VusionGroup S.A. (VSGRY) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to VusionGroup's H1 2025 Sales Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Olivier Gernandt, VusionGroup's Investor Relations Officer. Please go ahead.

Thank you very much, Sandra. Ladies and gentlemen, good afternoon, good morning, and welcome to our 2025 first half sales presentation. With me today are Thierry Gadou, our Chairman and Chief Executive Officer; as well as Thierry Lemaitre, our Deputy CEO, Corporate and Finance. Thierry Gadou will make some remarks on the group's business performance and financial performance as well as its full year outlook. And after these remarks, we will make -- we'll be happy to take your questions. As a reminder, some of the information to be discussed on our call today is forward-looking and subject to important risks and uncertainties that could cause actual results to differ materially. For these, I refer you to the safe harbor statement included in our press release and on Slide 3 of this presentation. This evening's release was issued a short while ago and is available in French and in English on Fusion Group's website, vusion.com. The slides of this presentation can also be found on our website in the Regulated Information section. A replay and a transcript will also be available on our website after the call. And with this, it is my pleasure to hand you over to Thierry Gadou for his opening remarks.

Thank you, Olivier. Good afternoon, everyone. Thanks for joining our conference call. Very happy to present our sales figures for the first half. First, in a nutshell, whilevusion Group achieved an excellent first semester ahead of our guidance with 50% growth in adjusted sales at EUR 648 million. Order entries for the first half reached EUR 873 million, up 22% versus last year. VAS revenues doubled year-on-year at EUR 90 million with strong growth in both recurring and nonrecurring VAS. And finally, we reiterate our full year outlook of 40% adjusted sales growth and improved profitability. So let's now go into more detail. The group's IFRS revenue reached EUR 613 million in the first half and EUR 648 million on an adjusted basis. Both are up 50% compared to H1 '24. This is above the guidance, as I was saying, the guidance -- I mean, the guidance communicated during the presentation of the 2024 annual results. By the way, it's also our best semester ever and Q2, our best quarter ever. In terms of geography, growth was driven by the Americas and Asia Pacific region. In this region, adjusted sales reached EUR 452 million, up 134% compared to the first half of '24. This performance was driven by the rapid expansion in the U.S., our first market, and particularly the deployment of Walmart U.S., which is entering an accelerated phase with the ramp-up of new capacity. For your information, we passed 1,000 stores now installed and live and fully operational at the end of Q2 in Walmart U.S. So the fluctuating tariff situation has not at all slowed down existing rollout plans as was anticipated and mentioned during our previous conference call, even though we do see a bit of wait-and-see approach from those retailers who have not yet made decisions about ESL. This doesn't impact our strong growth forecast for the year. In Europe, we achieved adjusted sales of EUR 196 million, down minus 17.7% compared to the first half of '24. As previously mentioned, despite the sequential growth between Q2 and Q1 of 18% and a 2-digit growth in order entries in H1 in Europe, the business in Europe is not yet fully benefiting from the contracts signed over the last 6 to 9 months due to normal manufacturing lead times. Also, the general economic situation is sometimes slowing down retailers' investment decisions. Nevertheless, our backlog and pipeline are strong in the region, and we do expect EMEA to return to growth during the course of H2 and beyond, although it is a little later than initially expected. If we now look at order entries, H1 was a very strong semester with new orders increasing by 22% year-on-year at EUR 873 million. Over the last 12 months, that represents EUR 1.8 billion, a 56% increase over last year at the same period. And this record figure is in large part explained by the recent Walmart contract extension. However, both regions had a double-digit growth rate in H1. In Europe, for instance, we announced several rollout contracts in H1, one of the top U.K. retailers, co-op, involving the digitization of 2,400 stores, one of the largest Spanish retailers, [ Eroski ] and 1 of the 2 largest European pharmacy groups, Dr. Max. after signing Phoenix in the second half of '24, another of the -- well, actually the first largest European pharmacy group. So pharmaceuticals is really becoming a very significant vertical and many opportunities even beyond ESL in this vertical. We also announced at [indiscernible] a partnership with Carrefour Group, one of the top retailers in the world to launch a new generation of connected stores based on EdgeSense, vCloud, VusionOX and Capana. Carrefour is the first major food retailer in Europe to adopt EdgeSense. These technologies are piloted in a large hypermarket with 7,000 EdgeSense Smart Rail, 70,000 digital shelf labels and 500 cameras -- shelf cameras. And a new store will be installed soon to test another