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

Good evening, and welcome to Quadient First Quarter 2022 Sales Presentation. I am Catherine Hubert-Dorel, Quadient's Head of Investor Relations. And I am here today with Geoffrey Godet, CEO; and Laurent Du Passage, CFO. The agenda for today's call is on Slide 3. We'll keep the presentation short to allow as much time as possible for your questions. As usual, you can submit your questions in writing through the web or ask questions live by dialing into the conference call at the end of the presentation. Thank you very much. And with that, over to you, Geoffrey.

Thank you, Catherine, and good evening. Moving to Slide 5. I am very pleased to report our solid first quarter sales. At a reported level, sales are up 2.5%, and they are marginally down by only 0.6% on an organic basis. This is a very good performance and very much in line with our expectation considering the high comparison basis we were set up against. Importantly, there are positive drivers for all our 3 solutions. So let me highlight a few key points. First, a strong annual recurring revenue for our software business at EUR 158 million and a double-digit organic growth in subscription-related revenue. Second point is that we have a very robust mail-related solution revenue, only marginally down on an organic basis despite a high comparison basis, as you can remember, from last year. Third point is we have a continuation of the deployment of our locker business with another 550 lockers installed this quarter and a double-digit organic growth in subscription-related revenue. So all in all, the fundamentals of our business are solid, and we are confident that quite an organic growth will accelerate throughout the rest of the year. So moving to Slide 6. Before we move to the first quarter detailed performance with Laurent, I would like to take some time to discuss our new and more ambitious climate change targets. As you know, at Quadient, we are committed to a comprehensive and well-recognized CSR program and we're constantly looking for ways to improve our targets. So as we set out our initial 2030 greenhouse and gas emissions reduction targets at the beginning of 2021, the targets for Scope 1 and 2 emissions was a 28% reduction against 2018 baseline. But at the time, we had not anticipated that the COVID crisis would act as such a strong catalyst to reduce our carbon footprint as we encourage us to embrace new ways of working for our employees. In that respect, we have taken a number of initiatives. We decided, for example, to adopt a smart working approach, focusing on providing maximum flexibility, sorry, to our teams. As part of these changes, we took decision to significantly reduce our office footprint and such over time. These actions helped close the year with a minus 45.9% decline in emissions. And based on this high reduction that we have achieved as early as 2021, we immediately started working on a new plan to build upon this already great outcome. Our new commitment is to reach now the ambitious level for of 2030 emissions reduction of minus 50.4%. This new target is set according to the more demanding SBTi methology based on the 1.5 degree trajectory for Scope 1 and 2. It is an all the more challenging target as we do expect an increase in our energy consumption coming from more corporate travel, obviously, but also from the growth in our business. Obviously, we wanted to align this raised ambition to all level of our integrated and unified company from both operations to managers. And this is why we have decided to introduce these new targets as part of the long-term performance share plan that we have and the criteria with a weight of 20% for the weight of those criteria. And this target is also part of the CEO annual compensation for the performance share's part. And just as a reminder, our Scope 3 targets remain unchanged. So moving to Slide 8. Before we turn to our software solution, let me start by sharing with you a remarkable achievement from our team. Last week, one of the top global software analyst firms, IDC, published its 2022 global report on the cloud customer communication management market. And we are proud to be recognized, once again, as a leader in the market. In 2019, if you remember, I made a strategic choice, as we communicated in our Capital Markets Day at the time, to fundamentally shift our software solution to the cloud. And this was specifically true for customer communication platform or CCM. So this is what makes this report so special for us because only 3 years after we announced our cloud strategy. And this time, the report focuses solely on cloud, as you can see on the chart. And as such, this is a great acknowledgment of our strategy, and in particular, of our ability to execute quickly our cloud migration. As you could see on this chart, our competitive positioning has even moved further up versus IDC non-cloud assessment in 2020. The IDC market space listed customer experience strategy, performance and scale and implementation experience as the strengths of Quadient. As you know, this recognition does not happen automatically. It is the result of the relentless efforts of the Quadient team and such over time. So I believe it speaks volume about their worldwide expertise today and their dedication over the past 3 years. And I would like to take this opportunity to thank all our employees and also our strong partners and, of course, our loyal customers who trust us every day. So moving to Slide 9. Turning now to the review of our 3 solutions, and starting with our cloud software business, Intelligent Communication Automation or ICA. As you remember -- or as you may remember, our first priority is to focus on customer acquisition. In terms of go-to-market execution, we have now passed the 12,000 mark, mainly due to our cross-selling effort with our existing 404,000 mailing equipment customer base. Thanks to the decision we took to become one fully integrated company, this internal sales synergy is a key market differentiator today and both in terms of revenue generation and cost synergies. In addition, we have expanded our product portfolio to new European countries in the first quarter with the launch of our account payable solutions in France and the U.K. One precision: we have restated the full year 2021 customer number by slightly less than 300 customers and the annual recurring revenue by around EUR 2 million to correct some limited double counting. So let's go back to our priorities. Our second priority is to focus on our platform usage and upsell. Once a customer is onboarded, we want them naturally to use the 4 capabilities we offer them. In the first quarter, we experienced a 24% increase in cloud platform usage. Further pushing our SaaS business model, we also saw an increase in our SaaS customer base. Consequently, both the increase in customers' count and also a better usage have been translating into a faster rise of annual recurring revenue, or ARR, reaching EUR 158 million this quarter, indicating that the average revenue per customer is rising fast. As with the rest of our revenue, the ARR also benefited from a positive foreign currency impact of EUR 5 million roughly. But even excluding this impact, the annual recurring revenue at the end of Q1 organically is up 5.7% against the full year 2021, which represents an annualized growth rate for ARR of more than 20%. So this is positive and important trend as we focus on delivering profitable growth this year. Laurent will now detail the sale number for the solution.

