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

Good morning, everyone, and thank you for listening to us. This is the expected session on annual results for 2020 and guidance for 2021. So we'll start with this, and then we'll have a Q&A session on results and strategy and perspectives. In the second part, for those who want to listen to this, and we divided this session on purpose in 2 because some people might not be interested. I will tell you about the PagesJaunes strategy at length, and you will see that I will answer a number of questions that you might have about PagesJaunes, its future, its position in the strategy, vertical markets, Google. I believe it might interest quite a few of you. But for the moment, let's focus on 2020 and the analysis of what went by. On the next slide. Next slide, please. It seems I'll have to present the next slide. So a small summary of the contents. I will give you a bit about the activity, the highlights, the lowlights, and then I will give the floor to the financial manager, who will tell you about the financial results that we communicated upon this morning at 07:30. Then I will tell you about 2021 strategy, and I will give you a few words about the guidance for the future. Then we'll take a Q&A break. And before we get back to the second part, as I said, concerning the PagesJaunes strategy. So what about the highlights and lowlights? What happened in 2020? We are very happy about some elements in there. We have some elements we have to take care about. As I said to many of you, we are going to make sure we're extremely transparent about our weak points. We will describe them. We'll tell you what we intend to do. And as you will see, we'll cover that during this session. As far as the highlights are concerned, the most important for us, for our philosophy is that we delivered what we said we would. And we, on May 18, we gave you guidance. This was in the midst of the COVID crisis with a lot of uncertainties. We gave you guidance, and we were able to deliver. As far as revenue is concerned, it's not great, but it's in line with what we had planned. We gave an EBITDA guidance and a guidance about cash. And in the end, after the restructuring, we said we would stand around EUR 50 million in cash and we stand at EUR 61 million in cash position, which is a bit better than expected. One point we're extremely happy about is the stabilization of the customer base in Q4. You might remember, in the Q3, I said we were happy because we were losing less customers in Q3 2020 than in 2019. And in Q4 2020, we were able to stabilize the customer base for the first time in many years. And I will come back to it. We also continued rolling out what our subscription mode model. It is a model that was generated by Eric Boustouller. And it means that at least 79% of our customer base has at least one subscription. The base has 79% and as we take about 2% more constantly, we will be reaching 80% and more. So the financial structure, no need to dwell on this. We stabilized it. We reduced our net debt, dividing it by a little over 2. And we divided our financial costs as well by 2. So this is highly satisfying. Just think what would -- the future of Solocal would have been. If we hadn't done it in October, we would be in a very worrying situation. So we're very happy we were able to do that, and we were also able to focus on our core business. No longer any print activity, we still had a phone book activity in 2020. We no longer have it. And we managed to sell QDQ, which we had in Spain and Mappy as well. These disposals did not bring in much cash, but they simplified our activity. As you may have read in the press release, there's still a lot of results given with the Print with QDQ, without QDQ. It's still a bit complicated. And in 2021, we should end up with something simple, and I like simple things. Obviously, we also have lowlights and a point of attention. Obviously, with the COVID-19 crisis, Digital revenue dropped by 13.6%. It's not extraordinary, but it's in line with what we announced on May 18. It's not an extraordinary performance, but it's a performance where we can say that we held much better our position. It was the second lockdown in November. First of all, because we have more subscription base, and we are more protected from the COVID-19 crisis and also because COVID-19 means an impact and is costing us, but it's also helping us in a way because SMEs, medium- and small-sized companies, large companies are much more interested in digital solutions, and this is helping us. So I feel that this beginning of 2021, the situation is not really unfavorable for Solocal. But we still have to be extremely vigilant because things might change and also because we're concerned potentially about what might happen when the government pulls back the oxygen mask it is applying to the French economy. What will be the impact on our sales, on our collections. We remain very cautious, and I will come back to that several times during my presentation. And above and beyond this macro event, which we have very little hand on, we have 2 issues. So customer satisfaction. It's not there, and I'm not satisfied about it. I will tell you more about it in a few minutes. And there is the trend in PagesJaunes with an erosion in the direct audience of PagesJaunes, and this is a concern to me, and this will be the object of the major presentation I will give you in the second part of the session. Now making headway on the review -- business review, I will start. It seems like I can't get to the next slide, sorry, says Mr. Danon. So as I was saying, I will start with the customer base. If you look at the top of the slide, the customer base, if we look at 2020 as a whole, it continued dropping. I would say that it dropped proportionally less than in 2019, but that wouldn't be a good argument. 