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

Good day, and welcome to today's SES-imagotag H1 2020 results. Today's conference is recorded. At this time, I'd like to turn the conference over to Mr. Thierry Gadou, CEO; and Thierry Lemaitre,CFO. Please go ahead, sir.

Thank you, and good afternoon, everyone. Thanks for joining our conference call following the disclosure a few moments ago of our first half results. So you can follow the slide show if you are connected on the web conference. And I will start with just a reminder for those who may not know us, SES-imagotag is the global leading retail IoT company specialized in digital solutions for retail and in particular, the world leader in electronic shelf labels. We have about 750 employees worldwide. We serve over 300 retailers, including around half of the top 100 global retailers, and our technology is installed in such 5,000 stores across 62 countries. So that's for SES-imagotag. Coming back to H1 performance. So H1 was the first semester of our new 5-year plan, VUSION '27. And beyond being our best semester ever, I'm sure that in retrospect, it will stay as an important milestone in our journey with a number of remarkable achievements in these 6 months. Our revenue grew by 33%, our order increased by 35%. We signed new blue-chip customers. We finalized the development of our new revolutionary digital shelf system, DSS. We signed our largest ever rollout contract with Walmart, thanks to the DSS innovation. We made 2 strategic acquisitions in data, analytics and AI. We increased our operating margin by over 70%. We delivered EUR 35 million positive free cash flow while funding high growth and strategic investments. So I will just briefly go through these achievements before handing over to Thierry for the financial-- the detailed financial results presentation. So record semester, as I said, in both sales and other entry, growing 33% and 35% other entries reached slightly above EUR 0.5 billion for the semester. We signed several new customers, including some of the most famous and admired retail brands. Our ES sales grew by 37%, a strong demand fueled by the inflation context, which drives prices velocity. Our VAS grew by 18% to EUR 53 million, a slower growth than expected due to the overall difficult context, which particularly affects consumption and retail operations, some new innovation projects in this context, have been postponed or slowed down. However, the mix of us has improved, driving better profitability, contributing to better profitability. And we made in the semester to strategic VAS acquisitions, which I will mention in a minute. So as I said, H1 will stay as a watershed moment in terms of strategic investments, advancing our product portfolio, aligning it closer to retailers, needs and priorities. We made 3 major strategic investments in particular. The DSS finalization, Belive acquisition and Memory acquisition. I will go through each of them. The first one is we completed the very critical final development phase of the latest generation digital shelf system, which includes the large-scale operating test and large-scale prototyping and pilot manufacturing lines. So it's a very important step. I of this new system, which is illustrated on the slide here, where you see where we changed the paradigm moving to a smart rail supporting IoT devices, including displays, which are now battery less and radio less. So it is precisely this new revolutionary platform in terms of hardware, software and IoT technology that led to the large ESL rollout contract with Walmart U.S. in April 2023. And that was obviously the first contract signed with this new platform, but a very important one. Second, strategic investment, the acquisition of Belive or the majority is taking Belive. As you all know, following the acquisition of Findbox a few years ago in Germany, we focused the company on computer vision and AI to develop the solution called Captana. We developed a wireless miniature shelf camera technology and developed a new recognition protocol based on ESL and camera synchronization combined with computer vision. We decided, after following them for a few years to acquire a majority stake actually 67% of Belive in April this year because it brings us a lot of complementary capabilities. First, ESL agnosticity. Any customers will be with our future new solution able to use our CV, computer vision solution independently from ESL or from whatever ESL solution or even with paper labels. Solutions for fresh counters are also one of the very important complementarity. Fresh counters are very strategic priorities, high contributors, high-margin contributors, and for instance, fruit and vegetables or bakery, which you see here on the slides are examples of fresh counters that need like all value -- high-value perishable products to be monitored in real time. It's also true for mid counters, daily counters and so on. So solution for fresh counters is also what we found in these assets of Belive. Solution for planogram compliance. Comparing theoretical planograms and realograms in real time. Solution for e-commerce in-store fulfillment, helping pickers find products in store when they prepare orders. Solution for autonomous stores here, you see an example in the B2B construction sector. Solutions for traffic and queue monitoring also extremely valuable type of computer vision engine. So there is a long list of complementarities really and we are now in the process of integration and convergence. The future combined platform will be extremely rich, functionally and technologically, leveraging the best of the 2 worlds, Captana and Belive. All this is still emerging phase. It's the beginning of computer vision and AI technologies in retail but we are convinced it will become one of the core technologies, enabling precision in retail in the future, and we have definitely put together the best expertise and the best technologies assets in this field. Third and last strategic investment, the acquisition of Memory. Memory is a leading French data platform for retailers and CPGs with clients, including Carrefour, Intermarche, Auchan, Casino, Monoprix, Cora, pretty much all French retailers as well as over 400 CPG brands. It's an end-to-end SaaS platform for category management, enhancing data sharing and collaboration with suppliers. It's an 80% plus recurring revenue model. It's highly profitable. It's fast growing and it's beginning international expansion. Memory analyzes all existing sources of data commonly available in retail to turn them into insights on sales performance, assortment, promotions, merchandising, sourcing, retail media. The goal of the acquisition here is to do more than just grow memory, but to create the first IoT and data company. IoT datafied the store, it creates new stores, new sources of in-store real-time data to augment retail intelligence so that analytics can be applied to the broader set of retail data ever. Maximizing on-shelf availability, optimizing merchandising and improving retail media performance. This drives also new value in the collaboration between retailers and suppliers because it provides more supply chain transparency. In -- particularly in the weak point of the whole chain, which is the stores. So indeed, H1 was a watershed moment for us, a very intense kickoff of our new plan with not only growth in a difficult environment, but profitable growth. And with this, I'd like to hand over to Thierry Lemaitre for a more detailed presentation of our financial results.