Thank you, Geoffrey. Good afternoon and Good morning, everyone. So I'm Laurent Du Passage. I'm Quadient's Chief Financial Officer. And I'm happy to walk you through the Q1 revenue for Quadient. So on this slide, #10, for ICA, which is our software division, we are back to double-digit organic revenue growth this quarter at plus 10.7% compared to Q1 2021. It accounts for EUR 52 million of revenue for Q1, and the bulk of it is the subscription-related revenue, 73%, which is growing fast and it's growing by more than 15% year-on-year, thanks to small and medium businesses on one side, who's subscription-related revenue is growing by more than 20% year-over-year, including a 50% growth for Financial Automation Solutions; and large accounts subscription-related revenue on the other side are growing by more than 10%, with the strong growth coming from North America and from the international segment. The slight increase we can see in license sales at 6.4% is due to a low comparison basis in Q1 2021, where perpetual licenses were down by 55%, if you remember last year. But we've made further progress in transition to SaaS model. The decline in professional services is mainly due to product mix and fewer large implementations in Europe compared to Q1 last year. Now back to Geoffrey for MRS.

Thank you, Laurent. So turning to our mail-related solution. We are very happy with this quarter's performance as it was set against a Q1 2021 level that was boosted by the strong post-COVID rebound in hardware sales in particular, if you can remember. The whole product range, both mailing and document system, showed a good customer traction, proving once more the quality of our offer in the market. Placement for our recently launched new iX series in particular continued to increase. The share of our upgraded installed base is now reaching 13.8% at the end of the quarter. Associated with our S.M.A.R.T software, the penetration remains very solid. And this is highlighting the success of our strategic choices to continue investing in innovation and further reinforcing the resilience of our business model. The backlog is also at a sound level, which indicates the demand continues to be solid in this first quarter and providing comfort for the months ahead. Our mail-related solution sales organization continued to demonstrate their go-to-market leadership by outperforming the MRS market. And at the same time, our sales team successfully cross-sell our cloud offerings and such now in both North America as well as Europe. So I am extremely proud of our MRS team performance this first quarter. Laurent?

On Slide 12, you can see that in terms of revenue, MRS performance continues to be extremely resilient with a minus 1.7% decline in revenue against Q1 2021, which was a high comparison basis as it was 6.3% above the year before. This has been possible thanks to a strong performance in North America, which has been slightly growing in Q1 -- let me repeat, growing in North America. The main European countries performance was good too, though lower than NorAm and notably in France due to the impact from lower activity during the presidential election period. On hardware sales, which accounts for 27% of MRS revenue, decline has been contained thanks to further penetration of our newly launched products and despite the strong comparison basis of last year. Subscription-related revenue, 73% of MRS revenue, decline has been contained with noticeable year-on-year growth in supplies in all geographies combined with a good management of the installed base. So with minus 1.7% decline in MRS, we continue to outperform this market. Now back to Geoffrey for lockers.