2020 is still a very mediocre year as far as customer base is concerned. But what's interesting is the Q4 evolution. As you can see, we started the quarter with 314,000 clients and we gained 10,000, lost 15,000 and we won back 6,000 because now we really battle to keep our clients. So we went from 314,000 to 315,000 clients over the Q4, which is something that hadn't happened at Solocal for many years. And if you look at the analysis, it's not so much the volume of acquisition that helped us, but the drop in the churn. In Q4 (sic) [ Q3 ] 2020, we lost 17,000 clients. In Q4, we only lost 9,000. And to understand what happened, I will show you on the next slide. I always told you there were 3 main strategy elements, if you want to reduce the churn. First of all, the subscription model. As we know in subscription-based models, churn, when you do not have a subscription and you lose the clients, you do not renew the client, then you lose the client. While with the subscription model, if the customer does not call to cancel the contract, the contract is automatically renewed. And if we look at the churn of cohorts, as we call, the number of subscription-based customers, not all our customers have a subscription, but we do have 80% that do. Then we looked at the number of clients that came to the end of the period of subscription in the Q4. And the number that left us, it was between 9% and 11%. If you look at 2019, it was 20%. So managing to reduce this churn to a range between 9% and 11% means an excellent evolution that we are very satisfied with. But it's not enough. Because even with subscriptions, some customers express the wish to cancel their subscription. And for that, we set up a loyalty system that did not exist. It took us a year to set it up. I told you about that last year. And I can tell you that any client -- customer, wherever they are, who expresses the desire to cancel their subscription or their contract, whatever the channel, e-mail, customer service, sales force, you have a team of 59 people that is dedicated and that immediately, meaning within the next 2 hours, contact the client, look at the problem. It may be a problem of customer service that we can solve or it can be a problem of value-for-money perception that we can try to solve. And retention rate is close to 50%. And what is very interesting is that when it comes through the customer service channel, which will be more and more the case given the subscription base, we can save over 60% of these customers. So this is our second line of defense, which is working well. We're happy. This is what I promised we'd do. Nevertheless, after this retention, we have the problem of customer satisfaction. As long as our customers are not fully satisfied, there will be an intention to leave or to churn, and I will come back to that in the second part of my presentation. Second topic, as I told you -- so as I told you with Olivier in the presentation about capital increase, I said that our revenue is based on a number of clients with an average revenue per advertiser, what we call an ARPA and -- ARPA and this is simple. And I like simple things, as I said. So I started working on this ARPA. As you can see at the top, it is evolving. Slightly increased in 2019, slightly decreased in 2020, but don't worry about that because we were extremely careful about our accruals at the end of the year for -- to potentially anticipate a bankruptcy level. So the ARPA is stable. As you know, we're aiming around EUR 1,400 in 2023. And as you can see, this is within range. So we are not at the end of the analysis of the ARPA and understanding it properly. We're working hard on it. And I believe that by this summer, we'll have made progress. What do we know now? We know that when we look at the ARPA, there are 3 ways of getting it to move. First of all, there is the acquisition ARPA and -- generally, but it's not certain, it's not fully demonstrated. When you acquire a client, you tend to acquire them at a lower level of ARPA than the average of the base. And once the customer is in, we start treating them with cross-selling and up-selling. And this has a positive impact because it increases the ARPA of the base. And then the third issue is the customer leaving us. The customers with high revenue or low revenue, well, I would say, tends to be those who are leaving us have low ARPA. But we'll report regularly on this, and we will report on ARPAs per customer category, customer segment. We have done a huge job to segment the customer base so that we don't add apples and pears. You have, for very small enterprise, the ARPA of our -- our order intake is around EUR 700, and it concerns 195,000 clients. But for enterprise -- medium-sized enterprises, it's around EUR 2,700. And for large accounts, it's around EUR 4,000. So the average ARPA is difficult to measure and we have to measure it per customer segment, and I'll come back to this in my presentation. But now that I've given you a brief overview, I'm going to give the floor to Olivier to tell us about the financial results. See you soon.