format in supermarkets. The partnership covers multiple performance improvement drivers, perfect merchandising compliance enabled by EdgeSense combined with automated visual shelf monitoring, better on-shelf product availability through automatic stockout detection, automated price and label compliance, precise product geolocation and mobile navigation to improve customer experience and associate productivity, particularly in the in-store fulfillment of e-commerce orders. So it's a very large scope of use cases, fully leveraging the spectrum of our solutions, our large range of solutions to turn stores into high-value assets. And we also have in Carrefour project of in-store retail media together with Animail and media performance. With EdgeSense, stores are becoming intelligent media platforms capable of interacting with customers in real time. during the shopper journey. So a lot of VAS in this -- in such a partnership. It's a perfect transition to talk about VAS now. Revenue from software services and non-ESL solutions reached EUR 90 million in the first 6 months of the year, up sharply by 105% compared to H1 last year. Both recurring and nonrecurring revenues grew strongly. Recurring revenues EUR 35 million, up 34% year-on-year, driven by our cloud platform and other solutions and nonrecurring revenues strongly increased, notably thanks to the good momentum in software sales from our new IoT operating system, Vusion which we have been mentioning many times over the past 18 months and the revenues are scaling. Our cloud installed base for your information, doubled in a year between H1 last year and this year from 110 million to 220 million cloud managed DSLs to date or at the end of June. In H1, we have continued also our strategic development to accelerate our VAS business. And I want to particularly underline here that we have announced a strategic alliance with Nielsen IQ to create value for retailers and brands by combining point-of-sale, trading data, shelf data, consumer insights to optimize at store level, assortment, merchandising, promotion, pricing, supply chain efficiency. This partnership is a major opportunity to accelerate the adoption of [indiscernible] through a collaborative model between brands and retailers and to expand internationally our data solutions through joint solutions with IQ. The combined services will soon be available in the U.S., France, Italy first and then aiming at penetration of further retail markets. We have also accelerated the synergies between our various VAS entities by creating the VusionData division, which includes Memory, Capana and Retail Media, which is led by [ Jerome Mamrit ] originally from memory. And the perfect example of such synergy is the launch of VusionLive, the combined data analytics and AI layer of the Fusion platform, which brings together for the first time, multiple data sets and IoT signals and delivers at the fingertips of store employees and store managers the most important alerts and tasks across many operational dimensions. The first stores are already using this version of VusionLive and more features will be developed in H2 and will be launched at NRF in January. That's for H1. Now for the rest of the year, our outlook remains unchanged with 40% growth for the full year of '25 and 100 to 200 basis points increase in our EBITDA margin with an excellent order book and pipeline and despite a persistently challenging economy and still some uncertainty about the tariff environment, VusionGroup has a strong level of visibility and confidence. We confirm targeting an annual adjusted revenue of EUR 1.4 billion for the year. We confirm our objective to grow VAS revenue twice faster than the top line at around 80% compared to '24 with strong growth expected both for recurring and nonrecurring VAS. Finally, we confirm an improvement of our adjusted EBITDA margin by 1 to 2 points in '25 and a positive free cash flow generation. VusionGroup's commercial momentum supports the outlook for continued solid growth in '26. And we will now come back on all this in more detail on September 15 when we publish our full H1 financial results. Also for those -- just to finish, for those who are interested, here are a few major industry events that VusionGroup will be attending in the next few months. There is, for the first time, NRF Europe in Paris in September, mid-September, and we are the prime sponsor of the event, and we showcase all our newest solutions, including VLI've and latest developments on Sense and Capana. The grocery shop event in Las Vegas at the end of September. Also during the summer, we will inaugurate our new customer experience centers in Cologne, London and soon in New York. With this, Thierry and I are happy to take questions.

[Operator Instructions]. We will now take the first question from the line of Ben Thielmann from Berenberg.

This is Ben from Berenberg. I would have 3, if I may. First one would be on order intake in Q2. So H1 orders looked pretty strong year-over-year. But if I carve out Q1, it looks like that Q2 orders declined double digit, 23% to be precise, year-over-year. So I was wondering if you could give some color. Was that the challenging environment you're seeing in the U.S.? Was that Europe struggling? Any color on what exactly drove orders in Q2 would be helpful.

