability of the iX-Series Mailing System and S.M.A.R.T. MailCenter Management Software that was for the U.S. This solution is, obviously, I think, what we could consider our premier mailing system, and it's designed and built to extend our market leadership, in particular, in the mid-range mailing systems. So the iX-Series with S.M.A.R.T., we could say represent Quadient's most technology advanced mailing system. It enables mail centers to modernize their operations, ship parcels and package within carrier of their choice, track and control expenses and fundamentally fuel stronger business communications with internal and external customers. So we do have a challenging market environment for mail related equipment, but we believe that by launching the iX-Series at this moment, it does position Quadient to continue to outperform the competition and grow market share, both this year and in the future, even in a declining environment. We also recently signed a significant OEM agreement a few months ago with global mailing equipment company, Frama AG, Swiss based. This partnership, I think, makes Quadient global manufacturing capabilities available to this player from us. And I think it will improve the manufacturing scale and support both companies, obviously, to their ability to continue to serve the customer need in the long run. Quadient and Frama have a strong history of collaboration business in EU. And this agreement represent a vote, I think, of confidence from them in the quality of both of our product and our relationship. Moving quickly to Slide 35 for synergies. What I wanted to quickly emphasize is what makes obviously Quadient unique is our ability to execute and bring together our core assets, including our innovative technology, our 500,000 customer base, our passionate employees and the recognition that we have from being market leaders in our infrastructure. So as we became Quadient, one company with one vision and one mission, this has helped us to better leverage these assets to efficiently accelerate our growth solutions. And we have many examples here that we could go through. And they are mostly examples of integration and synergies, whether they are customer-facing, R&D, on the supply chain, on the go-to-market and across our solutions. Moving to Slide 37. If we take a little time now to wrap up and talk about the 2020 outlook. As we already stated, I think thanks to our business portfolio. We are, today, uniquely positioned to continue to benefit from the acceleration of the shift towards both digital solution and e-commerce booming trends. I think that when we take into account the resilient performance recorded in the first half of 2020, and the revenue trend, I think, is expected to improve in the second half of 2020. This improvement will be driven by the growth in H2 in business process automation and parcel locker solution activities. And as a result, and obviously, if we exclude any furthermore development with regard to the COVID-19 crisis, right? Or any worsening of the economic environment that we can obviously not predict in the coming months, we expect for full year 2020 an organic sales decline of around 10% compared to the full year of 2019. A current operating income before acquisition-related expense in the range of EUR 135 million to EUR 145 million, and this is obviously at constant foreign exchange rates in H2 compared to H1. And last but not least, the free cash flow above EUR 100 million. So I think this concludes our H1 presentation, and Christelle and I and Laurent are happy to take your question or to get your feedback.

[Operator Instructions] And the first question is going to come from Nicolas Tabor of MainFirst Bank.

The first one will be to come back directly on the organic growth guidance for the full year, the minus 10%, which implies, I guess, around minus 7% for the second semester. Could you convert to the equity rate you had in July and August, so we can have some kind of color of the level of recovery you've seen? And mostly, what do you think will be the main drag in H2 for you not to be able to achieve a better performance organically because I think that the consensus is currently a bit more optimistic than you are in your guidance? And then the second question would be on the government schemes on the -- what catch-up effect should we expect on the deferred taxes you may have in doing this one? What's the volume of cash outflow that will occur in H2 that did not occur in H1? And same thing for the overall percent of the workforce that is still in partial unemployment and will still be an OpEx release in the second semester?

Nicolas, could you just repeat your second question?

Yes, sorry. The second one was on the government schemes, both the volume of tax deferrals that you enjoyed in H1 and that should be paid in H2. And also on the volume of partial unemployment that you are still benefiting from at the moment.

So I'll take maybe the first one. I'll let you Christelle take the second one. Nicolas, happy to discuss with you again after a while. So 2 good questions. So for the first one, we're not sharing, obviously, the monthly performance. Where we said that we did see some improvement from the lows in April on the monthly performance. We have shared on the chart the performance of month-on-month in '19 versus 2020. So if you go back at the revenue representation and you can see that the gap versus last year is changing month-over-month. So you see it is not to linear, but you do see that over time, there's obviously some gradual improvements. We have also added August, which obviously, August has been narrowing the gap further. So we're continuing to progress on that. And obviously, contrasted by solution and by region, a little bit in the same trend. So that's, I think, what I would say to give you some more color on the first part of your question. And obviously, this is based on this, on the current trend that we see in August. And based on the projection that we have for the rest of the year that we have been able to give our guidance for H2. Christelle?

Yes. So Nicolas, on the P&L side, I would say, on the OpEx and the part of partial unemployment, but I will bundle that with the measure we took in terms of furlough. Again, you can have a global impact of around EUR 6 million that we have as a reduction of OpEx. Regarding the deferral, so more on the cash side, we are less than EUR 10 million that would be our result for H2.

Okay. And therefore, so the visual you mean it is only EUR 10 million that will come back. And I mean the organic growth guidance is not that aggressive for the second semester. So I was wondering in terms of the working capital impact and the EBITDA guidance that you have given, why is that the free cash flow guidance a bit higher because that would mean you have only EUR 25 million free cash flow in the second semester.

So you're right, we are looking at the free cash flow globally. You know as well that there's a little bit of seasonality there in the free cash flow. So we saw that we could go above the EUR 100 million. We consider that with the improvement of the business, we will have more leasing. And so we have more CapEx than what we had in H1 globally with the impact I just mentioned, that is why that at this stage, we are providing this global outlook. And the working capital is also always very complex to define. And you know that we have January month which is usually pretty important in our financials.

And the next question will come from Patrick Jousseaume of Societe Generale.

