Solocal Group S.A. (LOCAL) Earnings Call Transcript & Summary

[Presentation] Good morning, ladies and gentlemen. Welcome to all the people on the call. This morning, we will have the presentation of our 2019 results. We'll also be telling you about our outlooks for 2020. Olivier Regnard will be here. He's our financial -- Chief Financial Officer. We're going to begin with a short -- we have begun with a short video, which has given you an idea of our company. It's a video that was projected to all our SoLocal teams. We are 3,000, and this was during a roadshow that are carried out in France so as to meet the teams and share our values, our culture. And you've certainly seen through this video that there was a lot of enthusiasm, commitment, dynamism, motivation from the teams. So this is the new SoLocal that you have just seen on this video. And we are here in Boulogne, at our head office, but I know that we are also there live with many people who are listening to us. We will take your questions after our presentation, questions that we will be able to take in French and in English. We will see how to do it in a flexible way. We will try to answer in French or in English, according to your questions. Now remember, for those who were here 2 years ago, on this very day almost, we were announcing our SoLocal 2020 plan. It had 3 pillars. It still has 3 pillars: first, to restructure our offer, which is resolutely digital, which is totally modern with subscriptions, with automatic renewal and with digital coaching. So that is the first pillar in our transformation. The second pillar is the modernization of our media platform, especially on PagesJaunes. And the third is the reorganization, the restructuring of our company so that it might be more nimble, more efficient, more productive, lighter, more cost saving. And this is what we've done in the past 2 years. So we are at the end of the second year. We are in working order for this third year of our SoLocal 2020 plan. And now this is the opportunity to tell you where we reached. And this was all due, and I will share with you the main achievements of 2020 -- 2019, sorry, 2019. So it was a year of growth in the last 2 quarters of last year. Growth in digital sales in Q4 2019, plus 7.4%, better than in Q3, where we had posted a growth in digital sales of plus 5.3%. This is what allowed us to stabilize our digital order intakes in 2019 compared to 2018. And this in accordance with our guidance, with our objectives, we posted a moderate growth in our recurring EBITDA with a growth of plus 2.2% versus 2018. And this after 9 years of consecutive decline, followed by a stabilization that we had registered in 2018. So now there is growth once again in nonrecurring EBITDA. And this year, we also had a conversion rate of recurring EBITDA into operating cash flows at a level of 50%. So a very good 2019, major achievements and some more successes. And I would like to talk to you about the real business of this company that we are discovering here through these 3 color blocks that you can see on the left-hand side of the screen. So the job of SoLocal is to allow 5 million companies, all these professionals, small, medium-sized companies, to have greater visibility on the Internet. That means more prospect, more clients and more business. And through our digital services, that's our objective, that is to help them develop their business. And as they're developing their business, of course, we want to have a more dynamic local life. And that's the mission of SoLocal. And this company is a real industrial company. There is probably no equivalent who can produce 15,000 Internet sites over a year, more than 15,000, actually, more than 90,000 digital advertising campaigns and also now more than 100,000 subscribers. And this is just the beginning, subscribers to our digital services presence and Priority Ranking customers. These are our 3 priorities: Internet sites, digital advertising and digital presence, 3 major activities where we have posted a certain amount of success. And particularly, if you look at our financial ratios, recurring digital EBITDA, 32%. 32%, that is plus 6 points in -- compared to 2018 where we had a ratio of 26%. What is very important is that in 2019 -- and I will get back to this a little later, we have launched some new projects. And this is our first thrust. This is our pillar, our transformation, a new digital offer. And this new digital offer? Well, it has received a strong welcome from our customers with a migration rate above 85%. So our customer base is migrating towards this new offer because we have to modernize things, that's our objective in 2020, modernize our large accounts. But this modernization is taking place very rapidly. It's very positive, very positive for all the VSEs, SMEs. Our economic model, our subscription model has been adopted because today, 75% of our subscription base is subscribed to all the digital services of our company. That's 50% more than in Q4 2018. In 2019, we posted -- thanks to the launching of our new products and thanks to the deployment of other products with the cross-selling system, we sell more products to a given customer, and our ARPA increased by 12%. It went from EUR 1,300 to EUR 1,400. And 2019 was a very good year for our PagesJaunes page, more than 2 billion visits per year plus 19% of -- in the number of visits, thanks to the partnerships we had in 2018 and in 2019. Now after having gone through these achievements, what I suggest is to go deeper into our results. And I would like to highlight the -- our Q4, which is a second consecutive quarter of growth in our digital sales, plus 7.4%, thanks to the deployment and the successful rollout of the Priority Ranking offer on PagesJaunes and the acceleration in sales in Presence and our Booster Contact offers. The revenue, however, is still going down. But as you know, I'd like to remind you, however, for those who did not listen to us on this topic, remember that our order entries transform into revenue as the services are provided. So this minus 11% decline in our digital revenue, this is a drop in our rhythm of order intakes at the end of 2018, early 2019. If you do the arithmetic for the coming quarters, this would mean that the growth in Q3 2019 and the growth of 7.4% in Q4 2019 should mechanically be translated into a growth in the digital order intake, growth in the revenues in 2020. Subscription order intakes, 75%, therefore, of our order intake, so this model of subscription is the reference model in our company. It should be around 90% in 2020. PagesJaunes traffic, plus 19% for the year, plus 12% in Q4, still driven by partnerships and the SEO Google. And an important point, because this is a KPI, an indicator that we'll be monitoring that we will keep reporting systematically on a quarterly basis. This is the order backlog, which increased by 7% between Q3 and Q4, driven by the growth in the order intakes during that same period. Now I would like to focus on the new digital services. So here, you see the progress over the full year. It was launched in July 2019 with 12,000 subscribers, and now we are above 100,000. Each month, there was a growth in the number of subscribers at the service of Presence digital and the Priority Ranking. So I'll tell you about our outlook for 2020 because we have a lot of ambitions for this product, which will have new functions. And 85%, that's the migration rate. That is 35% of our customer base that migrated at the end of 2019. And as you might have already understood, we have gone past this level since January and now at the end of February. Now what is important is that this migration is done with a creation of value, creation of value for our clients, creation of value for the company, for SoLocal. Each time we migrate a customer, that is a customer who was a customer on an obsolete offer on PagesJaunes search. If you take a small customer, very small customers that have relatively low ARPAs, the renewal rate or the development rate is more than 20% so we're creating value. The ARPA is greater, more value for our clients. They have a margin offer, and they deliver a greater performance or a greater visibility. That means more visits, more context. For the larger ARPAs, EUR 10,000, EUR 15,000 per year. This development rate is plus 3%, so we're creating additional value for our customers but also for SoLocal. These services are available since last year or 2 on our new applications, SoLocal Manager. SoLocal Manager is an application, which is available on the web, but is also available on your smartphones for all our customers. Not only for all our customers, it is also there for all the enterprises, 5,000 enterprises that are registered under SoLocal Manager, and they can update all their content on PagesJaunes. And that is the favorite tool for this digital relationship between SoLocal and its clients, a relationship and a means to update your content, of course, on PagesJaunes but also subscribe to services, subscribes to new services. Follow the performance of the services, the number of visits on PagesJaunes but not only on Google and Facebook and on others. So it's our indispensable digital trend, 375,000 clients of SoLocal today. And you must have understood, it's a wonderful tool throughout time to convert non-client enterprises, nonpaying enterprise into paying enterprises