Vusion S.A. (VU) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the SES-imagotag conference. I'll now hand over to Mr. Thierry Gadou, CEO; and Mr. Thierry Lemaître, CFO. Gentlemen, please go ahead.

Good afternoon, everyone. Thanks for joining our conference, following the disclosure today of our financial results for the first half of 2021. You can follow the slide show if you are connected on the web conference. So to start with just a quick summary before handing over to Thierry Lemaître for detailed figures. First, as previously was disclosed a month ago, so the sales figures, we posted 71% growth with sales of EUR 203 million. And for global entries, 87% growth in order entries of EUR 309 million for the first semester. We also had the good news that this semester is also showing our business model is delivering on its promise in spite of a very adverse environment regarding supply chain, component shortage, price increase. We substantially improved our all operational KPIs compared to last year's first half. VCM rate improved, OpEx rate improved. EBITDA margin improved to over 7%, and net result turned positive. And by the way, net cash flow consumption was very limited considering the high growth and the R&D investment we keep putting in our business to prepare for accelerating growth. So positive news today. Revenue details. So basically, the H1 revenue, as mentioned, was EUR 203 million and the cumulated 12 months revenue reached EUR 375 million, which is a growth of 53%, and there was strong growth in every region. The new order entry number, again, was above EUR 300 million. There were multiple wins in Europe and America. And the cumulated 12 months order entries reached a historic record, close to EUR 600 million, EUR 599 million, which is also a growth of 58%. If we look by region, on a 6-month basis, so for the first half, the growth in Europe was back to very high growth with 94% increase. Rest of the world increased by 23%. We mentioned a month ago that some of the shipments to U.S. were slowed down by the shortage of components. But it's important to remind that on a 12-month basis, rolling 12 months, the growth of Europe and America, Asia is exactly -- I mean, roughly the same at above 50% for the 2 regions. So the momentum is strong in all regions. So regarding financials, I will let Thierry cover this point in detail. Thierry Lemaître, our CFO.

Thank you, Thierry. So I'm really very glad to present to you the full results for H1. And as Thierry said previously, you see that there is a clear improvement in all the lines versus H1 last year. Of course, 71% revenue increase, VCM ratio up by 1.7 points at EUR 42 million. OpEx ratio down by 6 points, up 13% of the revenues, EUR 15 million EBITDA in H1, which is close to the full year 2020 figure. And also very encouraging net income positive at EUR 1 million. So definitely, a strong performance, really showing strong improvement versus H1 last year. If we now have a look the key drivers of the EBITDA growth, moving from 0 last year to 15% -- to EUR 15 million or a bit more than 7%. Actually, this growth is essentially driven by the volume effect, which is representing approximately almost EUR 16 million. We are also really very happy of the positive VCM rate impact, which is actually a mix of several items, some positive ones like the positive exchange rate between the euro and the dollar also, of course, the positive impact deriving from the increasing ratio of value-added solutions. All this, despite, as Thierry said, the component shortage which also induced from the price increases that we had to suffer from. We had also a limited impact of the OpEx. Overall, there are 3 drivers which explain the EUR 15 million increase of the EBITDA between H1 last year and H1 this year. If we now focus on one important driver that we mentioned just previously, which is the value-added services. We are, of course, very proud of the H1 2021 revenues, but also really very proud of the value-added services performance, where you see that the ratio is now moving from 13% last year 2020 to 13.5% in H1 this year 2021. One could consider that it's a modest growth, but when we post 70% revenue increase, essentially driven by a strong demand of ESL, this clearly shows very strong fundamentals into this business, which are underlying this continuous growth. It also confirms our intent to further grow this ratio to 15% as early as H2 this year and even above 20% the following year, 20% being the target for 2023. So that's a very encouraging performance given the overall very strong growth [ context ]. OpEx, you see that the OpEx ratio is continuing its way down. It's 13% in H1, and therefore, it's really confirming the target that we have to get the maximum of 10% OpEx in our P&L in 2023. CapEx are also under control, EUR 14 million versus a bit more than EUR 15 million in H1 last year. You see that all the lines are approximately equivalent and similar between both semesters. In H1, just let me remind you that last year, we incurred a significant amount related to our SAP rollout project. It will be the initiation phase, where we incurred significant costs. These IT costs have been reduced and have been offset by the increase of R&D. Total R&D representing approximately EUR 25 million this year, approximately 66% or 2/3 of it being capitalized and reflected in the CapEx for the first half as well. On the cash consumption standpoint, just to end up this financial performance analysis, while we are really very happy also to show a limited cash consumption, EUR 5 million over the first half. It's, of course, much more limited than the EUR 43.5 million that we consumed in H1 last year. It clearly means that we ended up the semester with a cash in hand at approximately EUR 80 million, which is a very good performance and the net debt which is limited at minus EUR 1 million. Just ending up with the EBIT to EBITDA reconciliation, just to reconcile with the GAAP standard KPIs, nothing really very significant. You see that the EUR 1.3 million in deduction of the EBIT to reach EBITDA is mainly coming from the amortization of the imagotag technology that we acquired in 2015. So EUR 0.5 million. And so the noncash cost of the performance shares under IFRS2 EUR 0.8 million. So that's it for the financial performance analysis. And now I'll leave the floor to Thierry for the outlook.

Thank you, Thierry. So well, we already mentioned, I think, last month that the fundamentals and the business momentum are very good. So H1 was clearly in line with our guidance. And both the backlog and the pipeline provide good visibility for the next quarters and into 2022 regarding the demand. Having said that, there are 2 risk factors, which still deserve attention and close monitoring. On the one hand, obviously, the continued tension on the global availability of semiconductors and other electronic components, but also the pandemic, the fourth wave, which is requiring lockdown measures in some Asian countries, such as Vietnam, but also in others. And overall uncertainties clearly in the supply chain. So as of now, we believe we can achieve the group's full year 2021 sales target of around EUR 400 million. We are implementing, as mentioned in our press release, very proactive action plans to mitigate the impact of the slowdown of some factories in order to catch up with the delay over the next -- sorry, the final months of the year. So we do hope we -- and think and believe we can achieve this target of EUR 400 million. Needless to say that without this adverse condition, we would be confident to do more. So we will continue to monitor this situation very carefully in September and October as those action plans are put in action and seeing the evolution of the crisis -- of the sanitary crisis, and we will update the market on a regular basis and as... [Audio Gap]