Regarding H2 activity, when I look at Slide #7 and where the charts are for recurring revenue and for nonrecurring revenue for August, it seems that you are pretty close at August to be, I mean, close to slightly negative organic growth. So effectively, based on that I'm a bit surprised that you gave us a guidance, which is implicitly minus 7% on H2. That's my -- I don't if it's a question or comment. But second, when looking at where the consensus was for 2021 and -- 2020 and 2021 before this publication. I mean, the consensus was expecting, obviously, significant rebound, I would say, next year versus this year. Are you comfortable with that? And third question, given the current trends, do you expect to have some things to do with goodwill to depreciate or to -- yes, goodwill intangibles at the end of the Q1 fiscal year, please?

Okay. So I will try to provide you a little bit more -- first, good evening, Patrick. So 3 questions. I'll try to take the first one and let Christelle respond to the 2 others. So on the first one, yes, on the chart, you could see that we are obviously continuing to improve the performance in the month-over-month, as you can see in August. That being said, I think also in the chart, you could see that in our quarterly view, we do have a lot of difference from one month to another. And the third month of the quarter is usually the biggest month for us always. And therefore, we have to take into account, like we've seen in Q2. So also obviously Q3 and Q4, that seasonality within the same quarter. And one month doesn't make a trend. You have a lot of difference in constructing trends with respect to the 4 solution and also the different geographies. So I do think that we do have a pretty good view, I think, on that, that allows us to have a little bit more visibility, which is difficult in this environment to still being able to project because we still, as of today, don't have the same visibility that we used to have in our pipeline in our closing rates so far.

And so just as a follow-up, Patrick, as what Geoffrey said. So given all this uncertainty and we have with the team worked to fight back, and we did have some visibility, I would say, a similar conditions, economic conditions, it's -- of course, we are opening up some rebound in 2021. But it's a little bit early to have a real good view and all the different activities in market will evolve if we continue the gradual recovery as we do, it will be a very good, but you should let us a little bit of time to confirm this trend for 2021. On the goodwill side, so as you know, it has been a very important exercise that all companies have done during this semester. So we did as well one exercise. You know that our goodwill is also currently looking at regional levels. So we benefit from the full portfolio of the different solutions at each region. And we do not have at this stage any issue with our goodwill. So nothing to note for the moment on this.

[Operator Instructions] The next caller will be Jean-Francois Granjon of ODDO.

Yes, Jean-François Granjon from ODDO BHF speaking. Two questions, please. Could you come back on the YayPay acquisition and give us a magnitude of the sales for this new company? And when you want to consolidate it to the group? And my second question, I will come back, sorry, but on the 2021 trends, after -- I'm a little bit disappointed by the H2 guidance in terms of growth or decrease. So do you expect or do you think it's possible to come back on an organic -- positive organic growth in 2021 or not?

Okay. So I'll take the -- sorry, good evening, Jean-François. Thank you for your question. I will take the second one, and I'll let Christelle answer the first one. So on the first one, just a reminder, obviously, of the difference in trend and weight of each of our solutions. We do have, as you know, a portion that is importantly related to our Mail-Related Solutions. We have seen some impact from COVID. But like for any other year, it's been a structurally declining business, and we've been able to actually do a pretty good job, I think, last year, to reduce the decline. This year, we've seen the impact of COVID in the more important part of the lockdown. And since then, we've seen some continuous improvement. So when you project yourself for 2021, it's going to be important for us to understand what is going to be that new level. And I think once we get closer, obviously, to the end of the year, we will be in a position to understand, hopefully, this space. And after that, we've got 3 growth engines, each moving at a different pace as well. You've seen in 2019, we were roughly in the 10% or a little bit above 10% for CXM. We were around 20% or less for BPA and 30% for Parcel Locker. I think it's going to be the same exercise that we need to be so comfortable with. We feel obviously very encouraged today on the midterm trends originating from those markets and those industries. So that's the, I would say, the tailwind that we have. So that's a pretty good sign. After that, we need to look at it by region and by country. We've done a lot of initiatives also this year in terms of launch and entering new verticals. So we need to wait, I think, to be able to see in a very unpredictable, I think, environment still focused during Q4, how each one of them will play to be able to respond to your question, obviously, about 2021 and after that, for just the performance, I think, for H2, we feel pretty strongly, I think, now on those 3 growth engines that we have growth in both BPA and parcel locker. For CXM, I think we have shared with you why we think it's not going to be growing in H2 because there's going to be some residual impact on both the lack of pipeline generation in H1 but also the impact from professional services. But the core business in terms of accruing new customers and the subscription on the platform and the associate license, we feel pretty strong about it. And then obviously, from the improvement that we've seen in Q2 for Mail-Related Solutions trying also to understand how Q3 and Q4 will evolve for MIS.

Jean-Francois, regarding the YayPay question on the financials. So you know that YayPay is [indiscernible] company and which has a huge growth. So in 2019, toward the full 12 months, I would say, May 5, it was recording more than EUR 1.2 billion revenues, but the RRR, which is basically the indicator, key indicator for this company was much more. And in 2019 as well as during the 9 months of 2020 is growing more than triple-digit growth. So extremely -- developing extremely rapidly internally and as we are working on integrating the company as well with Quadient. We are currently leveraging as well our customer base, and we are happy to see that it has already started during the first week of H2.

Do we have other question on the call? If not, or in the meantime, we can go to the webcast.

We have just received another question on the phone. This one is a follow-up from Nicolas Tabor of MainFirst.

So my first question was on the timing of the Lowes contracts. I mean, what's the ramp-up you're expecting? And is there some OpEx to anticipate before something comes up in terms of revenue and how do we convert to maybe Yamato? And then pertaining to H2, do you have any plans for that, something we should take into account already at your pricing? And maybe the top line will not be as good as the market is expecting.