Yes. You're right. The Q2 is less important. But when -- I think we mentioned that the tariff situation indeed is creating a bit of wait and see approach by those who have not launched their rollouts already or at least made their decisions. So it's been already quite clear in April that we mentioned that, and we see that. I think I repeated that. So there is this element. In Europe, even though we had double-digit growth in H1 -- we see also an economic environment where there is a bit of, I would say, investment decisions that can be a bit slowed down. So it's not wrong. But on the other hand, when you have to take into account also the comparable basis because when you manage a very, very large contract and they happen with obviously, contracts like Walmart, it creates also comparable basis, which are sometimes a bit tricky. So in our business, I think that looking at too carefully at quarter-by-quarter when we are making such peaks sometimes in order entries, it can be a bit misleading. So I would say it's a kind of balanced answer on -- we're very confident on the structural potential growth and the growth of the market because the demand is there. It's -- I think the market has evolved quite favorably in a sense. At the same time, when you look at very short-term situation, there can be also some slowdown in decisions, some wait and see. It happens. But let's keep in mind the comparable basis. And let's keep in mind that on a 12 months, which is probably a little more relevant period to assess, we're still 56% growth in order entry. So...

Maybe a follow-up on that. You had roughly EUR 530 million order intake in Q1. Was there somewhat of like a front-loading in terms of orders in Q1 from Walmart? Because last year, it was EUR 440 million in Q2. And I'm wondering what share roughly, I know you don't report on a customer-specific basis, but of the EUR 340 million that we have seen in Q2 now, were these less Walmart orders that were recognized in Q2 than, let's say, in Q1 this year?

No, there is no front-loading at all. The Walmart orders follow the rollout plans. And as soon as the stores are decided and planned and decided individually, there is 4,600 of them that gets in our order entries. And so it is following the flow. And as you know, we -- we had a EUR 1 billion extension contract in last -- at the end of December. So it's flowing through the year as announced. So it's not front-loading, but it's true that those are very, very big numbers. And so sometimes it creates ups and downs in the numbers and ups and downs in a comparable basis. So I think the -- obviously, dealing with a retailer of that size is always sort of, let's say, making all the comparisons always a bit difficult. And this year, there's going to be this additional EUR 1 billion over the year that's going to be booked in the order entry. So it's going to be part. But nothing special about that. And again, bear in mind that the market, I sometimes repeat it. We -- just talking about the ESL market, and I'm not even mentioning the VAS market, which has a very strong potential. The market today is about $10 billion ESLs, really the potential target addressable market. We have at best 12% penetration right now. The most advanced region is around 30% to 35% penetration. And we think that in the next 5 years, all regions of North America and Europe will probably be between 40% and 50% penetration. So that's a market growth anyway that's going to happen. So now the quarterly comparisons are not always completely relevant in a market like that, especially when you have still very large deals and smaller deals. So I would focus on the analysis on the structural sort of growth potential. So that's why we are quite -- we have strong growth ambitions. And even though there is a short term an uncertain environment, especially on tariffs that is creating some kind of wait and see. At the end of the day, we're quite confident on our guidance for the year and our growth for next year.

Maybe one follow-up, if I may. Is it fair to assume that as a percentage of group order intake in this quarter that Walmart accounted for roughly the same size with the same share as they accounted for in your Q1 orders?

You know we don't give specific customer numbers, but what -- for sure, what you would be able to assess at the end of the year is that out of the total, it will be EUR 1 billion in the total of our order entries. Because that at least is disclosed.

Okay. Maybe one last question, and then I go back into the queue. On recurring VAS revenues, they seem to be up quite a bit year-over-year. and you touched on that briefly already in your presentation, but I was wondering if you could reconcile a little bit where the EUR 39 million in Q2 were coming from. Q1 was roughly EUR 16 million, which is quite a sequential improvement quarter-over-quarter. So any color on whether these were one-off effects we shouldn't expect to see coming in Q3 and Q4 as well? Anything on that would be helpful.

What do you mean? I'm sorry, I don't read -- I think I mentioned that the growth of our recurring revenues is essentially going with the growth of our installed base of, first, the cloud platform and then the penetration on the number of VAS solutions. So that's the contribution to the increase. It's not necessarily exactly the same pace on a quarterly basis because it depends on the activation of services and the speed at which the stores delivered are installed and activated. So there can be some changes, but it's going up rather gradually. It's -- this year, it's -- I mean, this -- for the semester, it's 34% last -- in the first quarter, 35%. So all this is relatively consistent, and we see that continuing as we grow the Vusion Cloud revenues and increase the penetration of other services.

Yes. No, sorry, Thierry, I meant the nonrecurring VAS because if I look at Q1 nonrecurring, it was at EUR 16 million. And if you have EUR 55 million in H1, there must have been a doubling in nonrecurring VAS revenues between Q1 this year and Q2 this year. And I was wondering where that is coming from.