Thank you, Pierre, and good morning, everyone. I'm delighted to be here to present the financial results for 2020 after an unusual year. I would like to insist on 4 items during my presentation. The first one is that we delivered results that are in line with our initial forecast EBITDA of EUR 132.8 million and sales down 13.7%. That's Digital, of course. As Pierre said, we are now 100% digital after stepping -- after disposals and leaving print. We're entirely focused now on our core business. Third, we've increased the subscription business to offset the negative impact of the 2020 sales. Number 4, we're leaving 2020 with a clean financial structure, which allows us to anticipate 2021 quite positively, especially when it comes to cash flow. As we said before, no longer want to communicate on sales. And let me explain a little bit why this is. Sales, as you know, when you go to a subscription-based model, there is a mechanical gap between the historical recognition of the sale, which is the day of the order, the order intake, the date rather and the actual date of the service, when the service starts. So sales of a given year can't therefore, be compared to the sales of the previous year because of this -- especially, in the period of transition. Second, this notion of sale doesn't include the mix and the length of contracts. Some contracts are 12 months. Some contracts are 24 months, which is already what we said last year. But as we also said, we do want to communicate on our backlog and how much the backlog is generating the next year. On December 31, the backlog was at EUR 284 million, EUR 235 million will be coming in sales in 2021. And at the end of 2019, it was EUR 340 million, EUR 288 million were already secured for 2020. So this decline of the backlog between 2019 and 2020, how do we explain it? Well, we announced a decline of EUR 100 million between 2019 and 2020 because of the crisis, the health crisis. So the decline in sales, if we look at it in great detail, it only translates in sales for a period of 12 to 18 months. So the impact of the drop of sales of EUR 100 million had a limited impact on the first half 2020, a more pronounced impact during the second semester, second half of 2020. And some of this decline has yet to be found or known. And this is why the secured sales for 2021 is down versus the secured sales that we had at the beginning of 2020, down EUR 53 million. This being said, we're starting the year with less secured sales but we're still talking about EUR 235 million. And I'm going to show you how the subscription model will help us offset this -- the lagging. This chart on the bottom left shows how sales are composed for Solocal. The first, starting at the bottom is exactly what we just mentioned. It's sales, the secured sales coming from sales that were made the previous years. This is locked in, secured. The dark blue is the sales that have been generated by sales that have been renewed or that will be renewed throughout the year. So for that chunk, we have a fair amount of visibility. We know when the transaction will take place. We no longer need a signature or an agreement. So our job there is to improve or maintain the customer retention and satisfaction. Then we have the purple part, which is the contribution to sales of new acquisitions, cross-selling or migrations. So when we look at how this translates in numbers and how it translated in 2020 and how we expect this to translate in 2021. As you can see between 2020 and 2021, the secured sales have declined, but we're expecting volume of sales, which will be significantly higher for subscription sales in 2021 versus 2022. Why is that? Well, as you will remember, we launched the subscriptions at the end of 2019, the first year, where sales were going to be renewed is now going to come. We're going to see a lot of subscription renewals in 2021. It will be first-time renewals and we know when the contracts expire. And we know we need no longer -- we no longer need customers to sign off, and we're simply now focusing on customer retention, as Pierre said. The last building block in terms of acquisition and cross-selling is the acquisition and cross-selling. We've maintained our performance, but we're using better tools. We're using better segmentation as well. And we no longer have to work on the renewals. It will -- our sales force will be entirely dedicated to prospection and developing our customer base. So this is what makes us so confident, and we know we're going to further increase our customer base. So as you, I'm sure, understand now the weight of the drop of sales in 2020 and the impact on 2021 will be more visible in H1 versus H2. But the weight of sales, the weight of the acquisitions will be more significant in H2 versus H1. So in summary, once again, there's a lot of information on this slide. Two main takeaways is that renewal of subscriptions and it is going to allow us to offset the drop of secured sales at the beginning of the year. And the second point is that we expect lower sales in H1, but an increased -- but increased sales in H2. So in a difficult context with -- and with many changes on our business model, we do fully realize that it's difficult for you to gauge what our commercial momentum is like. So we would like to share an internal indicator, which we've been tracking and which is connected to the sales generated by our backlog. So it's the contribution of sales of one quarter and how it impacts the sales of the 12 next months. I'll give you an example. In 2019 Q1, we had EUR 156 million order intake. So that allowed us to secure sales. About EUR 19 million in sales for the next -- for the following 12 months. If we do the same thing for 2020, EUR 112 million order intake that will