for SoLocal. Thanks to these offers, that will be multiplying in the future. So SoLocal Manager is part of the system, a successful rollout last year in Priority Ranking customers and Presence customers, and this is going to be essential in the strategy of the company to conquer and retain its customers. When we talk about the customer base, last year, actually, we have to remember a few phenomena. First, an ARPA that increased that went from EUR 1,300 to EUR 1,460, and it was driven by our new products, but also by products that did very well throughout the year, especially Booster Contact, Booster site last year. You see the growth in the ARPA is systematic in all the subsegments with a small difference for the SMEs where we have posted growth in the past -- in the last 2 years of the year, we were at around EUR 5,400 versus EUR 5,900 in 2018. In the summer of in 2019, we are EUR 5,600, and we are increasing the ARPA in that segment, thanks to new products, but also because of more cross-selling. That is new subscriptions to products such as Booster. What you need to note is that this is a year where we have reduced our churn. We have more loyal customers. We went from 20% churn in 2018 to 18% in 2019. So it is a good performance. However, it is a year and certainly, the last year where we will be reducing and eroding our customer base because right now, we have 375,000 clients, which in 2019, it was a year where we focused, where we really focus -- we try to launch new projects, and we migrated our customer beliefs on all these new products. Now if I look at the next page, 2020. Therefore, well, 2020, our objective is to stabilize our customer base, to stabilize it after 10, 15 years of decline with 2 major systems -- I mean 2 major engines, to conquer new customers and to retain our customer base to have loyal customers. So here, you have a few engines for drivers. You have this business model, our subscription model here. So our commercial teams, sales teams would spend a lot of time renewing contracts every year. 80% of the time of our sales force was dedicated to the renewal of contracts. From next July onwards and today already, our sales force will spend less time renewing contracts, hardly any time at all, actually. And they spend more time on customer retention and conquering new customers on the upsell and the cross-sell. That is 40% of the time of our sales force that will be dedicated to these activities. We'll also be increasing our telesales for small customers to increase, conquers more than 100 FTEs in-house and outside the company. We will keep increasing, which we did in 2019. We will pursue this path. We will keep increasing our marketing investments, and we will have new systems that we tested last year. I'd like to specifically stress digital auditing. Today, if you're a company, you can assess, thanks to SoLocal, your digital performance, your digital visibility, and this in an automated way. And very quickly, we give you a report, which tells you about your digital performance. And last year, at solocal.com because that's where you'll be finding this digitalization audit, 3,000 digital audits. And this year, we will be at around 100,000 digital audits throughout the year. So as you've understood, each time we realize a digital audit in a company, that company can contact us to understand what additional tools will allow them to have greater visibility. Therefore, additional business is also an opportunity for us to call back these customers, show them the whole portfolio of digital opportunities that SoLocal can offer them. So it's a small -- it's a great driver, sorry, and we can have additional prospects for the company. We will also have a dedicated sale that will be dedicated on qualifying and acquiring new prospects, and we will be launching new offers in our presence range but also our site range, with the possibility to offer to companies to build their own sites. We have do-it-yourself sites. And we will keep accelerating the acquisition, thanks to our reference priority offer. We will keep on with the VSEs and SMEs. And in 2020, it will be also launched, 4 large accounts from next July onwards for this activity, large accounts. Now the acquisition of clients, this should be multiplied by 2 compared to 2019 and 2020. And at the same time, we will keep reducing our churn. We will have greater customer loyalty. We will reduce our churn by 2 points during the year. And our main priority is, of course, customer satisfaction. That will be our new obsession and especially for our products, products that have to deliver quality, performance and for the size to respect the delivery time. And for Booster Contact, I'd like to remind you that Booster Contact is our offer where we recorded some very strong growth today. It's a unique offer on the market because the objective is to take a commitment vis-à-vis our customer, the number of contacts that are given to them per month. That is a commitment we have, and we would like to deliver more quality in our contacts: phone contacts, contacts on the Internet, quality contacts, contacts that would be converted into prospects and clients for our customers. And, of course, Priority Ranking on PagesJaunes, this should deliver more value, more visibility. So Priority Ranking will gradually become a performance advertising offer. And during this year, this product will keep changing and will deliver greater performance, greater value, more loyalty for customers because it will deliver, considering their expectations, we'll be proactive vis-à-vis our customers. We will use our assets, SoLocal Manager as a strong retention tool. We will send notification proposals, some advice. We will observe whether their content has been updated, at what rate. We will give them recommendations for updated content, et cetera. So this will be very proactive tool and not just reactive. Preventive actions, we started in 2019. We started scoring our clients. According to certain criteria, we know whether our clients have a lot of appetite, whether they're dormant or whether they are clients at risk. We are going to intensify our actions based on this high-quality data, all the retention actions. We're going to anticipate a new risk of departure from this or that customer. And this thanks, to databases that are big data now, we have the artificial intelligence applications so that we might be more relevant and so that we can anticipate a certain number of movements from our customer base. So not only our sales force will work on acquisitions but also on retention because they will have more time to acquisitions rather than working on renewal of contracts. We have already also set up a cell dedicated to loyalty enhancement, which will help anticipate that these teams that will be fully dedicated to loyalty, both in telesales and field sales, supporting the teams to make sure that our customers will enjoy the best treatment, the best processing, and we will enhance their relations with SoLocal. And we also -- a 24-month commitment, that's the subscription policy. We were offering a 12-month subscription program. But now we will extend it to 24 months, allowing also our clients to keep subscribing for 12 months, whether the standard subscription will be the 24-month subscription. There is no -- nothing new about it. It's just very commonly found type of subscription duration. It's always very good to take an example to help understand the momentum of our business. There is a company, which is probably well-known, which is called Duvillard in Draguignan. It's an HVAC heating system company. It's quite a paradigmatic to understand our process. What our customers are asking for is being more visible. It's historically reported or registered client on the PagesJaunes, and they would spend some EUR 3,000 per year to be present on the PagesJaunes directories. But they understood that in order to be visible, they also had to be present on the web. So they have asked us to develop a privileged website, which is the high-end type of offering we have, and they've also subscribed to the Presence contract because with this search contract, you are present on Google, Facebook and other media. And this has generated a rise in their traffic on their website with 18,000 hits on multi-diffusion displays and had helped generate an additional 750 prospects for this company. And for SoLocal, it meant that historically, we had EUR 3,000 of turnover with them to EUR 7,000 in 2018. And thanks to the success of 2018, this company, Duvillard, considering that where the web is an excellent driver to boost their growth, we've offered them new solutions and they subscribed this Booster Contact contract that is potential prospects that are sent out to them every month with keywords, heating, plumbing in their geographic area. And this has helped at ARPA to go from EUR 7,000 to EUR 10,000, so a 30% rise in ARPA. But what does that mean for the customer? That's 120 new -- 22, sorry, new prospects and with an acquisition cost that has reduced by 6% in 2019. And in 2020, we will carry on with Duvillard with the Booster Contact offering, that is more keywords, more traffic, greater quality, allowing them to -- allowing us to reach a revenue of EUR 14,000 with this customer. So by enhancing the visibility of Duvillard on the web, we help them boost their business