Yes. Well, as I said, we have -- well, we have this -- our new operating system is also scaling. The Bluetooth-based IoT operating system, VusionOX is scaling. And it's -- that's something that I wouldn't consider a one-off because it's growing and accelerating. So -- and then there are obviously with the growth of a number of other services, especially that other services and managed services, we do have an increase that's going with the top line because there's lots of stores installed. So I wouldn't say there is a specific one-off. And again, we are confirming a growth of 80% for the full year, which means that we're anticipating -- I think it's quite explicit what we can anticipate based on that for the full -- I mean, for the H2. So if there was a one-off, we might be expected some kind of decline. We would not confirm our 80% growth for the full year.

Okay. So it basically means if you sell EdgeSense to a client, it means that the ESL on the EdgeSense rail, they go into -- in terms of revenue recognition in your ESL division, sure. And then if you connect those to the cloud, that goes into recurring VAS revenues, but VusionOX, which is EdgeSense specific, would then go into nonrecurring VAS revenues?

Vusion -- so you've got 2 types of -- in IoT world, you've got 2 types of software. You've got the software that is embedded -- the software that is embedded on the solution. And it's not necessarily only EdgeSense because if they are using the new Bluetooth protocol, they are also equipped with VusionOX embedded. So it's related with the new protocol. So it can be either on the stand-alone ESL 2 provided they are the new Bluetooth protocol. So you have embedded software and then you have the recurring software on vCloud. So basically, IoT works with embedded software connected to cloud, and you've got 2 components of that. And so what we are seeing now is the ramp-up of our new protocol, which drives both recurring revenues on vCloud and onetime software revenues on the embedded software. You will continue to see this trend as we grow the penetration of Vusion rights.

We will now take the next question. from the line of [indiscernible] from ODDO BHF.

Congrats on the semester. I have only one question. I was just wondering if you could provide some color on the EUR 50 million beat in H1 versus the EUR 600 million more or less guidance. And would you say this could bring some further upside on the full year target?

It could, but we are still in a moment where we have to you have a number of things that are not stabilized yet. I think of the tariff, I think of the dollar, I think of -- so you always need to be -- so I think we're confirming our guidance. It doesn't mean that there is no upside, but I think we're already very happy to be confident on the 40% growth this year. We're slightly ahead of our guidance for the first half. So we are safe for our guidance. That's already a very comfortable position to be in a market like that.

We will now take the next question from the line of Baudemont Flavien from Bernstein.

I have 2 questions on my side. The first one being, can you maybe give us a little bit more color on your deal pipeline? What is the current market sentiment? And did you see any slight improvement in the U.S.? And my second question is on the recurring VAS. Is it possible to have some color on your recurring VAS revenue growth, excluding what you generated with Walmart?

Generally speaking, I think the current situation is a bit different from the question of the pipeline. I think the pipeline is quite strong. Again, we are in a situation where we see penetration continue to go up in all our key markets. It will go up. It's a fundamental need. The most advanced markets are only at 30% to 35%. Again, as I mentioned earlier, U.S. is obviously very, very much below that. So there's going to be an acceleration. So the pipeline is logically extremely big, both in Europe and the U.S. Now the question is more the timing given the situation. Again, I think -- so we -- but we're trying to have an approach, which is slightly a bit longer term than your questions, like we know there is a big pipeline. We know there is growth ahead. We give, I think, as careful as possible guidance. But -- so we are quite confident on the way forward because structurally, there is no way retailers are not going to digitize and optimize their stores. They have to for multiple reasons. But right now, in the U.S., they are, I think, waiting a little bit to see what's going to be the cost of this technology, given all the situation on tariffs, et cetera. So we're getting, I think, close to the end of the suspense. But right now, it has been the situation like a little bit careful. But those who had already launched rollout have certainly not slowed them down because they know for sure, the return on investment, et cetera. So they were more in the acceleration than in the slowdown. And in Europe, yes, I mean, there is a bit of carefulness in terms of the decisions and the timing, but the pipeline is very -- is big. I think we said the order entries have been growing 2 digits. We see a rebound. There was essentially a comparable basis with a moment where we had a very large rollout. So we will see that coming back to growth during the course of H2 and beyond. So the market perspective. And then the VAS market is because all the digitization of stores is driving a lot of needs in computer vision, data analytics and the retail media is only at the beginning. So all this is going to be a very strongly growing market. So we're quite optimistic about and at the same time, the profile of VusionGroup is increasingly unique because we have all the scope of solutions. So the partnerships that we build with customers is multi dimensional now, certainly not just ESL-centric. So I think we're quite excited now we also face the bumps in the road like the tariffs and things like that. But we're very happy to be able to say that tariffs to date, at least are not expected to impact our revenue guidance and our profitability guidance.

