Release Date: September 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quadient SA (NPACF, Financial) reported a revenue of EUR 534 million for H1 2024, up 3.2% in reported figures.
- The company's subscription business model now represents 72% of total revenue, amounting to EUR 384 million in H1 alone.
- Quadient SA (NPACF) has maintained its AA ranking with MSCI, reflecting its strong ESG commitments.
- The digital automation platform saw a significant improvement in profitability, with an EBITDA margin increase of 6.4 points, reaching 15.7%.
- The company announced a EUR 30 million share buyback program, demonstrating confidence in its strategic plan and shareholder value creation.
Negative Points
- Mail Solutions EBITDA declined, impacting overall profitability despite the growth in digital automation.
- The parcel lockers segment reported a 2.5% organic revenue decline and a negative EBITDA margin of -6.7%.
- The change in commercial agreement with Yamato in Japan negatively impacted locker subscription-related revenue.
- The cost of debt increased to EUR 20 million due to rising interest rates, affecting net attributable income.
- The company faced delays in the implementation of two large US digital contracts, impacting revenue growth in the digital segment.
Q & A Highlights
Q: Could you give a trading update regarding Q3 and what you expect for the coming months in the digital business? Also, is e-invoicing already a tailwind for orders in Europe?
A: The ARR on an annualized basis has grown to 15% in H1, indicating a strong subscription revenue growth for the next 12 months. We expect the subscription-related revenue growth to significantly increase in H2, likely above double digits. Regarding e-invoicing, larger enterprises may anticipate the regulation, but the big wave of small and mid-sized companies will likely wait for the law timeline to be confirmed.
Q: What led to the decision to launch a EUR30 million share buyback program? Does this mean no M&A operations are expected in the coming quarters?
A: The share buyback program is part of our capital allocation strategy and is not at the expense of investments in the business. We continue to invest in our digital and parcel locker divisions and remain open to potential M&A opportunities if they align with our strategic goals.
Q: Can you explain the EUR8 million IT project write-off?
A: The write-off is related to an ERP project in North America that did not meet the expected balance of compliance, payback, and optimization. We decided to stop the project and write off the cost to avoid further spending without significant benefits.
Q: What is the current profitability of Frama, and what are the objectives for 2025?
A: Frama is currently around breakeven. We aim to upgrade Frama's installed base with Quadient equipment, which will benefit from stronger economies of scale. We expect Frama to contribute significantly to profitability by 2025.
Q: Do you expect the locker business to reach profitability in H2 2024?
A: While the EBITDA for lockers was negative EUR3 million in H1, we expect an upward trend in H2 due to higher volumes, especially around the holiday season. We are on track to improve profitability and potentially reach breakeven.
Q: How do you view the recent bid on Esker by Bridgepoint and its impact on your joint venture?
A: The bid on Esker confirms the high valuation of the SaaS financial automation sector. We have anticipated market consolidation and are well-positioned with our comprehensive platform. The joint venture with Esker remains beneficial, and we will continue to evaluate our strategic options.
Q: Have you started negotiations for the bond refinancing of 2025, and what would be the new rate in the current market conditions?
A: We have already anticipated part of the refinancing and are actively working on the rest. We expect the new rate to be around 5%, slightly higher than our current average cost of debt.
Q: What kind of free cash flow generation are you expecting for this year?
A: We expect a favorable free cash flow compared to last year, driven by improved working capital management and cash collection. However, higher interest payments and leasing portfolio growth may impact the overall free cash flow.
Q: Can you detail the number of newly installed lockers in France and the UK over H1? What are the target numbers and time horizon?
A: We have significantly increased the number of lockers in both France and the UK, with the UK installations tripling compared to H2 last year. We aim to reach 3,000 installations in the short term and potentially 5,000 in the long term, depending on market conditions and usage rates.
Q: What is the current EBIT margin of the joint venture with Yamato, and how does it compare with the former subscription contract?
A: The new fee-per-parcel model with Yamato has a short-term negative impact on revenue but remains highly contributive to EBITDA and EBIT. We expect the volume increase to more than compensate for the shortfall in the long run.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