Thank you, Laurent. So moving to Slide 13 and moving on to the Parcel Locker Solution. We have continued our strategy of offering a scaled open network with both open, hybrid and private option to our customers and with our deployment efforts focused on 4 main verticals. In particular, for the carriers and retail segment, we have rolled out existing and recently signed contracts, which offer promising potential for further growth. Similarly, the property management and education segments have shown further penetration as well and offer a good level of backlog, making us confident for the quarters ahead. Overall, the installed base of lockers increased by 550 units in Q1 and reached 16,300 lockers at the end of the quarter. So I would like to stress that we have a unique positioning we have today in this market, in this fast-growing market. Not only do we have strong market shares in all our verticals, but we are also uniquely placed to develop large open networks, which we believe is set to shape the future of the locker market. We are already seeing changes in the way some of the verticals are considering their lockers with -- for example, more and more of our recent click-and-collect installation for retailers being now open to other brand deliveries. And we also consider and observe more and more that the deployment of lockers is perceived in the logistics sector as helping to rationalize the last-mile delivery and limit carbon and green gas emissions. Laurent?

Now in Slide 14. In Parcel Lockers, our 17.9% revenue decline in Q1 is to be compared with a 67.9% organic growth we had last year in Q1 due to the hardware sales in the context of the end of deployment of the large loss contract, which has started in Q3 2020. Now if we look at the compound annual growth rate over the last 2 years, it stands at 17% per annum, which is a strong growth. With the increase in subscription rate, the revenue continues to be solid at plus 11.1% with a rising contribution from France and the U.K. thanks to recent contract wins. We have continued growth in backlog thanks to good bookings, but also due to customer installation scheduling delays in the residential sector in North America. Now moving to Slide 15. Adding all 3 solutions together, this brings us the major operations scope. Major operations reported revenue of EUR 236 million in Q1. This is slightly down by minus 0.8% organically, but it's continuously growing in subscription-related revenue thanks to the double-digit growth for PLS and ICA businesses, combined with a more resilient performance of Mail-Related Solutions. License and hardware sales are declining due to the high comparison basis in particular for the Parcel Locker Solution in North America. And we continue to benefit from a stronger growth and dynamics in North America compared to Europe. North America is accounting for 57% of major operations revenue in Q1, with each of the 3 solutions at gear. In Europe, where MRS has traditionally been weaker, we expect to benefit over time from progressive launch of our Parcel Lockers and ICA complete portfolio. While representing only 5% of the total, we enjoyed a double-digit growth for international operations, notably thanks to APAC this quarter. Moving to Slide 16. Now let me address more specifically the sales review for Q1 2022. On Slide 17, you can see the quarterly reported revenue and organic change for major operations with details of each solution. While seasonality towards Q4 exists -- that's what you see for MRS and ICA -- we see clearly the impact of the large loss deal in Parcel Lockers over Q3 2020, Q4 2020 and Q1 2021. On a reported basis, major operations revenue has been growing year-over-year, combining both organic scope and currency effects. Now moving to Slide 18. This is our usual summary slide. Major operations now accounts for 94% of our group sales in Q1 of EUR 236 million. Our continued efforts on reshaping our company profile are almost completed. Additional operations now only accounts for EUR 16 million or 6% of total revenue in Q1 thanks to the latest divestment we made last year. Moving to Slide 19. Finally, to give you a wrap-up vision of our Q1 performance. We can see here the revenue bridge between Q1 2021 and Q1 2022. The reported growth stands at 2.5%. And within the bridge, we need to exclude the net scope effect, which represents minus EUR 4 million. The scope effect is related to the divestment of Automated Packaging System at the end of H1 last year, which we need to deduct from last year revenue for Q1. It also includes the acquisition of Beanworks that was end of March 2021, the revenue which have been added from beginning February to end of March 2021 to make it comparable. We also benefited, on the right-hand side, from a positive currency effect of EUR 11 million, which is the resulting of the dollar strength against euro. Overall, we ended with an almost stable minus 0.6% organic change at group level.