We will now take the next question from the line of Hugo Paternoster from Kepler Cheuvreux.

My first question would be a follow-up on Flavien. And I just would like to have a little bit of more color, if you can elaborate on the momentum that you are currently building in Europe. I'm not sure you can comment by customer, but would it be possible to comment a little bit in terms of verticals, whether it's more in the grocery, in pharmacies and kind. My second question would be on the deal that you managed to have with Coop. Just wanted to have a bit of more detail in terms of value-added services in which this client was interested to and if you can comment on that? And the last one would be more a question, broadly speaking, on the traction that you managed to have in terms of value-added services overall, mainly interested in Catena, Memory and Engage. So in terms of all the pilots that you are currently rolling up, how is it received by clients? How is it getting traction? Is it according to your own estimates? Are you pleased with that? Any comment on that would be useful.

Yes. So regarding the first question on Europe, I think the various verticals has been definitely one of the -- is one of the drivers of the growth in Europe because since there is a higher level of penetration in the whole market because it started much long time ago, there is already 30% to 35% penetration. Obviously, there is a significant contribution to further growth is penetrating other verticals, beauty, DIY, I mean, beauty and cosmetics, DIY, pharmacy, obviously, consumer electronics, although it's -- there is already a high penetration in consumer electronics. But all these -- there would be also automotive retailing that is starting to loom in the horizon with a few projects that are quite promising. All kinds of retailing, we have also specialty retailing like we have a number of very advanced with multiple store pilots on eyewear, glasses retailing. So actually, there's been a lot of -- every time there is some kind of specialty developments around the solutions, for instance, in eyewear, it's a very specific products where you have location, inventory, but also obviously, pricing and a number of other factors. So we're working on all these verticals, and that's why we see growth coming from that. However, there is still many, many grocery retailers that have not yet and will sort of make the decision. So there is still a lot of growth. I think about, for instance, in Germany, in the U.K., most of the retailers will adopt digital solutions in store and particularly ESL or, let's say, digital shelf systems in the coming 1 or 2 years. So there is still a lot to do in grocery. And co-op, because you asked a question about co-op, it's part of that sort of momentum in the U.K., 2,400 stores. It's relatively fast and bold decision quick. I mean, it shows the need. It shows how tense the situation is right now. There is high velocity of price, high cost of labor, high need for automation. And yes, there are many vast services associated to the sale of ESL because, first, it's fully cloud operated. So there is cloud platform. There are a few pilots now going to start on Capana and also on pricing on data analytics that we also are starting. So usually, it starts with the first deployment of, let's say, the basic infrastructure of ESLs and then you have all the other services coming up. So grocery and to grow to 40%, 50% penetration, the market will drive growth in Europe as we already have. And don't forget that over the long run, I mean, if I look at our growth rate in average since 2020, we have above 20% growth in average in Europe, and it will continue. So I think your last question was about traction in VAS. The VAS and Capana particularly you asked, we work with many clients now on very, very significant and large scale, I would say, really large-scale pre-rollout pilots. We mentioned, I think, publicly, even in 2 keynotes, major keynotes, the project with [ Carrefour, ] for instance, which has already 35 hypermarkets live. The project is extremely promising. We see that our solution is delivering a lot of things that are required and many others are the same. So the pipeline is strong, consistent with our high ambitions in this area. As I speak, we are -- as of now, I mean, we are completely convinced of 2 things. One, that computer vision is going to be a must-have in the market. Like ESL, it will be a very big market. It's the next wave. There will be an eye on every shelf in the future because it's so important to optimize a number of dimensions of the operational execution that there will be an eye on every shelf and CV is going to be a big market. And the second point, so this is really a conviction. And frankly, all the projects on which we work are very sort of promising. The second thing is that our strategy is the right one because we come from a strategy that is twofold. One is 360 shelf digitization, which means that we have computer vision embedded in digital shelf systems and for instance, soon embedded in EdgeSense, which means computer vision works better. It's combining multiple sources of information, which deliver unique accuracy. It's really high performance. And so we think that is going to be a very, very winning strategy in the future to have CV as part of a digital shelf system. Like in the future, it's like a smartphone. Would you buy a smartphone without a camera? No. And that will be the same with the digital shelf system. It will have an eye as well as automating display. And the other side of our strategy is the collaborative model with brands and our Nielsen partnership will be a strong asset in the future. So I think based on our pipeline, we clearly believe we will achieve -- we can achieve our '27 ambitious target on Captana. And you will see CuterVision is going to be a must for retailers. Now it takes a bit of time. It's true, but we're quite happy with the results at the current stage.