Thank you, Thierry. So if we move to the financials, I'm of course, very pleased to present the results for this first semester of 2023. We already published a revenue increase at 33%, and you can now see the more impressive profitability increase with the EBITDA growing plus 72% versus H1 last year and an EBITDA margin standing now at 11.4%, which is a 2.5-point increase versus H1 2022. We have consistently increased the EBITDA margin over the past years, but mainly by decreasing the OpEx to sales ratio. In H1 2023, as guided at the Capital Markets Day last November, the EBITDA increase has mainly come from the VCM increase, which is clearly demonstrating that our operations get more profitable. The VCM increase, which is plus 2.8 points versus H1 last year, and was driven by the improving profitability, both on the ESL part and on the VAS part. Improvement on the ESL margin should show the improvement of the profitability in the coming quarters. Depreciation also increased due to the capacity incurred over the past years and nonrecurring noncash items, as we will see later, consists of IFRS 2 noncash expense related to employee performance shares and some M&A fees. EBIT now stands at 6% of the revenues. And below the EBIT, I am sure that you all noted the unequal contribution of IFRS to a more readable set of financials through this wonderful IFRS 9 restatement in connection with the warrants of Walmart, granted on 2nd of June, we will, of course, elaborate on this later on, but I would like to underline the fact that before this IFRS 9 impact, we tripled the net income at EUR 15 million versus EUR 5 million last year over the first half. On the following slide, you see the revenue evolution, nothing new. That's what we already showed in July. We already presented a quarter-over-quarter growth of 34% and H1 versus H1 last year, 33% and of course, a very significant order entry level of approximately EUR 0.5 billion, mainly driven by the first SOW of format in the U.S. Following slide, you see that we keep the OpEx under control. OpEx in H1 stands at EUR 48.7 million. which is a EUR 13 million increase versus H1 last year, of which EUR 7 million in staff costs and EUR 6 million on non-HR cost. If we exclude the impact of the acquisitions that we made in H1, Belive and into Memory that Thierry just mentioned before, the OpEx to sales ratio is slightly decreasing. So we keep optimizing and we keep streamlining the OpEx to sales ratio. That's, of course, one of the commitments that we made. Belive and in the Memory, of course, they are slightly different business model. It's more like a SaaS business model and they are showing higher margins but also higher OpEx ratios. Following slide, you see the evolution of EBITDA and if you compare the EBITDA between H1 last year and H1 this year, so you've got this evolution, it's, of course, mainly driven by the volume impact. That's the same criteria as the previous semesters. But this time, in H1 2023, you also see that the VCM rate impact has a positive impact, almost 11%, driven both by a deep improving margin on ESL and VAS and of course, it is partly offset by the increase in OpEx, EUR 7 million on OpEx -- on HR OpEx, EUR 6 million on non-HR OpEx. Following slide on the CapEx and you see that we have a level of CapEx, which is EUR 48 million. What we did in H1 is that we definitely focus on completing the development and the industrialization of the next-generation digital share system. This is now completed. So of course, this EUR 31.9 million that you can see in H1, they will no longer exist in H2 2023. We also invested in H1, 2023 in IT in order to extend the SAP scope to more companies and we also received the certification by ISO 27001 on the cyber risk, which is an ISO shipment as well. So on the overall CapEx, we believe that sales to the decrease in our CapEx to sales ratio in H2, we should be between 8% and 9% of capacity sales ratio in the full year as of little bit as of last year and we will get that progressively from 2024 onwards to the guidance that we gave at the CID, which is 5% to 7% CapEx to sales ratio. Following slide, we wanted to make a focus this time on the working capital and more specifically on the operating working capital which has already delivered a very significant improvement, and we are very satisfied with that because that is contributing to the cash flow of the period. So the accounts receivable, you see that we have decreased by approximately 13 days of sales. We are now below 60 