Thank you, Laurent. So moving to Slide 20. As we are nearing the end of this call, I'd like to take the opportunity to update you on the recent trading conditions as well as what we see on the market today. So firstly, let me stress that we continue to see positive development for our 3 solutions. The fundamentals, meaning the digitization and e-commerce penetration, are healthy. We are confident in the quality of our product offering as well as in our innovation capabilities and that they can both continue to deliver an upgraded state-of-the-art and state-of-the-art of our solutions. We are also confident that our solutions provide time and cost savings to our clients and mainly through automation -- mail automation for mail-delivery automation, parcel delivery automation, document automation across our 3 business. For SaaS software business, in particular, we focus on our cross-selling strategy that provides us with a competitive advantage in terms of customer acquisition costs. But we are also expanding the base thanks to our deployment into new geographies. So having more than 12,000 customers now, we are also focusing on usage increase and upselling initiatives. For our mail-related solution, the quality of our products will enable us to further penetrate our main markets and continue to outperform the market. And lastly, for the Parcel Lockers, as mentioned previously, we're happy with our unique positioning in this fast-growing market and the quality of our current pipeline. So given the market condition that we can assess today, we remain, obviously, confident in our ability to deliver organic growth in the coming quarters. Turning to one of the hottest topics of the moment, inflation. We do monitor inflation very carefully and we have today some pricing power for new product placements. Moreover, an important factor in terms of inflation protection is our large installed base, which is largely indexed. But mitigating inflation is not only about price increases. We're also very focused on cost control, where, as you know, we enjoy a good track record. On the other hand, we're also proactive with, for example, the management of our workforce in terms of compensation and working conditions. So if we move to the supply chain, which, as you remember, was an important topic last year, costs have stabilized at a high level, but we're not experiencing any further deterioration, neither in terms of shipping delays, nor in terms of freight and raw material costs. So let me also add that our manufacturing effort is also helping us to mitigate these impacts. So all in all, we do monitor the macro situation and take actions where appropriate to mitigate these impacts, and we remain confident in our ability to achieve our plan. So moving to Slide 21. With all that said and all these, we are confirming our full year 2022 guidance. We continue to expect strong organic growth in revenues for both our cloud software business, driven by the customer acquisition and the increase in the platform usage for software, and for Parcel Locker Solutions thanks to the deployment of existing contracts and the conversion of part of our pipeline, naturally, for this year. We anticipate further resilience for the revenue from our mailing and document system activities, MRS, with a limited organic decline. So building on these healthy fundamentals, we continue to expect organic sales growth above 2% and low to mid-single-digit current EBIT organic growth for the full year 2020. So I want to thank you for your attention up to now. And Laurent, Catherine and I are ready to take your questions.

We'll start with the questions on the line.

[Operator Instructions] We currently have no questions coming through. [Operator Instructions].

So while we wait for questions on the line, we can start with a question on the web. We have a few questions on ICA and the 2023 guidance. So if I start with the first one. Can you give us a range of churn rates for the first quarter for ICA? And do you see a slowdown in software activities since early May?

Good questions. I could take them. On the churn, the churn rate for ICA have not changed particularly in Q1 versus what we have experienced last year. As you know or if you don't, what we usually share on ICA is that we feel we have pretty sticky solutions, both for large enterprise customer base as well as the mid-segment of the customer base. And also whether they are the customer communication platform, obviously, on the accounts receivable or account payable, because we feel that once those solutions are installed and the customers are happy with the quality, there is really little reason for them to change. So we have seen a 1% to 2% usually churn on the larger part of our customer base and up to 5% and more around the smaller size of the customers. And that's something that we've seen more or less consistently quarter-over-quarter or for the last now 2 years. And that's an element of reassurance on our side. We feel pretty confident of the quality of the -- and the stickiness of our platform. The second question was on the...

Slowdown in software activities since early May.

Yes. No, not particularly. Obviously, we're not going to comment specifically in any second quarter guidance. But we have a good sentiment of dynamic, right, in terms of booking, in terms of pipeline generation, regeneration. We have started to see more of an acceleration since the beginning of the year as we get into, for us, February, March, April. I believe this is something we continue to experience in those last few weeks. No particular deceleration, and I would say almost the contrary on the software side. We start to get on our side the benefit of the investment we made in the first quarter, because we started to launch some of our product portfolio into Europe and in the U.K. and France compared to the previous years for the second quarter. We also have more and more cross-selling initiatives on leveraging more of our sales guys on the mailing and document system organization. And each year, we augment and they augment the contribution to the ICA growth. So these are things that are in motion that have been put in place. And as part of, for us, the expectation of an acceleration of the growth this year for ICA as we get into the second and the third quarter and the fourth third quarter.

And at group level, do you confirm your 2023 guidance?

Yes, I think, was on Slide 21 or 24. Geoffrey said, yes -- the answer is, yes, we are confirming both top line and EBIT guidances. So minimum -- sorry, so more than 2% growth for 2022 organic growth in revenue and low to mid-single-digit growth on the EBIT.