Okay. And just 1 follow-up, if I may, on COP. With the signature of co-ops, do you notice, I don't know, any reinforced interest from co-op peers in the U.K. in terms of discussion with your clients?

I think in the U.K., there is probably very, very few retailers with whom we are not actively speaking or even in active pilots. So I think it's a market that will catch up. It was lagging behind, to be frank. In fact, co-op is the first largest large -- really the first large rollout, large-scale rollout and nationwide -- nationwide rollout. But yes, it's obviously triggering a wave that will continue. Same as Walmart in the U.S. is triggering a way that will also continue.

We will now take the next question from the line of Adam Gildea from Bank of America.

I have 2, please. First, you mentioned over 1,000 Walmart stores now equipped. Is there any more color you can give around the cadence of that rollout through the 2027 target to roll out across all 4,600 stores? Should we be expecting another 500 or so stores in H2? Or is this progressively accelerating in H2 and then 2026 as more of these production lines go live? And then second, just a quick one on the guidance for European growth this year. When you say you return to growth during H2, are you thinking of H2 as a whole being positive year-over-year or like the exit rate in Q4 being positive for EMEA growth?

No, we -- I think what -- we see H2 as a whole being back to growth, probably more towards the second half of the semester, but overall growing. And what we see is that it should be able to compensate, let's say, the dip in H1, so that roughly we should be around stable. I think that's what we mentioned in in '25 as a whole. And regarding -- sorry, I started with the last question, but coming back on Walmart. Yes, we are entering a phase of acceleration because there is a ramp-up of capacity that's been described already several times. We are ramping up and putting in production more capacity as was sort of ordered. So now it's stepping up. So we should see a continued acceleration. And for sure, the full rollout, the full fleet be rolled out before '27. And yes, so the only thing is that here, I'm talking about -- need to be always thinking about store installed and store that's produced and sold and shipped because sometimes the installation phase can be not dependent necessarily on us. So in terms of our revenue, it follows the production, but sometimes the installation is done more by -- is decided more by Walmart. So if there is, for instance, holiday season during the end of the year, it can be -- so I can't give you any numbers of installed stores because we control, let's say, the production and the delivery, but not necessarily the speed at which the stores are installed, especially towards the 2 last months of the year, which are very, very intense months in terms of the revenue and the activity -- so sometimes they can slow down a little bit the installation. So we don't control that. So I can't give you a number on this. But for sure, we are asked to deliver at high pace because the project is delivering very satisfactory results for the customer.

We will now take the next question. From the line of Valentin-Paul Jahan from Stifel.

Perfect. I have 3 questions, please. So the first one would be on VusionOX operating system. My question is, do you pay license fees to Qualcomm for the communication protocol or for other IP or not related services as you worked a lot with them in the recent past to develop it. And therefore, does the gross margin on VusionOX is accretive compared with the gross margin on SaaS subscriptions such as memory or Cap, for example, or not? This will be my first question.

Yes, it's -- the answer is, yes, it's -- did you say accretive, you mean? Yes, yes. It's obviously software sales, so it's accretive. And there is a small rev share with Qualcomm, you're right. But regardless -- I mean, in spite of that, it's accretive like a software revenue.

Can we say it is the most profitable solution in your portfolio?

Generally speaking, software is the most profitable solution. But I think Vyouision Cloud is also -- I mean, all the Vision Cloud and VusionOX today is profitable, but Captana is also a profitable solution. So I mean, generally speaking, Maybe, Thierry, you want to add a comment here, but I think it's...

I fully agree with you. I think that we don't enter into the details of the profitability of all the VaaS lines. But roughly, I would say, yes, the cloud and Vision OS are really very profitable among the most profitable line of services that we are selling and Cana for the recurring part as well. So everything which is really globally pure SaaS is very accretive for the group.

I mean they are, let's say, in the standard. I mean there is nothing -- I mean, they are in the standard of the software company. It's just very classic. -- more profitable than the hardware as I think it's been always explained and it's also a general, I would say, pattern of business.