reaching more prospects that will be converted to new customers. And we went from EUR 3,000 revenue with them in 2018 to more than EUR 10,000 in 2020. So that's the whole dynamic of our business model, subscription plus digital services, enhancing the visibility of our customers that will have more contacts. And it's a virtuous system, because it's a value creation for the customer and for us. Same for large accounts. They account for 20% of our revenue approximately. This is also a business, which is based on 3 main pillars, the same: digital presence; website; and presence. With a specific feature is that all these products have been upgraded for large-scale companies that do have networks because these big companies also want to generate more traffic on their website and on a very local level as well. And that's the very strength of SoLocal because we do have the local data. We have the products that are aimed at their geographic area. And thanks to our platforms, we have given them the opportunity to manage their digital marketing and digital advertising campaign from the center for the very thorough areas, that is they can manage their brand names in a consistent fashion throughout their scope and to manage their investment to monitor the performance and return of their investments, thanks to some products with a digital presence, which was subscribed by Five Star, which is body work -- car body work network, their presence all over France, and some representatives from Five Star management are with us today. We also have the Booster networks. I talked earlier about Booster Contact, it is also available for large accounts as Booster network plus 500% last year with new clients, Ascencia, a business school; Autosur for technical inspections of vehicles; Profil in the car making sector; Mutualia for the mutual funds and insurance companies. You have here, with these networks from 10 to 100 and even 1,000 points of sales. So we help generate traffic locally and we can do that in an even more sophisticated fashion for the big ones, like Intermarché retailer, SFR telco company, Toyota and others. This is a business that is on the rise. It's called drive-to-store business. And with the Booster network, Booster's presence, we generate additional contacts on the web. With drive-to-store, we generate more traffic with prospect lines for these. But at the level of the point of sale, the dealer's facilities, we are one of the key operators in this business, which has been on the rise, also plus 100%. And we've done more on the last quarter with this product than with Local Impact, our Local Impact, which combines a series of platforms, which is a local data platform, allowing us to target all those who would like to go to McDonald's or visit a Renault dealers. We also have a programming platform, allowing to program these ads that are reaching out to these well-optimized targets. And we also monitor the traffic and the hits on the website, and we also sell these products by comparing the traffic at the time when this company was not exposed versus the time when this company is being exposed. It's a very virtuous system to the point that we are negotiating with the big ads agencies. Like, for instance, we've signed an agreement with QuartierM, where we jointly announced this agreement. We've developed a common offering drive to store via SMS, via boards that are managed by the SoLocal teams and by QuartierM. QuartierM is the WPP local range, targeting local companies. Same with the big players of the market, have as publishers, and you name it. Other big ad agencies and communication agencies in France. So we are very hopeful in terms of growth, plus 400%, plus 500%, plus 100% of growth for these large accounts. This is also going to be the driver of SoLocal business model in the coming years. As I said earlier, 2019 was a good year for PagesJaunes. PagesJaunes, which was the very core business of our company. This is allowing us to be independent, making SoLocal an operator that can operate in an ever-changing world, in a world where GDPR is to be complied with, where users don't want to be overwhelmed with invasive and pervasive advertising that do not match. There, web form of patterns of consumptions where the key operators are changing the rules, and we are independent thanks to PagesJaunes. So we want to make PagesJaunes a very strong media, generating hits, visits and contacts. And we want to keep on investing in PagesJaunes. It is one of the pillars of our transformation plan. We have started this transformation process. In the meantime, we signed new partnerships with Leboncoin, Amazon, Bing and Apple. We've also increased the qualified contact by 6%, but we want to go further. And today, PagesJaunes is more conversational with JackBot, allowing the consumer to be directly in contact with the business because the interest of PagesJaunes is to have connections between 5 million of companies and 67 in -- or 55 million consumers in France. So that's the driver for PagesJaunes. But we want to go far more than that. We want to have the chat system and also allowing people to make appointments, sending and receiving quotations and also giving the opportunity to post their inventories on PagesJaunes so that PagesJaunes will be a marketplace. So we are reinventing PagesJaunes with -- in 2020, a new PagesJaunes website, which will be more focused on services, chat, community-based, so fully engaged PagesJaunes so that it will be completely in line with the SoLocal mission, which is to be the player, which is going to make this a dynamic process and we -- and one of the key operators on the French market. 2020 is a year where we're going also to further our offering portfolio when it comes to, for instance, Priority Ranking and Presence. Presence will be extended at an entry-level and top of the range, with an access offering, which will be made available next summer for the 5 million companies that are currently registered at a local manager, allowing these companies to update their content with videos and photos on PagesJaunes. So it will be a free entry level, but also the Essentiel offering is the premium offering of the future, allowing our clients to update their content on the website, Google, Facebook, Instagram and others or TripAdvisor, for instance, and also to generate the ranking of consumers. So it's EUR 49 today, and it will be sold at EUR 29. And these prices will have to be confirmed when we launch these new services, these new products. And we also have a premium offering with many more functions that are expected and demanded by companies that is transactional, appointment scheduling, quotations and chat solutions. So Presence will be fully fledged. It's not only multichannel display, but it's all really -- will allow for actual transactions between the customer and the business. And then new functionalities will be offered also to manage relation with the clients, with prospect clients and existing clients. It will also help them to design a direct marketing campaigns, which will be fully designed by the company, and this will be made -- and is available in the second half of this year. So we will go from 2 products to 4 products, from entry level to the top of the range offering, covering all aspects of the market. This means that we can acquire new customers, thanks to the new entry level, but also to keep our clients more loyal because of the new functions that are being offered. Also for the Priority Ranking, which will be rolled out and will be offered to large accounts and allowing for more performance and allowing many more -- for many more contact of a high quality, we also are going to boost the website range today, with 3 main offering: Essentiel, Premium and Privilege for the high end. We will have new functions for e-commerce and for customer relationship management and database management. And this range will also be complemented with a do-it-yourself website, where you will be developing your own website. These are offers that are available on the market. We want to be a major operator, a major player in this market because some of our customers do have the digital knowledge, and they want to develop their own website. And we will be, of course, providing them with the support, the need to develop their own website. And also we want to put the emphasis on quality, performance and achieving the contracts within the deadlines. We want to enhance the performance so that the websites that are generated and developed and designed by SoLocal will enjoy a very good SEO. We have developed a new platform called [ SoOptimal ], [ SEO Optimal ], which will help to design the website and to monitor the websites ranking throughout their life cycle. And thanks to this [ SoOptimal ] platform, we can perform these digital audits I was talking about, because digital audits give us access to [ SoOptimal ] also. This is a platform, which has been fully developed by SoLocal. It's a home-based product, will help to monitor performance at the time of the production throughout the life cycle of the website to guarantee the best of customer satisfaction. So so far for what I had to tell you. Now we'll give the floor to Olivier Regnard, who is going to give you some financial achievements and financial results, and then I will come for -- with my own conclusions. Thank you.