And for 2023, I also confirmed guidance for both top line and the EBIT organic growth.

The indication for 2023.

Yes.

Yes.

Yes. Gabrielle who asked a question. You can tell us whether you wanted the guidance for next year or if it's January 2023. I think we have a question online.

Okay. Of course.

A question comes from the line of Patrick Jousseaume from Societe Generale.

Yes. Can you hear me? Can you hear me?

Yes, we can hear you, Patrick.

Okay. Perfect. Yes, my question was about the pipeline that you mentioned on PLS. Could you, let's say, give more details about this pipeline? And to what extent do you need to materialize at least part of this pipeline to get the above 2% organic growth figure that you forecast for the full year? And regarding this activity, Parcel Locker, you mentioned on Slide 14 that you have some scheduling delays in the residential sector in North America. Could you explain why, please?

Sure. It's a good question. So on our 2 main markets in the Parcel Locker are the Japanese market and the U.S. market that represent probably more than 90% of the revenue. And we have 2 new geographies in which we're launching our effort or reigniting our efforts in terms of growth in terms of France and the U.K. market. So obviously, the performance of the U.S. and Japan is material to the achievement of this year or even next year's performance. In North America what we've seen is a good activity in this first quarter in terms of the bookings, right? So the placement of new orders from the team, we had, had a contribution from both property management, which is the main market, but also the corporate segment with universities that has been from quarter-to-quarter evolving. As a net overall, in this first quarter, we had a good level of bookings. So if I was to comment on the same activities as we get into Q2, the level in the last few weeks have not changed. On the contrary, we're pretty satisfied on the booking activities. As a result -- that's what I believe Laurent mentioned -- we have a good backlog at the end of Q1 that is actually one of the highest backlog for Parcel Lockers that we ever had. Backlog is really the orders that we have signed. What we've seen in the first quarter, when we talk about the scheduling issues, is that some of the backlog that we had has not been able to be installed in Q1 and will likely to be installed during Q2 or Q3. And that's related to one of the segment, which is the property management. Specifically, when we have orders from the property management segment, we have 2 type of orders: either it's orders to install the locker into an existing property or orders that are dependent on the completion of the construction of a new property. The new property activities not related to us has been suffering in the last year or 2 since the COVID because constructions in terms of having all the different activities, having to be well organized and timely has suffered delays from shipping, where there are a lot of the activities. And some of those new constructions sometimes could not schedule or do the installation as we have planned. And that's the reason why in Q4 last year or quarter-over-quarter last year, we've seen sometimes some delays in installation. That has unfortunately continued in Q1. The good news is that the net between the booking and the installs, the backlog has continued to increase. So that gives us, obviously, a lot of confidence in terms of what we could achieve for the rest of the year. And the level of activities overall in Japan has been good as well and pretty steady over the last past few quarters. The pipeline we were referring to in the last few calls together are really related to not the ongoing pipeline of activities, but more those special projects, those larger projects that are in size not a few dozens or hundreds of lockers, but more a few thousand lockers. This pipeline of larger project is maturing and continues to mature. These are long sale cycles, as you can imagine, because they are big deals. That being said, the expectation for us of the contribution that those projects could have this year and the growth of this year is limited as they are usually a project that are organized into Phase 1 of pilot phase or Phase 1 proof-of-concept and then scheduling the rollout and implementation over several years or several quarters of those big and large projects. So we may have the benefit of some of those contribution this year and probably a lot more into 2023. And our performance for the full year is not related to any of those given larger projects.

The next question comes from the line of Mourad Lahmidi from BNP Paribas.

My question actually relates to the ranking that you got from IDC MarketScape. What difference does it make in terms of sales or of commercial discussion of pipeline to be ranked as you are in 2022 versus to be ranked as you used to be in 2020?

It's a very good question. It's always a delicate one to know how one ranking could influence pipeline and sales performance in a given time frame. That being said nowadays, those analysts and well-recognized analysts like IDC, a report does make a tremendous difference. More and more of our customers are -- in the way they source and they make decision to buy, they use a lot more information online through the web. And those analysts, obviously, are part of the way our customers get educated about how to buy software. So it is a significant assessment, clearly, being on -- the most advanced company in terms of strategies and capabilities and being recognized as such on the cloud in the market is definitely -- hopefully, will have a notable influence. Some of the sales cycles that we have are over 12 months, so sometimes it may not materialize itself right away. It may impact near-term decisions as we compete with different vendors. It is definitely a very positive assessment. So hopefully, I'll be able to share more with you if they had -- the quantification of the impact in the coming quarters.