generate revenues of EUR 77.5 million over the next 12 months. So the Q1 sales allowed us to secure 14% less versus 2019. So this indicator shows where we stand in our trajectory and what our ability is in terms of keeping our objectives and sales objectives. So this is a complex indicator, but it is very complementary to the ones we've already shared before. We will communicate on this indicator quarterly in 2021. Let's now move on to Solocal sales. So EUR 433 million at the end of the year, down by 13.7% versus the previous year. We have 4 product categories: Connect, formerly PagesJaunes; Websites; and Booster, which is our digital advertising line. So if we focus on each of these segments, Connect is up 9% versus last year. This can be explained by 2 things. First of all, we've worked very hard on the Connect range in 2019. And with the health crisis, there's been an increased need for small companies and SMEs to increase their visibility. And so that's the first thing. On Websites. Down -- we're down 20% versus the previous year. So this is the result of difficulties we had at the beginning until 2020. And this had an impact on the sales momentum in -- for Q1 2020. Websites require a bigger investment for small companies and, therefore, a bigger ARPA. And this -- so the investment, obviously, had an impact on this business in a complex environment for our customers. Digital, down 19%. And again, some of our customers and prospects had to close their operations during the different lockdowns. And therefore, we've significantly and sometimes very significantly reduced their advertising budgets. So EUR 433 million, we do have the contributions of Mappy and QD Media, QDQ, that's giving us a total of EUR 437 million, that's what you will find in our financial statements. We will come back to this in greater details in a moment. And then we have Print. Print for the very last time generated sales, a total revenue of EUR 27 million in 2020. Let's now take a look at the company's EBITDA. As I said, it's EUR 132.8 million. Our initial guidance was a little over EUR 130 million, so we're very much in line with the guidance and forecast. So the EUR 132.8 million, let's take a look at how it breaks down. On the left side, you have the contribution. This is important. The word contribution is important. So we have a contribution of Print and how it contributes to the company's EBITDA. So it's the gross margin. So it's sales, minus direct costs. So the printing costs, for example, for the printing industry. So it generated EUR 20.8 million, but no fixed costs or indirect costs were allocated for that business for this year. So EUR 20.8 million EBITDA, all the rest of the company generated EUR 112 million EBITDA. So how does all this translate in our consolidated financial statements? And coming back to what Pierre said, it's a little complicated once again. But the objective of this slide is to explain how this should be read and interpreted. So the marginal contribution of Printing is EUR 20.8 million. As you can see, it's identified here in the P&L. It's at the very bottom of this table. So you have EUR 112 million. That's the recurring EBITDA of the company. That's what I just described, the EUR 437 million, that's total revenues, which is right above. So just to make it easy to read this table, we have the pro forma column which shows exactly the same information, 2019, 2020 in a comparable fashion and that way you can focus on the drop of EBITDA between 2019 and 2020. And then more specifically focused on Digital. So as you know, the main driver of EBITDA is sales and revenue with gross margin, which is 90%. We have a business model with fixed costs, as we have said before. So a drop of EUR 68 million in Digital revenue that obviously is going to have a huge impact on EBITDA. But we've taken -- made cost saving measures very quickly. As you will all remember, we have made some of our employees unemployed during the first lockdown. This allowed us to save EUR 13 million. And we were also able to have some cost savings, which were launched in 2019. We had a mobility extension program, which was launched in 2019, and we very closely monitored our payroll and spendings. So altogether, we were able to save another EUR 35 million versus 2019. And of course, we did this keeping in mind that we had fixed costs. So EUR 35 million is a very significant performance. So EUR 35 million savings and ours the limit, the drop of our EBITDA to EUR 32 million. So EUR 144 million in 2019, EUR 112 million in recurring EBITDA in 2020. That's Digital once again. So let's now take a closer look at how the recurring EBITDA breaks down. We have nonrecurring expenses. We had a litigation with the French administration. This is now solved. The consolidated EBITDA stands at EUR 116 million. We have depreciation and amortization of EUR 67 million, which is slightly down. EUR 67 million take rents and the amortization of rights that we have updated. And we're also now applying IFRS 7. So the operating income is stable compared to last year. It's approximately EUR 50 million. And I would like to spend a little bit of time on the financial results, financial income. The operating income, which is up 20 -- sorry, EUR 2 million. That's the financial results. So if you look at the expenses, there are total of -- the total is EUR 61 million of financial expenses. They include EUR 30 million. These are capitalized interests. These are nonpaid coupons. But during the last 3 quarters, they were capitalized as part of the financial restructuring. So we have another EUR 7 million of financial interest and the fees, that's the cost of our RCF as well as the fourth coupon of the year for 2020. This is post reductions. Then we have another EUR 