Thank you, Eric. Good morning, everyone. I'm very pleased to be here with you to report the financial results for 2019 at SoLocal. There are 4 key messages to remember about SoLocal last year, and this will be the backbone of our presentation. EBITDA has increased by 2% and also the fact that we have a fixed cost model in our business model. It's a business also that generates a high operating cash flow even though we've had to cash out a lot of money because of our restructuring plan. And finally, I'd like to say that we will give even more emphasis on our revenues rather than on our order intakes. And I'm sure that will please you. Let's talk about our order intake. After second quarter 2018 with a 24% drop of first quarter in 2019 where it was only minus 5%. The order intake has increased in Q3, plus 5.3% and plus 7.4% in Q4. This has helped us to stabilize our order intake in 2019 to EUR 520 million. And as Eric said, these order intakes will be converted as a revenue. When you sell 100, for instance, they will convert by 2/3 as a revenue in the 2 months further to the return intake. And the last 1/3 will be converted as a revenue after 12 months. Now the pace of conversion has improved between 2018 and 2019. That is the conversion rate between order intake to revenue. This indicator was an indicator of our performance. But today, as you've understood, the subscription business model will completely change the way SoLocal generates revenue because we're going to reduce our churn in a significant fashion. And it will help to release more time for our salespeople, so there will be more focusing on upselling and cross-selling and developing further our customer base. Now back to the impact of subscription model on our KPIs, and I will take an example to explain this. Let's assume that we have a sales person who would visit our customer every year on July 15. He did that in 2019, but he's going to sell -- to tell to the customer, "Well, we automatically renew your contracts, and also I'm not going to visit you anymore. So there won't be any visit, any call on July 15." The order intake will no longer take place, but the order intake will be considered at the beginning of the service, which is historically, December 1. So what is my salesperson going to do if he doesn't go to see the customer on the 15th of July? Well, he will do some upsell, cross-sell. He will develop a new customer base. From a financial point of view, what is that going to change? Well, from the sales point of view, as you might have understood, will change a lot of [ trading ] because in Q3 2020, there will be a drop in the number of sales but no change in the revenue. The revenue will be registered from December to the next December and the coming years. This is why we'll be focusing on the digital revenue in 2020. In addition to the Digital revenue, we will talk about the customer base. Now I just want to talk about the Digital revenue before going on to the other indicators. As you might have understood, and Eric has already explained this to you, the growth in Digital revenues in second half of 2019 will not offset from the point of the revenue, the drops in sales in H2 2018 and H1 2019. So in H1 2020, we will have a drop in our Digital revenue. It is mechanical. And the other elements that we will be publishing, the acquisition of new customers, that's very important. The second point, ARPA. And finally, we will give you an information on our order backlog, as we did historically. In this time of transition, we'd like to give you an additional indicator on which we are thinking, which will certainly be the breakdown in our order intake of our sales throughout the year in which these order intakes will have taken place so that you can have an idea of the order intakes at the end of the year. Now let's look at the financial results as such. The group's revenue 2019, EUR 584 million, 12.7% less than the previous year. Just for the Digital, the revenue reached EUR 520 million. That is a drop of 8% compared to the previous year. This drop in the revenue, what is it? Well, it's the mechanical effect of our drop in H2 2018, H1 2019 that could not be offset by the increase in our orders in H2 2019, still the same mechanism. Now as for our products, you see that it is Digital Advertising that went down in terms of revenue. Why? You remember that Digital Advertising was based on our former offer, which is Search. Search was getting obsolete, and that was the whole point of reconfigurating our product offer, and this allowed us to launch. And that's the whole meaning of our Priority Ranking offer in the summer of 2019. This allowed us to reverse the sales trend. As for Presence and Internet website, the revenue is stable versus 2018. As for our P&L, well, the revenue went down by 12.7%, so therefore, the group has posted a growth in its recurring EBITDA by 2%. A small caveat, though, you know that just as all the others, we are affected by the IFRS 16. We have applied the standard since the 1st of January 2019. And for a greater readability in our results, we have the published 2018-2019, before taking into account IFRS 16, and in the last column, you have the result that will be published in our consolidated accounts after taking into account IFRS 16. So what must we remember from this P&L, on this net income? So a massive increase in our external expenses, EUR 33 million. All the costs, all the work that have been addressed, maintenance, IT, real estate, cars, the only thing that has increased in our external expenses are the spend media. That's good news. This reflects the success of our Booster Contact offer. The second element that helped, a change in our paradigm from the point of view of IT. And the last point, marketing, the advertising campaign and give greater value to our image and boost our visibility. So these are the elements. And in addition, we have a drop in our personnel costs, EUR 36 million. To tell you, this is a minus 30% of our personnel costs compared to 2017, EUR 116 million of savings. So that is the full year effect of the plan that was launched in 2018, mid-2018, so full year effect. People left at the end of 2018, early 2019, and we are reaping the fruit of all this, this year. So this is what allowed us to improve our EBITDA by 2%. Under the recurring EBITDA, what do we have? Well, you know that we've extended the 2018 plan -- mid-2019 plan to some hundred people within SoLocal. These people amongst these 100 people, we had people who were dedicated to Print. Now -- then you have EUR 23 million nonrecurring costs. Then you have the depreciation and amortization, which has dropped compared to last year. We have maintained our CapEx between EUR 40 million and EUR 45 million. And the last point, the financial income on a comparable basis, it went down slightly because we have new financial resources that have been set up. Now let's go back to the EBITDA. You must remember, you have to relate this growth in the EBITDA to the drop in the revenue by 13%. Now if you look at the SoLocal 2020 plan, what was it exactly? It was a transformation plan that's aimed at adapting our fixed cost base; secondly, review the entire range of products and stop the erosion of sales