Okay. And I have a follow-up one on the P&L. So -- I mean, in order to achieve double digit over the full year, you need a significant step-up in the upcoming quarter. So with respect to that, do you expect the share of subscription-related revenues to be the same in full year 2022 as they are in Q1? Or do you expect contribution from some sale program?

I think, Mourad, on that question, the main topic is the comparison basis. So in Q1, again, we had this end of comparison basis with loss from last year. Moving to Q2 and the rest of the year, we don't have, I would say, this unfavorable comparison. And that's what you saw on the Slide 17, is basically we've been generating EUR 22 million of revenue and then EUR 30 million and finally EUR 22 million of revenue each quarter where we had deployment loss. And now we are back to a comparison basis which is EUR 19 million for Q2, EUR 21 million and EUR 21 million. So -- which means moving forward, yes, we intend to go back to growth on the locker side. I mean, it was unusual to be declining. And again, when you look over 2 years, you have a 17% annual growth rate as -- when you do the calculation. So that's why we are confident that the indication we gave, the guidance we gave on Parcel Lockers today is achievable, and will, I would say, become more concrete from Q2 onwards.

Moving back to questions on the web and still on lockers. So the question is quite specific about the lockers in our joint venture in Japan. So how many lockers are located in our Japanese joint venture. Do you still add lockers there? Or is it, the growth only spurred by other countries?

So I can take that one. I mean you know and we've been publishing also in the Capital Market Day 2021 that we've been extensively rolling out lockers in Japan since the creation of our JV a couple of years ago. It's been -- and it is still a real success. And we have today less than half, probably around 40% of our installed base in Japan. But the growth today comes from everywhere. It comes from North America. It comes from Japan as well. It continues -- we continue to roll out lockers in Japan. And it also comes from France and U.K., where we have specifically in the last months significantly invested in this area.

Moving to inflation. Are both inflation indexed, MRS leasing and PLS renting contracts? And if so, what is the reference index?

So I'll let Laurent respond on the type of index. I think I could -- just in terms of business model that all -- because we obviously have been carefully monitoring the work from a sales perspective. All of our contracts are mostly recurring. We do place the hardware or license in some of the 3 solutions. But our goal as a business is to drive subscriptions, subscription-related revenues, recurring revenue in nature. And those contracts are across the different solution over a contract term that are over 7 years, 5 years, 3 years and sometimes on a yearly basis. In most of those contracts, a large part of them, we have the luxury to have those recurring review being indexed, and therefore, giving us the opportunity to increase them. Laurent, maybe you want to give the specific additional information.

Sure. You just also need to take into consideration that we have several hundreds or thousands of contracts notably in postal leasing in NorAm. So we have -- we are covering a wide range of countries and a wide range of regions and verticals. So there is not a single rule for Quadient. I think what we can say is that it's largely indexed. So depending on the country, it would be from a different indexed one. And I think to date, and that's what is also interesting, is that you would typically increase those prices at the anniversary of those contracts. And those increases would materialize progressively along the year as all our contracts doesn't start specifically February 1 and doesn't end the 31st of January the next year. So largely indexed, yes, different indexed by region. And you have different components. And we know we have also supplies in the subscription-related revenue, that it's not necessarily indexed because as we purchase every year new supplies. So that would be more at our hand to increase the prices.

Still on inflation. Can we have figures about inflation wages, please?

So the market is a little bit difficult. I mean, we could -- generally speaking and not at Quadient on the markets. You've seen, I think, I'm sure, as you have probably read some of those inflation-related index on compensation. The U.S. traditionally or just in the last few quarters have been the one with the highest level, around 6%, 7% or more at times. And with Europe catching up a little bit by a few quarters late or later compared to the U.S. And the U.K. in particular being one, I think, of the countries in terms of our primary countries that has been the most exposed. And when you look at those numbers, they are average, and they obviously differ in terms of supply chain position, hardware, R&D, or engineering, sales, marketing, support function within the companies. I would say that, generally speaking, we've seen them more or less increasing in average or in a similar way on the markets, but with clearly some higher levels, in particular, on the engineering side, for R&D, in particular, on software. And that's actually where -- the pressure, I think, on the market we've seen it probably starting in Q2 last year in 2021 in the U.S. and then progressively expanding to the rest of Europe and then progressively the sales position, generally speaking, in particular, in terms of tech sales position as well. That would be, I think, the peak. Our position on that has always been the same, is that we want to retain our best resources. We want to retain our resources on the market. So we have to be competitive on the market. We've been proactive last year, not waiting until the end of the year to do what we think was necessary. So we already had some impact in 2021 that was shared with Laurent that we did not anticipate. But that did not prevent us to be able to achieve our EBIT and profitability target. That were definitely not expected when we started the year. And obviously, we took those increases into consideration as we were planning our goals for 2022 and forward. And I think so far, we've been able to be in line with our expectation of what we need to do.