12 million coming from that of restructuring costs. That have also been booked in the P&L. So all this combined gives us a total of EUR 61 million. Now what is surprising is that we actually have a financial result of EUR 63 million gains, that is noncash. This is really important. This is simply by restating the financial restructuring according to IFRS 19 in our accounts. And once again, it's noncash. I know this is difficult to understand, but it's been -- this simply is the transition of all the restructuring -- financial restructuring we've gone through in 2020. So if we remove EUR 6 million, that we have a net result of EUR 66 million for the fiscal year 2020. Moving now to investments and CapEx. As we decided to keep our capital expenditure equivalent to 2019 in 2020 because we think this is important for in terms of rebound and innovation after the lockdowns and post-COVID. So the different areas of investments are the following: first of all, media. Yellow Pages, for example, Pierre, we'll come back to this in a moment. The second area where we're going to invest in is Digital services with Connect. New features, large accounts, websites, Solocal manager and so on. And then we have other areas we're going to invest in, data and advertising. We're going to optimize our sourcing, and we also want to increase our sales solutions with nearly 1,200 people now who are in our sales teams. Having a proper sales solution is absolutely essential. Now let's specifically look at the breakdown. EUR 3 million are going into hardware, offices, computers, servers and so on. EUR 40 million are going -- will be invested into are internal, so inside the company. And the other half is external. So in addition to EBITDA and investments, what is interesting is our ability to generate cash. And it very much depends on our working capital requirements and on our customer working capital requirement. So at Solocal, our working capital, WCR, is negative. Customer WCR is negative, which means we're -- in a sense, we're prefinanced by our customers. At the end, the prefinancing was nearly EUR 120 million. So I need to take just a short moment to explain why the working capital requirement is negative. It is negative due to the fact that when you sell a service, offer -- sometimes customers pay you at the very beginning when your sales, again, is only identified for a limited period of time, 12 months or 18 months. So there is a lack of synchronization between the transaction and the actual recognition of the transaction. So what happened in 2020? COVID-19 hit, the first lockdown hit and we saw a significant reduction in our sales and order intake, minus 75% during the first 2 weeks of the lockdown, which means that the money inflows dropped subsequently. And so we have this very sharp decline. And this explains why our working capital requirement has deteriorated, EUR 17 million. And at the end of H1, we had already EUR 50 million drop in working capital requirement. And at the beginning of 2019 or -- sorry, 2020, we had already anticipated a drop of WCR. We -- the anticipation was EUR 30 million. The other working capital requirement elements are easier to explain and they mainly correspond. We have EUR 8 million reimbursement of our debt, our liabilities rather. And we have the impact of the deconsolidation of Mappy and QDQ. And then operational flows, recurring flows are very stable. As you can see, we have the financial -- the disbursed financial results, EUR 5.6 million. Corporate income tax, this is CFE and CFAE (sic) [ CVAE ]. And the recurring free cash flow is down EUR 12 million for 2020. So once again, in 2020, we were impacted again by nonrecurring items. Hopefully, it's the end of this, with a total of minus EUR 67 million. So minus EUR 67 million, EUR 46 million were planned. They were anticipated. These are the money we had to pay for the PSE plan of 2019. On January 1, 2021, we only have EUR 9 million to pay out for these restructuring programs, and we have another EUR 20 million that are coming from the cost of the financial restructuring. So the cash flow available is minus EUR 75 million. So how did we pay for this? Well, we paid through it by financially restructuring the company, EUR 32 million -- EUR 32 million additional we had a loan of the BPI. We had a bond for EUR 16 million, and we had a capital increase, which represents EUR 85 million. To this, we also need to have the reimbursement of our payments of rents. That's the very bottom, which is now an obligation with IFRS 16, total EUR 17 million. So all this combined, puts us in a position of EUR 61 million at the end of the year, which is a little better than what we had -- what we initially anticipated. This makes us look at this current year quite positively. So here are the key takeaways of the financial restructuring, which was carried out in 2020. Again, 3 important bullet points. We had a cash injection of EUR 118 million. We had the capital increase, additional funding -- EUR 32 million additional funding. Debt, which has been halved, mainly coming from the conversion of bond into equity. And we had financial cost's run-rate that are going to decrease dramatically, going from EUR 45 million before to EUR 20 million would be in the future. Moving on to the presentation of our debt structure. We have EUR 256 million of gross debt, EUR 61 million cash, net debt is EUR 195 million at the end of 2020. So on that basis, we have new covenants -- the financial leverage, sorry, is 1.9x. The covenant is 3.5x. And the ratio is above 5x. That's the interest coverage ratio, which is about 5x. So all this is very financial. I'm going to hand over back to Pierre, who's going to tell us about the company's strategy for '21 and for our ambitions.