days, 47 to be precise versus 60 at the end of last year, the most friction impact is really the very good job which has been done on the inventory side. We are now standing at 68 days of inventories versus 100 million last year. We even subsided in increasing inventory in values, minus EUR 5 million, despite a very significant revenue growth, and we are now stabilizing the accounts payable at approximately 75 days. So all in all, we subsiding in gaining approximately EUR 10 million operating working capital impact on the cash and that is, of course, very beneficial. That is contributing to the very good news, which is the positive free cash flow that you can see on the following slide, and we posted a EUR 35 million positive free cash flow in H1. This is, of course, coming from improving profitability, improving operating working capital, as we saw before, of course, largely on tenants in connection with the very significant order entries that we record in H1. Of course, we had also to pay the one-off DSS related CapEx. We also had to fund the acquisition of Belive and Memory for approximately EUR 90 million. So all in all, we ended up with approximately EUR 35 million free cash flow of course, I can already hear some people saying, yes, but that's essentially due to the down payment. So I made the calculation for you. And if you restate the elements which will probably not take place in H2, essentially the one-off payments on the DSS CapEx, the acquisitions of the memory and Belive and assuming that we've got no down payments in H2, then by definition, we would have generated EUR 20 million net cash over H1. So that's a very good performance. And of course, that is a performance which is now there and that we will keep repeating over the next quarters. So we end up on the semester with a net cash -- net debt position, which is very sustainable, EUR 6 million net debt. If you compare the net debt to last 12 months EBITDA, that's a ratio of 0.01%. So that's -- 0.01x. So that's a very and very sustainable financial structure. Then just the 2 financial technical slides on the EBIT to EBITDA reconciliation. So you see that essentially between the EBIT and the EBITDA as set under depreciation expense you can see the equity M&A-related fees, approximately EUR 900,000 and the cost -- noncash cost of the performance share plans under IFRS 2 for EUR 4.4 million. Then, of course, we cannot completely skip the impact of the Walmart warrants and the IFRS statement. So under IFRS, we have to assess the fair value of the right granted to Walmart to be allowed to buy SES-imagotag shares at a predefined price, approximately EUR 112 for a certain period of time. This fair value was assessed using a bulk insurance method at EUR 453 million on June 2, when the shareholders' meeting approved a grant of EUR 1.7 million warrants to Walmart, to best, of course, under conditions. The fair valuation as the size of the warrants resulted both in an asset and the liability in the balance sheet as a date, the liabilities are considered as a financial debt under IFRS 9, and it is revalued at every closing. At the end of June, on June 30. The fair value of the warrants was revised down by EUR 76 million, mainly on the back of the decrease in share price of SES-imagotag between June 2 and June 30. This valuation decrease resulted in a financial income booked in the P&L for EUR 76 million. On the other side of the balance sheet, the asset is a contract asset that will never be revalued, but IFRS standards consider that it must be amortized against the revenues generated by the rollout of the Walmart contract. Of course, we will provide the full details of this restatement. We have, of course, agreed in the past to have a pure equity only dilution impact so impacting the P&L as if it were a cash payment makes absolutely no sense, but it is something that we have to accept under the IFRS. So of course, what we will do in the coming quarters and semesters is that we will give the full details of all the restatements both on the financial income, but also on the revenues generated by the restatements of this Walmart walls. So of course, we want to repeat once again that this restatement has no cash impact. It's pure dilution, pure equity impact. So just consideration made under IFRS standards to have this kind of first image of what the cost would be if it were a cash item, which it is not. So that's it for the financial presentation. I leave the floor to Thierry to say last word on the guidance.