and the revenue of SoLocal and then reboot growth so that we can fully use the SoLocal machinery. The savings plan that was initiated, EUR 73 million, it was planned to compensate, offset all these elements. That is the gradual stopping of Print. It cost us EUR 28 million and also the Digital revenue that was supposed to decrease the cost of our product offer that was obsolete. So EUR 73 million that offset this drop of the contribution of Print of EUR 28 million and a drop of the Digital of EUR 42 million. Now let's go back to the SoLocal model. And you know from 2020, we will stop Print. So we wanted to give you greater visibility on the breakdown and the margin and the EBITDA of each of these activities. So here on this chart, for 2018 and 2019, you have all these activities. You have the variable costs on the one hand and the fixed costs on the other. Now what must you remember? Well, first, we have a variable cost margin, which is very high, 80% for Print, 80% for Digital. Fixed costs that account for 50% to 60% of our revenue. What do we have in the fixed costs? Personnel costs, our costs for our sales forces, real estate, property, et cetera. And this is where you see that the EBITDA rate for Digital is very high. It went from 26% to 30% with comparable standards. So all this transformation plan of SoLocal, when you see this model, it's a fixed cost model. So our transformation plan once we adapt our cost base, it will help us run this plan. I'm going to show you an example so you can better understand what we mean by fixed cost model. If you take EUR 100 million, you have revenue of EUR 100 million, you have variable costs of EUR 11 million and fixed costs of EUR 59 million, so an EBITDA margin of EUR 30 million. So with an equivalent product structure without taking into account threshold effects, at SoLocal, when you have EUR 10 more of revenue, you create EUR 8 of extra EBITDA. So you must have understood. All this is based on our CapEx that we want to turn towards the key issue of the company. Now what's interesting in this CapEx, when you look at the configuration of the CapEx, they account for all that we've already said, our issues at stake, our media platforms, PagesJaunes, our product offer, our sales tools and the move to cloud, which is absolutely indispensable so that we can scale our business model. With an EBITDA CapEx margin of EUR 128 million, 25% of our revenues, SoLocal will generate cash. In 2019, in spite of a decrease of our working capital requirements, the group generated EUR 100 million of recurring operating cash flow. Now let's go back to the working capital requirement. First, the customer working capital requirement. Well, you must remember that on an average, the customer at SoLocal pays before the service is provided. So therefore, at the end of 2018, to give you an order of magnitude, the net WCR for the customer was at minus EUR 200 million. At the end of 2019, this amount was minus EUR 160 million. Why do we have this decrease of EUR 40 million of customer WCR? For the first element, and we had the opportunity to mention this at the end of November and in December, the new range, the shift towards the new range costs EUR 20 million in terms of working capital requirements for the group. The second element, which is also very important, is that the drop for what our customers pay in advance, a drop in the revenue for Digital and Print. This drop in the revenue gave way to the drop in the WCR for our customers. When my revenue stabilizes, my WCR stabilizes, when the revenue improves, the customer WCR becomes a resource for the company. The second element is the supplier part. Our supplier WCR went down by 6 million over the year. Why? So we reduced our fixed cost base by EUR 33 million. So mechanically, our supplier WCR shrunk. And once again, this is a nonrecurring item. Therefore, EBITDA of EUR 190 million; CapEx, EUR 43 million; variation in the WCR, EUR 150 million. We generated EUR 100 million of recurring cash flow in 2019. To that, you have to deduct financial expenses that have increased slightly and take into account the financial impacts of the IFRS 16, the group managed to generate recurring cash flow of EUR 60 million. The EUR 61 million, combined with the new financial needs that we have set up allowed us to absorb EUR 155 million of nonrecurring disbursements. And this new means -- financial means, we've already talked about this, EUR 50 million of RCF, this EUR 80 million of WCR facility and we've set up an equity line. This equity line allowed us to obtain EUR 17 million at the end of December, 3 million more at the end of January. And we have 16 million of shares that have not been exercised. And this 16 million of shares are underlying decrease of 2.5% -- 2.5% of potential dilution. Now let's look at the nonrecurring costs. They represent the cost of the redundancy plan in 2018 and its extension in 2019, which cost EUR 20 million. This cost altogether cost EUR 225 million. This EUR 225 million, EUR 164 million were already disbursed at the end of December 2019. And what remains to be disbursed is EUR 60 million for fiscal 2020, 2021, and especially in 2020, where we'll have to disburse -- pay out EUR 56 million. So you're going to say, "Well, how can you finance EUR 56 million of nonrecurring disbursements in 2020? I suggest we carry out this exercise. We have EUR 40 million of cash in our bank, as you've noticed in the previous page. To this EUR 42 million, we have EUR 40 million of liabilities. That's EUR 45 million. EUR 45 million, we plan, I'm sure you've already looked at the end of the slide, EUR 90 million of recurring free cash flow in 2020 with EUR 15 million of IFRS 16 impacts. So a resource of EUR 120 million that will offset EUR 45 million of fixed cost and EUR 56 million of nonrecurring disbursements. You must bear in mind that this plan, EUR 225 million, allows us to save in a recurring way in terms of personnel costs, EUR 116 million. EUR 116 million are now acquired. So you've probably understood that today, the restructuring plan is behind us. We now just have to focus on the top line, top line and the top line. At the end of 2020, we will have a SoLocal that will generate a lot of cash -- net cash. But these disbursements, the nonrecurring disbursements in 2019 gave way mechanically to a temporary increase in the net debt. This net debt, before taking into account IFRS 16, accounted for EUR 420 million at the end of December 2019. That is EUR 463 million of net debt, to which you have to withdraw EUR 40 million of cash. That is EUR 422 million of net debt at the end of 2019. The lever is 2.3x the EBITDA. And when you compare it to the covenant that we have in our documents, 3.5x, you can imagine the maneuvering margin that we still have. However, you also knew that we had a margin ratchet at 2x the lever and the first half of 2020 will be 10% in coupons. The other important ratio is the coverage of our fixed costs. Today, we have a fixed cost coverage ratio of 4.8x. When you look at the covenant in our documents, you have a lot of maneuvering margin because our covenant is at 3x that amount. I'm going to give the floor now to Eric, who will conclude and talk about the guidance.