Thank you, Olivier. To conclude the first part, I will give you some elements about our 2021 strategy. Starting was one of our main concerns, which is customer satisfaction. As you know, we've been working very hard on it. We're starting to understand really well this issue. And we now measure customer satisfaction after each event, and we give a rate mark out of 10. So after a sale, the satisfaction rate is 7 out of 10. It's not bad. But it would be better to have 8 or 9, meaning that from time to time, you can have an issue like the salesperson did not really understand what the client needed or the client didn't understand what he was being sold. But we get 7 out of 10, which means that the sales force is doing a rather good job. Then you get to operation, production of the website or the advertising campaign. Here, you see the mark is 8 out of 10, which is not bad. We regularly produce the website in Angoulême. Now this is -- the issues have been solved. We produce quality sites, which doesn't mean that from time to time, you do not have an issue on an advertising campaign or the ranking of the site. But overall, it's good quality. There are incidents, both in terms of sales and productions or operations and a true issue is that when the client, when the customer calls up customer service to complain or rectify things, there, we do not manage their claim properly, which means that we get 4 out of 10, which is not a good mark. This is not an issue about our staff. They do their best in daily operations. But the organization of the customer service at Solocal was extremely deficient, which meant that the time to treat the claims might -- may have lasted up to 3 months and customers are not happy. People call, they get where -- they talk to different people, they can end up in different places and they're not satisfied with that. So they have multiple contacts. So we're trying to work on that. To give you an idea, in terms of customer requests, we had 14,000 in November, this was the stock of claims. We started working very hard, working weekends including. And as you can see, we're now in February down to 4,000. So you can see that if we work on it, we can really take care of customer claims. This was a tactical idea to give you a better idea. We changed the management of this. We have someone who is a professional, an expert in customer service, Olivier Lemoine, who is the head of this. This is what he expects as results, first of all, increasing the opening hours because when you work with VSEs or craftspeople, you can't tell them that we work from 8:30 to 6 PM. So we have increased our working hours or opening hours. We have increased the quality of service, the reachability we stand at 83. It's not enough. The efficiency, for example, if a client wants a copy of his invoice, we cannot send him directly the copy with the first contact. He has to go to a second contact in this, obviously, may take 1 month or 2 months and really means queuing. So we have to be able to solve that. This is what we call the once and done. We want to stand at 80%. Up till now we didn't measure it. And 80% would be a good level of performance. We want to reduce the people's need to call us, the call rate. Why does a client need to call us to get this copy of their invoice? These -- their invoices are already on Solocal Manager. So we have to make sure that they download Solocal Manager and that if they need their invoice, they can connect to Solocal Manager and get it right away without waiting. So this is the strategy we're presently developing with an objective to reduce the time of solving claims for a simple request. It needs to be under 5 days, and for more expert requests like issues of publication of Google, Facebook or whatever, we have to reduce it to less than 8 days. For the moment, we're around 18 days. So we aim to improve the ranking to 4 out of 5 or 8 out of 10, as I was saying earlier. We're working very hard on this. And these are targets for 2021, and we hope to reach them by the summer of 2021. We want to improve organization. We want to stop getting lots of entry points for the customer service, lots of different numbers, call numbers, which is extremely damageable. We are managing our partners, our subcontracting partners. In order to improve the rate, improve the resolution time, we listen with, we control, we do -- we reinforce the quality system. We also work on the resolution time of requests and transfers. When something has to be transferred to another department, we want to make sure that the other department has the same quality level and more and more, we want to get the support of Solocal Manager, which is a customer's base. It's good for the client who can solve his issues right away directly, and it's good for us because it would get less calls. I said -- I told you that we would improve churn by the end of 2020 with debt and for customer satisfaction, we'll improve things by the summer. So obviously, there's the issue of customer satisfaction, but there's set of crews. As Olivier told you, we have a very high ambition for growth in 2021. We believe we have all the planets in line to aim at a strong growth. In order to do this, we had to get organized in a more scientific manner. In particular, we did a huge job at segmenting our customer base. Our segmentation was okay, but it was still rather approximate not properly controlled. Now we have a real clear segmentation, and this will last for the next 3 years. We have VSEs, enterprise and large accounts. VSEs 195,000 clients overall, an average order intake of EUR 700. But we also included in the segmentation, the potential. We have to focus on prospects as well. And we looked at the customers' potential, and we set it at EUR 1,000. So we have 195,000 clients and prospect clients with a potential for growth in this database. And the important thing is that we have to make sure that the -- our commercial sales are profitable. We don't want to get subscriptions for -- just for the sake of subscriptions where we lose money. So we have to make sure of the subscription acquisition cost and for the VSE segment; in France, offshore-onshore, it's EUR 713; in offshore, for example in Mauritius, it's EUR 214. So we have to have a mix. There are a number of activities with an ARPA of EUR 700 and