Yes. Thank you, Thierry. And of course, just picking up on the last point, I mean this is why we also mentioned in our -- now in our table, the economic net results, I mean, the economic net result is EUR 15 million. The EUR 91 million accounting result due to IFRS norms has not a lot of meaning. It's a big number, but it's not a lot of economic meaning in this case. And to a certain extent, it is the impact of the Gotham attack because it's only related to the fall of our stock, the very severe fall of our stock in June. Otherwise, this would not even be there in our accounts. So it just needed to be said. So anyway, excellent results, the outlook now. Well, as Thierry said, I mean, we are showing in H1, very repeatable trends actually an improvement. So for the second half, which is underway, we anticipate revenues in line with the annual target of EUR 800 million with, in particular, a strong Q4, both in sales and other entries and a continued growth in profitability. And sorry to repeat myself, but in '24, it's a little bit the same. We continue to see ongoing strong growth, particularly driven by the acceleration in the United States, which by the way is already happening also in H2. And again, further growth in profitability. So that's for the outlook, we should continue to improve our business model, our operations, our revenue and our profitability in the coming 6 to 18 months. So with this, thank you for your attention. And I think Thierry and I are happy to take questions, if any.

[Operator Instructions] We will take the first question from Johannes Ries from Apus Capital.

Only 2 short questions. First, some people had a little bit disappointed. You know that the software and service business have not grown in the same space. Do you see an acceleration in the second half or at least in the year 2024 because, for example, if you ramp up the Walmart deal and this is a year where support a lot of software and services at least have a positive impact.

You mentioned, Johannes, that you had 2 questions. What is the second one?

The second one is the impact of your -- the 2 acquisitions on the bottom line. Also there are drivers for us, I think. And secondly, are there earnings enhancing going forward?

Yes. So in the VAS business, again, I think the VAS business is very innovation related. So it has been -- again, it's growing 18% in H1. The growth should be, I mean, higher, but we need to take into account the fact that some of these projects are innovation projects for retailers. And currently, the times they are crossing are difficult. And again, very difficult with the mix of inflation of consumption decrease in volume and of operational costs going up. They are under -- they are struggling a bit. So sometimes they postponed a bit new innovation, I mean, innovation projects. And so that's why, I mean, 18% should not last for long. We think there's going to be an increase in the growth of VAS definitely. We are very confident on our target for the 5 year in terms of VAS revenues. We are building a product portfolio that has been also completed, as you mentioned and as we mentioned earlier in the -- with the 2 acquisitions. So again, computer vision is an AI or new emerging technologies in retail, but they're going to be core in retail. So this is going -- sometimes those projects can take time to -- because they need a big change for rollout, they need to be changed in operational process but we are very confident on the growth and the high growth, we have a target, an average growth target in VAS revenues of 40% to 50% in average over the plan. And we are absolutely confident on this target. And for the second part, I will just let Thierry mention the impact of the acquisitions...