My question was, does it -- is more profitable than memory or Captana, but I understand that you don't want to answer it. Maybe my second question, it's kind of a follow-up about the growth prospect beyond 2025, actually. Because your order book already gives you a visibility through 2026 and because you mentioned a solid growth for 2026 in your press release, -- given the current development of your order book and current discussion with your customer, do you think you will be able to achieve more or less 20% growth in 2026, which is the figure that will put you on track for your 2027 targets? Or does the current economic environment could lead to softer growth in 2026 than this threshold?

Yes. I mean it's maybe early to already disclose the guidance for 2026, we only disclosed in H1 2025. So maybe you want to slightly elaborate on that, Thierry, but I think it's a bit early to already give a good visibility or an element of visibility on 2026.

Otherwise, we don't need to see each other for the next 12 months. So we need to keep a bit of No, I agree with you, Thierry. Absolutely. And I was going to say that, especially if we are talking about numbers, like we said solid growth because we see growth because America will continue to grow and Europe will be back to growth. So as a whole, we see -- yes, we see solid growth. Now saying if it's -- what number we need to wait probably until the end of the year to give you again, as usual, a guidance with '26, especially since.

Okay. So my last question would be around the working capital, including upfront payments. the comparison base will be demanding with a significant upfront payment you collected from Walmart in 2024 and 2025 and before significant revenue with Walmart in 2025 and 2026. So should we expect a slight cash consumption in 2026 due to this working capital unwinding effect on this big contract or not?

You seem to be very interested in 2026 rather than 2025. But '25 is not completed yet. So let's already focus on what needs to get completed. 2025, we said that we would generate a positive free cash flow. 2026, we will see depending on the pace of the rollout for the last stores of Walmart because, as you know, we're going to reverse the positive impact on the cash due to the down payments paid by Walmart. So I'm a bit more, I would say, cautious currently on 2026. But definitely, 2025 will be a positive cash flow generation year.

We will now take the next question from the line of [indiscernible] Apus Capital.

Three short questions from my side. How is the pipeline about maybe further upgrade deals with existing customers like you have published with Carrefour? That's the first question. Are other existing customers, you have other customers which are years ago installed the ESLs now ready also to move up the value chain and adopt more VAS solutions?

Yes, absolutely. I mean, in fact, we don't talk very often because we talk about new deals and new, but in the order entries, there are a lot of retailers that are customers for sometimes more than 10 years and who renew. And every time they renew, we renew, we migrate to cloud, we add some other solutions, some other features. We expand the scope of -- so it's also going on. It's -- everywhere, we have customers who are renewing, et cetera. It's part of the momentum and the dynamic of the market, and it's very positive because as we innovate a lot, we always have a lot to do with our existing customers. And when I say 10 years, sometimes -- I mean, we have customers that have -- that are generating permanent significant revenue for 2 decades. So it's -- yes, we are -- you're right to mention that we are often to -- always speaking about the new logos, but we have a lot of hundreds of existing logos, sometimes for more than a decade, and the churn is quite low. Another question, Johannes. It's a long time since you have been on this call actually or you were the last question. I was wondering where you have been.

No, no. I think very often, there have been many other questions I had late in the row, but not a problem at all. Maybe a second question regarding the impact of the dollar. On maybe on your guidance compared that the dollar has weakened further in the last quarter and you stick to your guidance and the guidance is not constant currency. Therefore, maybe help me, does the underlying growth higher? Or is it -- have you already been a little bit more cautious by setting up the guidance only to get it right? And the bottom line, if I have it right in my head is you are now nearly natural hedge. Therefore, the impact is limited, but more only on the absolute euro figures. Why you stick maybe or they could stick with it despite this much weaker dollar and you have this negative translation effect?

Yes, you're right, Jan. So yes, we consider that currently the impact of the dollar is something that we can absorb on the revenue side. So we can still deliver the revenue guidance despite a weaker dollar. And you're right that on the profitability side, the impact is quite limited because you got almost a natural hedge. So the revenues that you collect in dollars and the cost that you pay out in dollars are quite similar. So it has a very limited impact on the profitability.

Great. And finally, only maybe a clarification more general, not on special figures to the question from the colleague asked before. If I got it right, despite a lot has happened in the world in the meantime since you had the Capital Markets Day 2 years ago, you are still confident to achieve your 2027 ambition.