a potential of EUR 1,000. You can process a number of clients of customers with this productivity in France. But in some situations, you cannot process these claims, and we have to strengthen our offshore ability and I'll tell you more about that. At enterprise level, we have an average order intake of EUR 2,715 with a potential of EUR 6,000. So we have to strengthen our field force, which is working more and more on the phone and via video links. We've learned that from COVID really, and the cost of acquisition is around $1,400. So it is profitable and more and more efficient. In particular, we modified the mix in our field sales force. It used to be mainly concentrated, mainly focused on renewal as of customer contracts as Olivier told you. As many of these customers now have an auto renewal subscription, we have been able to change this mix and we recruited 115, what we call, scouts sales that no longer look for prospect from what we call hunters. We had a number who were already in-house and we recruited some more. And the first results in January are extremely encouraging about the ability of these hunting sales force to recruit new clients with the right level of ARPA. And this is something I will report on for the first time in April. And obviously, then we have key or large accounts. Overall, the revenue of Solocal is 60% enterprise, 20% large accounts, 20% VSEs. So large accounts are very important for us. So we have 120 field sales force and 41 telesales because we are interested in these large accounts. Some of them have a lot of local point-of-sales, and they want to work on these point-of-sales. So we have people working on the main network -- the top of the network to create these framework accounts, framework contracts. And then we have the support of telesales in order to be able to sell a local solution within a network when one of the partisan network is quite independent as far as decision-making is concerned. So here, in the pink frame, you have the acquisitions. This is the actual business sales force. Why do I say this? Well, because behind -- below the pink frame, you have retention. We have 78 person -- people working on retention. And at the top, you have what we call the lead factory to generate leads, and I'll tell you something about that because we strengthened our capacity for the lead factory and this is mainly offshore-ed. Why? Because when you work on prospect markets, it's not highly productive to call people or to visit people without preparation. The -- it is not profitable. So the lead factory is something that enables us to sort of warm up the leads and to qualify, to check that there is an actual real need. And when we send the sales force, then the conversion rate is much better, and I'll tell you more about that later on. So as you can see in the pink framework, development, migration and prevention, you have 2 angles. You have those who do development, migration, prevention. And as you can see, as Olivier told you, we reduced our resources for migration because we have auto renewal, but we didn't -- we invested more -- with 23% more in the development. And even for prevention, we invested more in order to avoid churn and to be extremely proactive. If you look at channel, VSEs, enterprise, large account, as you can see, we increased the activity for all our sales force. In total, this represents 17% growth for resources from 1,064 to 1,244. For those of you who have a question, the year-on-year operational expenditure is stable, meaning that we managed to fund this growth by being more clever, getting a better mix. But in total, rest assured that the operational expenditure is stable in 2021 as compared to 2020. So I said a word about this. I'm not going to take too much of your time, and this is essential for our growth. Growth is with sale with 90% gross margin. We have a model of fixed cost, and we have been able to reduce our costs about 30%. Now we have to focus on growth, profitable growth. Profitable growth of our revenues and you see that this huge factory that we built, this lead factory, you can see these figures. We want to create 250,000 qualified leads. And you can see the impact. If you send a salesperson to nonqualified leads or co-lead, it means almost 0 sale per day sometimes. While if you look at quantified leads, you can go up to 1 sale per day for the sales force. And when you have hot leads or reconquering clients and regaining clients, you go even further. So this is what we do to -- for the win bags and hot leads we get from 1 to 2. So this is what we did. We want to make this extremely clear. It is clear for our staff. And everybody knows what they have to do from the Sales Manager to the sales force and the people in operations. As you can see, all our directors, i.e., almost 60 people, you can see that their objectives are clear, 60% on cash, 25% is based on growth and 15% on satisfaction. So as you can see, we are really focused on cash and profitable growth for the CEO, who's joining us on April 6. 100% will be his objectives. So he has to get there for the Executive Committee, 70%, 30% being based on a number of other objectives per department because we wanted to make them quantitative so that there can be no problem. Then as far as other directors are concerned, 60% on main objective and 40% on objectives or priorities per department. Obviously, someone who is in charge of the sales force will get 40% on the sales objectives. We also have another mechanism, which you know the long-term incentive plan, which we call LTI. We have a new LTI system where we were able to potentially distribute 1.2 million shares. Well, let me explain. The people who are on this statement, i.e., the 60 people concerned at stake, for them to get their shares, the company has to deliver its cash generation plan year-on-year. This represents 80% of the share acquisition and 20% is based on the share price. And we picked on EUR 4.41, which was the share price assessed by [ CAC ] at the time of the capital increase. Above and beyond that, we have a mechanism with -- for reporting with monthly Board that -- we will present them to the Board every month. We also present them at the Executive Committee. And what are -- what cause the road book means that everybody has to know what they have to do. And this is