Yes, yes, Johannes, we mentioned on the slide regarding the OpEx that actually these 2 acquisitions have a slightly accretive impact on the EBITDA, a limited plus 0.4 point impact on the group EBITDA margin. So that's the impact of these 2 acquisitions.

Okay. Super helpful. So maybe a short follow-on. Some statements to the pipeline. How is the pipeline developing after maybe you signed the Walmart deal, which is a lighthouse deal definitely. On the other side, more negatives that the economy, especially in Europe is weakening.

Yes. So again, as we said in the outlook, I think currently, there is a crisis in consumption and in retail, which is global. And in this context, you have, I would say, an increasing gap between the best retailers who invest in their future and in their transformation and maybe some who are a bit more struggling. So what we try to do is really to focus on the best. And you've seen the blue-chip names that we acquired in H1. It's not only Walmart. You've seen a number of incredible names, which are very famous brands. We try to focus on this. This is why we are confident on the fact that this year, we will have around 30% growth. This is what we are confirming with our target. Next year, we continue to see strong growth because the pipeline is very big. It is a bit more focused on the retailers on which we try to focus, maybe the part of the retailers who are in the crisis are investing in their transformation and will win, obviously, in the future. So it is this strategy that we have, and we see growth absolutely for next year, but also for the next 5 years because we are only at the beginning of this transformation. And when they will start delivering all their results, it will become to be mainstream let's say, playbook for all the retailers in the world. So yes, we see growth, as I said, and it's because the pipeline is in very good shape.

We will take the next question from Gil Crasper from Arise.

Actually well, congratulations for the great margin improvements. One question, unless I'm mistaken, I remember from the CMD last year that you mentioned that operating leverage was to improve period here from what I see VCM, well, the value cost margin improved stronger than the EBITDA margin, which, to my view would mean the leveraging the -- sorry, operating leverage decreased rather than increased and which is surprising to me against a growth of 33%, which is a great growth. So I wondered what -- if you could comment on that?

Yes, of course. What we said at the Capital Markets Day last year is that we would move the EBITDA margin from 9.5% in 2022 to 22% in 2027. And we said this improvement in the EBITDA margin will come 2 points from the improvement of the OpEx to sales ratio moving from 12 to 10 points. And then the improvement -- the remaining improvement will come from the VCM ratio that would gain approximately 10 points. So we are exactly on this trajectory. We want to gain 2 points on the OpEx to sales ratio, moving from 12% of the revenues to 10% of the revenues. And if you consider the like-for-like increase of the OpEx, actually, we have a slight decrease. We have a minus 0.8 point OpEx-to-sales ratio decreased between H1 last year and H1 this year. So we are on this trajectory. And we are on the same trajectory on the VCM rate improvement because we have improved it by 2.8 points and we wanted to gain approximately 10 points over the next coming 5 years. So we are exactly in line with the guidance that we gave at the Capital Markets Day.

Okay. Well, it was my misunderstanding. I thought you were focusing on the fixed costs and very much appreciate your clarification.

[Operator Instructions] The next one from Ben Thielmann from Berenberg.

This is Benjamin Thielmann from Berenberg. First of all, congratulations to the good results numbers and free cash flow looking good. Maybe one more or maybe 2 more questions. First of all, are there any CapEx we should be aware of that might be back-end loaded in H2, which could push free cash flow into negative territories again. Maybe that's first and then the second question would be regarding the pipeline in the United States. You mentioned it a couple of times now that you are in negotiations with a lot of great names in the United States. Is it therefore likely that we might see some new press releases regarding new rollout in the United States in 2024, maybe somewhere in like H1 2024. Just to get a little bit of a picture, like at what time could we expect further rollouts to be announced in the United States.