Moving back to lockers. What is the current usage rate for your locker base? And have you experienced a growth in usage?

So I can take this one. So the usage rate, it continues to be very good. As far as you can remember in the presentation of the full year, we've been communicating on the last 4 years basically of evolution from 25% to more than basically 60%. Q1 is less active in terms of usage. So we are slightly -- I think slightly down or in line with the end of year usage rate. But it's the cyclicity we see, because basically Q1 for us means November, December, January that basically includes high turnover of parcels. When you go to Q1, obviously, as you don't have Christmas in Q1, you are slightly less favorable. But if you compare to last year Q1, yes, we are in a very favorable position, which basically makes us think that the underlying driver is well oriented and the need for lockers will continue to grow.

Moving to MRS, our mail business. In Q4 2021, you experienced a strong demand over expectation with some orders that have been pushed back into 2020. Have you solved this bottleneck issue and cleared all these extra orders to date?

So I think if I understood well, it's probably the orders of Q4 of '21 pushed into Q1 2022.

Into 2022, yes.

So the backlog -- 2 things. On the backlog side, a little bit like for the answer -- or the question we had on the Parcel Locker. The backlog remains high on the MRS side, which is good news because it's high, not because we're not able to deliver it, but because we have very good placement and new bookings of new hardware. As you could see, the performance in Q1 that Laurent shared with us earlier at minus 1.7% only on the placing of hardware. Relatively speaking and historically speaking, if we compare, it's a very strong performance, especially considering the comparison basis. Last year in 2021 in Q1, the placement of hardware -- I forgot the actual number, Laurent -- was a pretty strong performance. So being almost flat this year in Q1 is a pretty strong performance. And that's ongoing activities. We see that in particular in NorAm, where we had actually growth overall. So we feel that the team and the market has been able to benefit full speed from all the investment in the sales organization and the quality of the sales organization in term of performance. So that the booking has been good. Now coming specifically outside of that context. Why I'm saying the booking, is because we obviously have more products than even what we can anticipate to deliver. And that being said, we have more or less stabilized. Even if the booking -- the backlog is high, it hasn't increased much in Q1, generally speaking. So we have been able to deliver the hardware. We have not solved the supply chain issues that we faced last year, meaning that it always takes longer than pre-COVID if you want to deliver the hardware. Shipping time and costs remain high and complicated. But we seem to have reached a peak. So there's no more degradation. Hence, will also help us contribute favorably to the Q1 performance for MRS.

Moving back to inflation, the 2 themes of the evening. Inflation usually favors software companies. And it seems that for you, it benefits PLS and MRS segment. Is it fair to state that inflation is globally favorable for your company and costs are growing slower than revenues?

I can take this one. I think the -- I think what we are living today in terms of inflation has not happened since probably 35 to 37 years ago. So the general -- it's quite difficult for us, I think, to assess exactly the consequence of this inflation depending of the sector or the vertical of the business. And also because the inflation that we have today is not necessarily due to the same reason of the inflation we had probably 30 years ago and the conditions under which this inflation happens is also different. We've seen in the past year a specific trend and pressure on the software market for resources, and notably R&D and salespeople, also because the traction on the tech environment was very high. So telling you now and commenting on the margin by solution is not what we intend to do. And I think we confirmed very clearly the guidance of the full year in terms of top line and EBIT. I think it would be very early to make comment about the impact on inflation on one or the other solution. The only comment I think I can make on that is that you have to also take into consideration the phasing under which you apply the price increase and under which you have the increase in cost. And in a subscription-related revenue business, you would basically place new software at a price increase, and you need to have also, I would say, the education to do so. So the -- I would say the risk would be not pushing the price. But we are actively working on that and we continue to work on that. And the most risk I see is also the time difference between which the price increase is reflected in the revenue and the one under which it's reflected in the cost structure.