measured on a daily and weekly basis. So we are really ramping up to growth. And if we manage that, it will be great because it will be the first time in many years that the company has a growing revenue. And all our efforts tend towards that profitable and cash-generating growth. In passing, let me tell you that we do not forget our social responsibility. We're working on that. We have corporate social responsibility ranking called Gaïa, and we became #26 out of the 230 midcaps listed in France. We stand around 80, while the average is around 51. We are working on this, but at low cost. For example, we had an audit at the National Assembly, they asked us what we did against corruption, and they were very flabbergasted when they heard that what we did for the benchmarking cost us EUR 150,000 in 2020. We do this, we do this work, but we do it without losing sight of our cost control. And to finish, let me tell you about our ambitions or our guidance. We're going to be cautious. I told you what we are aiming at, but we'll be very cautious as to what we commit to because Olivier and I have the philosophy of delivering what we commit to well. So we have a moderate growth for the customer base in line. As you saw, we first stabilized the base with the drop in the churn that we have noted. We are quite confident that we can grow the customer base. And this will be the first in many years over here. And EUR 120 million Group EBITDA. I told you on May 18, and I repeat that we will get to EUR 120 million, 100% digital business EBITDA. Now I cannot give you any more guidance as far as we don't know what's going to happen with COVID-19. We don't know whether there will be another lockdown, what is the level of bankruptcies that follows the crisis. So the guidance as far as the revenue is concerned, I still remain very cautious. But as you have seen, the whole company is mobilized to reach this growth in revenue. We are now going to take your questions, and Olivier and myself will answer. And then I will tell you more about this strategy, I told you about the customer satisfaction. And we have another concern about the audience for PagesJaunes, and I'll cover that later on because I know that many of you may not have time or may not wish to spend half an hour listening to the PagesJaunes strategy, can listen to this Q&A and then get on to their other issues. Any -- do we have any questions?

Yes. First question, Pierre or Olivier. The 2021 EBITDA guidance is -- are you cautious on purpose?

Yes, absolutely. Let me remind you that we said EUR 112 million in 2020. When I say EUR 120 million for 2021, it's 7% or 8% growth. We started from a low base. So it's cautious but not very cautious. Let me remind you that there is some inertia. And we will have trouble reaching the EUR 120 million, if we do not grow the revenue. So you have to manage cost and cash very carefully. Otherwise, we won't reach our ambitions, our targets. So it's careful but not excessively careful. Don't expect much more than EUR 120 million. Now let me remind you that we give you guidance of EUR 190 million for the EBITDA of 2023, and we're not changing that because the snowball and inertia effect, and it's something we can reach.

Does the specific COVID crisis, would you say it has had a temporary positive impact on the churn, Pierre?

On the churn, I don't know. I would say that there are negative impacts of COVID. The one I'm most worried about is the bankruptcies that might happen when the government pulls off the oxygen mask. That is a clear worry for me, clear concern. So we've been extremely cautious at the end-of-period to get some -- to keep some defense. For the churn, I don't think there will be a specific impact on the churn because 80% of our customer base is on a subscription base with auto renewal. And you saw that we have this new retention sell with 70 people who are ready to do whatever is necessary to help support the customer. I know that recently, I gave my approval for suspension of -- well, I know this is what happened in my sports club. They said, we closed the gym so you will not have to pay for the next 2 or 3 months. Well, we do this for some clients when it is justified, and I'm reasonably optimistic as far as our churn level for 2021 is concerned.

Next question on websites. Have you seen a decline of websites in Q4?

Well, we did a good job. The problem -- we did have production and quality problems in 2019, early 2020, and we were very reluctant regarding websites. We had to prove we were good once everybody was convinced. It took a little bit of time. In August, September, October, we really pushed very hard. And -- so we had a very strong increase on website sales. And this is continuing in Q1. And -- but we did have to make a few adjustments, price adjustments, especially the initiation fee or launch fee, we had to adjust this, we had to be competitive. Sometimes, our competitors are very fierce, and the competition is sometimes very good. But we have an entity now in Angoulême with 400 people. They do top quality. They have great management to [indiscernible] who is really producing top-quality products, excellent customer service. Our sales people are very motivated, and the so-called hunters are -- feel very, very comfortable, and they're working on new acquisitions. Some people say, no, it's not for us because it's cross-selling, this is not the right time. Well, our hunters have been very successful at picking up deals, including with prospects. So I'm reasonably optimistic on websites.

Next question, how do you see the evolution of working capital requirements in 2021? And what is our tax situation? Olivier, I guess, that one is for you.

Yes. Thank you. WCR in 2021. As I said, WCR, working capital requirements, has been very much connected to the gap between sales and revenue. I told you that we were expecting an increase, a rebound in H1. We expect our working capital requirement to slightly go down because of the customer capital requirements, but we expect it to stabilize in S2 -- or H2, sorry. And the question on taxes, we have 148 postponable tax, and we're quite confident that we can use this postponable deficit in the next years.

We have a question on taxes going forward. There have been some announcements from the authorities. What do you think?