Thank you, Olivier. After having listened to Olivier and myself, you understand that we are still on our -- on the track, which was presented as a guidance 3 years ago. So over the last 3 years, we have done our best to build the new SoLocal company. It's 100% digital with revenue growing. That is the Digital revenue. We are delivering an EBITDA above -- ratio above 30%. And we are a cash-generating company. Now let's turn to the future of this company by 2021. For instance, we set ourselves some objectives for 2020. First of all, we want to stabilize our customer base. And thanks to a new client acquisition, which will be doubled, and we will reduce the churn by 2 points. Second objective, we want to renew with our Digital revenue growth in the second half of 2020. As of today, more than 50% of our 2020 revenue is secured. That's the order intakes from 2018 and 2019. And we will, of course, make sure that in the second half, we will boost the Digital revenue further. All this is underpinned by the subscription mode business model for all our offers. This will help us acquire new customers to upsell the existing clients and to cross-sell the existing clients and to better satisfy them. This will, of course, release more time to our sales force and will allow us to invest further in marketing. Our objective is to accelerate our Digital EBITDA and also to generate a recurring operating free cash flow above EUR 90 million. These are our objectives. So that's all what we had to say this morning. And of course, the floor is open to questions, either here on -- in this room or via the webcast.

We want to make sure that you have a microphone.