On the first one regarding CapEx back-end loaded that would trigger negative free cash flow in H2? No. So there is nothing, no specific CapEx that should drive negative free cash flow in H2.

Okay. Okay.

As we explained in the press release, the -- I mean, the DSS final phase being over in H1, this part of our CapEx will reduce. So I think we gave a guidance in the press release around the overall full year target. I think we gave a range of 8% to 9% of revenue. And it will then come back in the following years to our range of 5% to 7%. Regarding the pipeline in the U.S., well, first, I'd like to stress again that even though, of course, the spotlight has been a lot on Walmart in the first half of the year, we actually ended the year with a press release mentioning 3 big wins in the U.S., 4 significant rollouts. And yes, we did mention the names. But it still exists, and we will be a bit more -- well, I hope we would be a bit more sort of will give more information about these rollouts later on when the customer is okay. But they are significant. We -- I think we mentioned that we are reaching very soon with all the orders signed or installed close to 6,000 stores. We are going to be -- I'm sure you mentioned H1. I think we should be reaching around probably not far from 10,000 stores in H1 next year. We're in good shape. So we don't announce everything, but you will see the traction already between H1 and H2, I think, first. And the acceleration that we mentioned in our outlook is really significant in the United States, really significant. We're talking about -- so pipeline is very big. Announcements have been made also outside Walmart already, and of course, it will continue. I'm just back from 2 weeks sort of tour of a number of our customers and prospects in the United States, I'm quite on this subject right now and very bullish on our prospects in this great country.

We will take the next question from Valentin-Paul Jahan from Stifel.

Do you hear me well?

Yes.

So congratulations, first, for your gross margin management and also for your working capital. Is it -- so I have 2 questions, please. On gross margin. So in H2, is it fair to assume that you can significantly increase your gross margin on ESL, thanks to the euro-dollar parity, we are if we keep the same parity as of today.

Well, I mean, if -- I'm not sure I understand your question, Valentin. But you said generally improve the gross margin, thanks to the euro dollar, if we keep the same euro-dollar parity. So you mean -- we can further increase, yes, because we still have some economies of scale. So we have some economies that we can generate and savings that we can generate on the purchasing costs. So yes, it's right. Without any impact of the euro-dollar ForEx impact. Yes, in dollars, we can generate additional saves in H2 versus H1, yes.

Okay. And regarding the working capital, if my understanding is correct, you got around EUR 130 million of down payment for another entry, which was EUR 500 million in H1, so it's around 25%. Is it something that we can take for the years to come?

I think it's a bit -- well, it's not exactly consistent between all the customers. We had significant down payments on a couple of them. And for some of the customers, which are usually a bit more little customers, we have 0 or limited down payments. So the 25% is not a normative ratio that you should apply on the other entries that can really differ from a quarter to another one.

We'll take the next question from [ Uber Matet from Matet Company. ]

Just one question to understand what has been written in the press release tonight. Should I understand that the price paid for Memory and Belive is EUR 90 million? Or did I get it wrong?

No, none of it correct. That's a -- it's a bit less than that. That's approximately EUR 88 million. But yes, we said roughly EUR 90 million, yes.

Our next question from Laurent Gelebart from BNP Exane.

So I have 3 questions. So first one, coming back on your 2 acquisitions in this H1. Can you give us a flavor on the pro forma? So what will be a full year sales of those 2 companies EBITDA just for us to be able to model a bit better. The second question regards your guidance for the second part of the year. So you call for a strong Q4 and other entries in Q4. So what does it mean in Q3? Do you expect bigger growth in Q3, or smaller growth, could you quantify? And last question regarding your DSS platform, which is up and running now, having finished the development for Walmart. So what will be your commercial strategy going forward. It is the products are going to put in front of everybody everywhere. Or would it come later in your, for instance?