Yes, absolutely. We are -- we set ourselves an ambition in -- at the end of '22 for '27. And we are halfway on the plan. We have delivered -- we have already doubled the size of the company since then. We have done in H1 more revenue than in the total year of '22, which was the -- when we launched the plan, and we are halfway. So we're quite excited. Now is the '27 target a stretching and an ambitious one? Absolutely, it is. Otherwise, it would not be stretching the company and putting us and everybody in the company on their toes. But it's a stretching, but we have a pipeline that makes it very possible. And so we are definitely willing to deliver. And I think halfway, we're really good. So yes, it's not 100% sure. Otherwise, it would be a very -- it would not be a very good target. So it's difficult. But have we already delivered ambitious targets in the past? You know that, yes, we did. And really halfway, we think it's quite a good position to be. So yes.

Sounds very good. Good luck and up to next time in 3 months we get the full figures.

Yes, the full figures is on the 15th of September. And then yes, I wish you in the meantime a great summer.

We will now take the last question from the line of Gilles Crespel from [ Alice. ]

Congratulations for the level of activity, especially in Northern America. I had, if I may, 2. One is after those trends, I see 2 which are little improving. One is the growth in EU. You already discussed that. But when we look at it, the Q2 is even below the Q1 growth without entering into details on a quarter-to-quarter basis. Does your order book now give you some confidence on having a positive EU over the full year? That would be my first question. And the second trend where I'm seeing little progress is the VAS percentage of revenues, which is not growing at this stage. We are about 5% to 6%, whereas you set yourself a target of about 30%, if I remember well. And so I wondered what could trigger there an actual takeoff for this VAS as a percentage of revenue?

So yes, thank you, Gilles, for the question. Regarding Q1 and Q2, there is a sequential growth between Q1 and Q2. I think it's -- Q2 is 18% above Q1. So it's clearly starting to show -- I mean, basically, the revenue follows order entries. And so we have started going back to growth in order entries in the last part of '24. So it's coming now in the delivery. So we have a sequential growth between Q1 and Q2 in Europe, as I mentioned. And we see this growth continuing and having -- and being back in Europe to growth in H2. And I think we mentioned during the call and actually in the press release that we expect H2 to be back to growth and the year to be roughly stable versus last year, thanks to the -- because some of the growth is coming later in the year. So that's what we -- so H2, we see it back to growth and full year roughly stable. compensating the dip in H1. So it's what I already answered. And the second -- and which is also in the press release. And regarding your second question, I think the growth in VAS is significant, 80%. It's -- and 100% actually in H1. So it's growing. It's not linear and particularly the percentage because the percentage comes with a significant part of your installed base that has a penetration. So we are in a network effect. Every time you have a network effect, you have a cumulative increase in the percentage. because you need to have -- every year, you are accumulating the revenues of your installed base that have penetration on cloud, on Captana, et cetera. So it is something that's mechanically not linear. And we have a target of EUR 600-something plus million in '27. And our pipeline sort of is completely consistent with this target. So we are definitely thinking we can achieve this target.

The 30% VAS -- well, revenue percentage in '27, this being part recurring, part nonrecurring, correct?

Yes, part recurring, part nonrecurring. And again, we are targeting an absolute number because, of course, if we are doing more sort of more hardware sales or more ESL sales in '27 or less, it can be different in terms of the percentage. But roughly, what we are targeting for '27 is around EUR 600 million in all VA numbers -- in all VA revenues. I think it's EUR 650 million actually. Thierry correct me if I'm misrepresenting the Vusion '27. And today, so it's not linear because the penetration in Captana will grow like vCloud as a growth curve, which is not at all linear, now it's growing very fast and VusisionOX is growing very fast. So those things are not linear at all. Innovation is never linear. In fact, the penetration of ESL in the world is not linear, is just accelerating. I think you realize that. So it's like that. You need to have a certain level of penetration to reach the moment where it's scaling much faster. That's how it is always in innovation.

Yes. Well, here, we have -- part of it is adoption of services and that can be -- I'm not expecting a perfectly linear trend, but I didn't see over the last quarters an increase on the percentage of those VAS, the recurring part of it against the revenues. And so we'll see over the next quarters for sure.

Well, I mean, you have already the answer. We are expecting an 90% growth this year on VAS. So I think the answer is already there. And we're expecting -- so I mean, it's -- just look at our guidance, there will be no surprise for '25.

Thank you. I would now like to turn the conference back to Thierry Godau for closing remarks.

Well, thank you for your time tonight. I wish you a great afternoon or evening, and we will be happy to see you after the summer on September 15 for the full financial figures of this excellent first semester. Thank you very much. Bye-bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.