Thank you, Mr. Boustouller, for this excellent presentation. It's a very nice tool. I'm a shareholder, a simple shareholder. I believe a lot in the extension of the company with these new tools and new offers. And indeed, you have invested, you have generated more demand and you have introduced recurrent contracts. We might think that it will be great in 2020 and 2021, but there's one thing, which hasn't been discussed today and discussed in the past, which is about your -- the collapse on the stock exchange, which is unexplained and which means no dividend for the shareholders.

There are 2 explanations to this problem. One is endogenous, and the second one is exogenous. I'll start with the first one, the endogenous one. For you and for others who are listening to us, those who are observing a company that is going through major changes, you are expecting these changes to deliver at one point, not as a onetime but rather in a structural fashion, that is. This is what we've tried to do quarter-after-quarter, working, first of all, on one indicator, which is a precursor of the other ones, the order intake. The third quarter 2019, 5% growth; and the last quarter 2019, 7% growth. And I will invite you to keep an eye on these Digital orders -- order intakes in 2020. And our commitment this morning is that this will be converted in a higher revenue in the second half. What our shareholders are expecting, be they big shareholders or small shareholders, they want us to deliver and to confirm this quarter after quarter. I perfectly understand your point. It is our main focus, and this is what we are working on. We're obsessed with this every day. And I'm reminding you that this is a 3-year plan. After a huge restructuring plan we had to go through that many people who are calling for that we have achieved. And as Olivier said, it's history now. We are focusing on the top line, and this is what we're going to do, deliver quarter after quarter. And we could easily imagine that this objective of delivering quarter after quarter will certainly have an impact on our stock price. The second thing that I wanted to mention is the exogenous environment, the environment, without mentioning the current situation of the market. The mid-cap stock exchange, stocks was negatively impacted over the last quarters, so much so that some companies such as SoLocal and others had to suffer from this market impact. We have little control over the exogenous factors, but we certainly have a control on our top line and our objectives, our business objectives, while ensuring that we do generate profit, which will generate cash. That's our obsession today, and this is what we're going to deliver quarter after quarter. And I'm sure this is going to have a positive impact on our stock price.