So I will start, Laurent regarding the EBITDA or the pro forma. We already gave a guidance when we presented the revenue, we said approximately 2% of the revenues were deriving from the acquisitions. And we said that they represent approximately 0.4 points incremental EBITDA margin. So you see the trajectory. These are not very big figures. You've got a sense of where they are and what they can deliver on the full year, I think. On Q3 trends...

Yes. Well, I mean, again, just to -- regarding Q3 and Q4, when we say we anticipate revenues in line with the annual target. We made EUR 380 million in H1. So I mean to be very clear, it means we are anticipating EUR 420 million or so in H2. And what we know is that this is not going to be split exactly in 2 halves, but probably with a stronger Q4 than Q3, but in any case, to do EUR 420 million, which will be, again, a record semester, the 2 quarters are going to be strong, right? But it's going to be slightly more of -- in Q4 than in Q3 just because we know the timing of deliveries and the supply chain topic. So it's going to be through. And it's the same in -- but both quarters will be strong and the total will be in the ballpark of EUR 420 million or plus. So that's for the -- and the...

There is -- you're right, there is a base effect just nonetheless because Q3 last year was a very strong quarter. So it doesn't change, of course, the performance of the year. But on a relative basis, it's true that the growth in Q3 will be maybe slightly lower than the growth in Q4 just because of this base effect when we had a very strong Q3 last year.

I see the point, yes. Okay. Yes. Last year, we had a very strong summer because we were in the mid of a big rollout in Germany. So it's been -- I think we were around EUR 180 million. But in absolute terms, it's going to be a good performance in all quarters, but a stronger Q4. The sum of the -- of both will be EUR 420 million. That's sometimes a question of supply chain and lead times and deliveries. Regarding the platform in the new DSS platform, of course, we called it the next-gen digital shelf system for a good reason is that over the next 5 years, it will -- it's bound to gradually replace and be predominant in our sales just because it makes more sense. It's a revolution in many ways. So we will, of course, extend it, and we are already starting to extend it to other customers. We right now have a, I would say, a primary focus on the U.S. because it's a new market, frankly, from ESL standpoint. It's a new market and you want to start a new market with our new platform. Having said that, it only applies to a big part of retail, which is grocery because it's shelf driven in many retailers, you don't have shelves. Like if I take, for instance, a retailer like IKEA, you don't have really shelf labels or very few, less than -- so it applies for grocery. It's going to be first for U.S. because it's such a strategic and high-growing and high-growth market, but it's obviously the next-generation system for everybody. It took us...

And selling grocery so far, it's how much of your mix?

Grocery is 70% of retail, and it's roughly around that for us. I mean, this is the -- this is why a lot of pure players want to go in grocery. This is 70% of retail. So same. So it's about the same. I don't know exactly the number. I couldn't tell you right now. We are 3/4 of our revenue is about growth rate.

We have a follow-up question from Gil Crasper.

Thierry, if you allow me. Back on the VCM, would you split it in between improvement due to the progression of VAS and due to improvement on the ESL side. If you could? And second question, still on the VCM is on the ESL side, if there is any improvement on the VCM, I assume that the improvement will be on the early version of imagotag before moving to the new so-called Walmart standard. And my question was here, will this margin improvement translate into this new Walmart standard for the ESL? I hope it's clear enough.

So roughly on the full year, the improvement of the VCM ratio will mainly come from the ESL. I don't want to be much more precise than that. But on the full year, that's essentially the improvement of the ESL, which is going to drive the improvement of the total VCM rate. That's the first point. And then part of the improvement that we generate is also due to the scale effect. So the higher the volumes we can aggregate on any generation of ESL or hardware, the more scale effects we can generate. So whatever the solution, VUSION or DSS, that would be the same phenomenon.

It appears that there is no further question at this time. Mr. Speaker, I'd like to turn the conference back to you for any additional or closing remarks.

Well, okay. Well, thanks for your attention. Thanks for your questions, and thanks to be many attending our call. We will be back at the end of October, very soon for our Q3 report. And I want to wish you a great evening or afternoon. Thank you for being with us today. Bye-bye.