So the earlier you do it in the year, the better because you get the full year benefit of those price increases you did earlier in the year versus the one you would do at the end of the year.

And a different topic. Have you identified extra room for office surface reduction in line with extra work from home? And if so, what could be the extent?

So we've continued the effort on the reduction of offices as planned. I think it's important to raise that we closed, I think, around 30 offices last year and we continued to close offices this year as planned. And that was also factored in the overall guidance we've made to the market.

Next question. Can you help to bridge the ARR objective at the end of 2022 considering your objective of EUR 250 million at the end of 2023?

So I guess, yes, the question is -- yes, at the end of the year, our commitment is -- I mean, our indication, and that's what we shared in the full year result, is EUR 250 million. It was in the ICA edition, I think, even...

At the end of 2023.

'23. So that's the end goal. I think we've been detailing the curve, I think, that would lead to this EUR 250 million. You need to have in mind that this is going to accelerate as we penetrate new markets and notably new geographies like Europe, France and U.K., in particular, and also in AP and AR solutions that are the most dynamic on the ARR side.

So we expected an acceleration in '22 for the AR growth versus '21. And we would expect a further acceleration in '23 versus '22.

Still on ICA. What is the split between the CCM software and the other software solutions at revenue and EBIT level? What will be the margin for each solution?

So the revenue split is probably around 50% -or 50%. And probably will evolve more favorably on the other platform than the one we have for the large enterprise, because the growth rate today of the large enterprises, as we have shown up for a few quarters, is, usually speaking, around the 10%; whereas the growth that we see -- that we experience and we benefit from on the midsized companies has been much greater. So naturally, over time, in the mix, the revenue will likely favor a stronger proportion unless we can accelerate or we continue to accelerate further the growth on the larger enterprise segment. So that's where we are. In terms of product and portfolio, we obviously don't share the profitability by platform or product or modules because we're actually building one platform, one integrated platform at ICA level with different modules that are sharing codes. So we have a lot of those codes already shared between the platform and the modules used by the large enterprise versus the one on the mid-segment on the customer communication, the one referenced by the IDC report. But we integrate also further the accounts receivable modules with the account payable modules. We share connectors with the different ERPs. But we also share the knowledge and the code that exists with the customer communication platform. So it's really having one ICA platform, where our customers could start and log in. And based on the different modules, they would have access or licensing right too. So as a result, the profitability by product or modules makes less and less sense, but more the ICA profitability as a whole. And at the end for us, what we're always going to be looking at is for any dollar of R&D we spend on the modules, on a product, on the feature was the return on that investment; and what is obviously the investment that we make on the sale side, making sure that the same way as we invest into a particular modules or product, we get the return on sales and the efficiency on the go-to-market. But overall, we are sharing all indicators at the ICA level. The last thing I would say, I think, just to understand the profitability is that a little bit like on the Parcel Locker and a little bit like on the MRS, the installed base. So we have today 12,000 customers, probably a little bit more than 1,000 on the large segment side, 11,000 on the mid segment. Those customers' installed base, the one we already have, are highly profitable, in both cases, on the large and the midsized one. And they are even larger on the customer communications side, on the account payable side as we have the most customers who are at scale, if you want, on one hand. So that's higher profitability. Then really the difference on the ICA profitability is on the level of investment you make in terms of go-to-market and acquisition -- customer acquisition costs, sales and marketing cost, if you want, that we do in a given year for a given product or platform. And that's really how the overall profitability could be differentiated. And we do differentiate the level of investment we make in sales and marketing. But today, we know we have a scaled ICA platform overall and for the different modules, and we know they're highly profitable today across the board, and at a similar level, whether that's on the mid-segment or the enterprise segment.

And that was the last question. So Geoffrey, over to you for the last -- closing remarks.

Thank you. So thank you all for your questions. They were good questions. Obviously, we're happy with -- Catherine, Laurent and I to answer them. We look forward to our next Quadient General Assembly Meeting that will be held in Paris, June 16. And we will also look forward to be able -- to seeing you September 26, 2022, for our first half 2022 results. Thank you very much for your attention.

There was one very last question that arrived a bit late.

Maybe we'll respond it later or...

One...

Okay. Please give.

Have you bought back any shares year-to-date?

No, I don't believe that is the case. Since the beginning of the year, I don't think we had many opportunities actually with Laurent for various reasons. No, I think the answer is no on my side. Thank you very much for this question. Thank you, everybody. Bye-bye.