What is the stock price this morning?

I don't know. I'm not keeping an eye on the stock exchange every morning.

Well, I guess they must have been skyrocketing since you have reporting excellent results, plus 18%.

In the morning, yes. We're not going to speculate on what is going to happen this afternoon or tomorrow. Once again, there are market factors, and there are inner factors that are to be found in the company, and we will make sure that we'll deliver our objectives.

Congratulations. I have a question regarding CapEx in 2020 and WCR. Since there is an acceleration in the number of subscriptions, do you have any idea about the CapEx and WCR?

I'll talk about CapEx, and Olivier will answer regarding working capital requirements. For CapEx, as I said, we wanted to maintain the CapEx at the same level in 2018, 2019, and this is our objective in 2020. CapEx, is mainly CapEx for IT and R&D. They are fully in line with our objectives, that is enhancing our offering and make sure that we have all the tools to deliver higher efficiency and productivity. Now in this EUR 42 million of CapEx, it's EUR 37 million that are dedicated to innovation and innovating these platforms.

Now for working capital requirements, as you have understood, next year, we will carry on with a revenue, which will still be negative in the first half. That's the inertia effect that I already described. And 2020 is the last year for Print directories, Printed directories. The latest one were published at the end of last year. So we still expect that the working capital requirement will be significantly negative in 2020 because those people who were using the print would pay much earlier than those who were using the digital services for a simple reason, which is that people would pay and then the directory was printed and then sent out. Therefore, the impact on working capital requirement will still be significantly negative in 2020 and will stabilize in 2021, and then things should improve.

Another question, Eric Blain from Finance Connect. Two to 3 observations, you've talked about the new subscriptions and their prices, but you didn't mention the premium and privilege contracts.

The prices have not been defined as pricing has not been determined yet. They would be determined in January next because we want to cover the whole market. Now the premium with a lower-end range will mean that the ARPA will go down. If it was EUR 14 and EUR 29, maybe next year, it will be a price range that will go from EUR 19 to EUR 79. All these products will be put on the market next summer. So we have a few months to define the pricing. We have already done some qualitative tests on all these products. We have received excellent feedback from potential users.

Then regarding Print business, you've talked about EUR 160 million positive WCR. What is the share of Print in this?

Today, we cannot tell you exactly what is the share because we do have clients who are using both Digital and Print, so they have a single invoice for both services. So today, it's difficult to break down. However, our revenue is driven mainly by Digital, but the Print still is high.

What about the Print in EBITDA for 2020? Will it be 0 contribution to EBITDA?

Well, the latest directories were printed in Christmas time 2019, so the revenue will still be visible in 2020. 2021 is the year when there won't be any Print anymore. In 2020, there's still be a contribution to the EBITDA but not to the cash generation, therefore, the impact on WCR.

Another thing about the WCR decline, you've talked about the activity has declined. Well, this certainly not be the case for the Digital business in 2020. They will even be positive in the second half of 2020 since you are growing. But you do not pay any taxes because of your restructuring plan, so for how many years then you'd be exempted from taxes?

Fortunately or unfortunately, we will be paying a corporate tax in 2021, but it will be really marginal.

Do we have any questions from those people listening to the webcast?

First question. Site has grown significantly during Q4 2019 and over the year 2019. Could you please elaborate further on the substantial growth and comment on the quality of this traffic?

Yes, 2 points here. First, the growth is really driven by 2 factors. The first one is the SEO, the Google SEO, that's on the growth trend. And the second one is driven by the partnerships and, in particular, via Apple, Leboncoin, which are very, very powerful partnership that we have established. Apple, some time ago or some years ago and Leboncoin, last year. So it is driving additional growth to the 3 engines of our traffic, which is one, the direct traffic; the second one, the SEO; and the third one is partnership. Finally, we assess the quality of the traffic with one KPI that I indicated a little bit earlier, which is contact. So it is not just the visits or the unique visits, it's the contact. The contact is something, which is tangible contact that has an impact which is actually a real lead that convert into a customer. So that has been growing by 6% last year, and this is where we are putting the most important emphasis.

Second question, what was the main reason for the decline in the customer base in 2019?

Well, 2019 was a year where we're mainly focused on migration. So we put little effort in allocating our resources regardless of the type of resources, HR, marketing, sales. We worked very earlier on acquisitions. So the customer acquisition rate was rather low in 2019, and we could not compensate the churn rate, which is 2 points below the churn observed in 2019 -- in 2018, sorry. So there was no offset. We will -- would push on all the drivers, and we wanted to double the acquisition and reduce the churn. So that's the reason why we can make a pledge today, which is to stabilize our customer base. But at the same time, this migration was boosted by these new products, which have helped us in turn to increase our ARPA. So the churn has improved. Acquisition was the weak point, let's say, in 2019, and this is where we're going to put the emphasis in 2020.

Could you please give us some figures about the customer satisfaction rate? Any precedents?

We do not have any quantified customer satisfaction. So in the future, we will disclose them because we monitor them at the company level but also per product line. So we'll go do that to the next time we meet.