Earnings call transcript: Quadient Q1 2025 revenue dips, maintains guidance

Quadient SA reported a slight revenue decline for the first quarter of 2025, with figures showing a 1.1% year-over-year decrease to €258 million. Despite the dip, the company maintained its full-year guidance, signaling confidence in a stronger second half of the year. Shares of Quadient experienced a slight decline, closing at €17.04, reflecting a 0.94% decrease in market value. According to InvestingPro data, the company maintains strong fundamentals with a healthy gross profit margin of 74.82% and has consistently paid dividends for 23 consecutive years.

Key Takeaways

• Quadient’s Q1 2025 revenue decreased by 1.1% year-over-year.
• Recurring revenue now constitutes 75% of total revenue.
• The company maintained its full-year 2025 guidance.
• Digital and Lockers solutions showed robust growth.
• North American market faces macroeconomic challenges.

Company Performance

Quadient’s performance in the first quarter of 2025 was marked by a minor decline in revenue, attributed largely to macroeconomic challenges in North America. However, the company reported strong growth in its Digital and Lockers solutions, which saw double-digit increases in subscription revenue. This growth is part of a broader strategy to shift towards more stable, recurring revenue streams, now accounting for 75% of total revenue, up from 72% in the previous year.

Financial Highlights

• Revenue: €258 million, down 1.1% year-over-year
• Recurring revenue: 75% of total revenue, up from 72%
• Organic revenue decline: 2.5%
• Mail hardware sales: Declined by 15.8%
• EBITDA margin: Improved across all solutions

Outlook & Guidance

Quadient has maintained its full-year 2025 guidance, anticipating stronger performance in the second half of the year. The company expects a recovery in mail equipment renewals and continued momentum in its Digital and Lockers solutions. Forward-looking projections for fiscal years 2026 and 2027 suggest stable growth in both EPS and revenue.

Executive Commentary

CEO Geoffrey Gaudet expressed optimism for the remainder of the year, stating, "We remain very confident in our ability to deliver a stronger performance in the second half of the year." He also emphasized the strategic importance of the recent Syrensia acquisition, noting, "We are looking for a very fast integration over the next few months."

Risks and Challenges

• Macroeconomic headwinds in North America could impact future sales.
• Decline in mail hardware sales may continue if renewal cycles do not improve.
• Economic uncertainty may affect customer decision-making across markets.
• Potential impacts from US tariffs on operations and profitability.
• Integration of acquisitions like Syrensia poses execution risks.

Quadient’s Q1 2025 results reflect a company navigating challenges while positioning itself for future growth. The maintained guidance and strategic initiatives in digital solutions underscore its commitment to evolving market demands. With a strong free cash flow yield of 19% and an overall Financial Health Score of "FAIR" from InvestingPro, the company demonstrates resilience in its transformation journey. Discover detailed insights and a comprehensive Pro Research Report covering Quadient’s strategic positioning and growth potential through an InvestingPro subscription.

Full transcript - Quadient SA (QDT) Q1 2026:

Anne Sophie Jean, Head of Investor Relations, Quadient: Evening, and welcome to Quadient First Quarter twenty twenty five Sales Presentation. I am Anne Sophie Jean, Quadient’s Head of Investor Relations, and I am here today with Geoffrey Gaudet, CEO and Laurent Depessage, CFO. We will have a short presentation followed by a Q and A. You can submit your questions in writing through the web or ask questions live by dialing into the conference call. Thank you very much.

And with that, over to you, Geoffrey.

Geoffrey Gaudet, CEO, Quadient: Thank you, Anne Sophie, and good evening, everybody. For the first quarter of twenty twenty five, we posted €258,000,000 in revenue. This represents a 1.1% reported decline compared to the same period last year. As we highlighted during our last result conference call, this performance was for the most of it anticipated. As you’ll remember, I set the expectation we would have a low Q1 and a progressive improvement quarter after quarter.

In terms of Q1 solution achievement, I want to highlight a few things. We have, once again, posted another strong quarter for our digital and local solutions, with double digit growth in subscription related revenue for both solutions. Their strong performance underscore the strength and the success of our offering against our competition and the fast pace of innovation that we bring today to our customers. In the first quarter, we experienced also a low point in the renewal cycle of Mail Equipment impacting the performance of our Mail business. This is a cyclical trend that we had expected, and we anticipate a recovery in our Mail activity as we move forward.

Additionally, this performance was amplified by the challenging macroeconomic environment, notably in The United States, a factor many companies currently are navigating. Despite the small top line decline in Q1, I’m very pleased to say that our current EBIT has been growing organically compared to last year and supported by the EBITDA margin positive development in all three solutions. Let me repeat, in all three solutions. Our teams have demonstrated strong operational discipline by continuing to deliver steady profitability increase in our digital solution over the last two years and now more recently over the last twelve months for our lockers solutions. So despite its lower top line, our Mail Solution also slightly improved its EBITDA margin as it benefited from the Pharma integration.

Looking ahead, we’re confident in the stronger second half of twenty twenty five. And as I have just mentioned, we expect to see a progressive recovery in Mail. Additionally, our momentum in digital and lockers is set to remain strong, with further improvements in their profitability that is expected. Our order pipeline across all solution is promising as well, indicating a healthy demand for our offerings. So naturally, based on these expectations, we are maintaining our full year 2025 guidance.

Laurent, over to you.

Laurent Depessage, CFO, Quadient: Moving to Slide six. Thank you, Geoffrey. I would like to draw your attention to some noticeable movements in our shareholding. The Swiss hedge fund, Teleos, exited the shareholder base early April after having reduced their position to below 5% on March 27. Conversely, Visa Equity Investment, our largest shareholder, controlled by Daniel Katinski, has further demonstrated its long term commitment, increasing its ownership to 22.6 as of April 1, up from 16.5% at the January.

The legal crossing notification associated with this movement can be found on the AMF website. Let me now give you the details of the Q1 sales performance. As you can see on the left hand side, Q1 twenty twenty five is down organically by 2.5%, explained by a lower May placement in The U. S. While we saw continued growth in the recurring revenue, which is a good news and now represents 75% of total revenue, up from 72 last year.

This reflects the strength of our subscription based model. On the right hand side, geographically, North America has always been positive since COVID but indeed marks a decline this quarter, notably due to the lower point in the renewal cycle of mail equipment that was mentioned by Geoffrey, reinforced by the macroeconomic headwinds. In Europe, we can see the same trends as last year, but some countries are performing well or very well, notably The U. K, which demonstrates good performance in all solutions. Moving now to Slide nine to see the bridge between Q1 last year and Q1 this year.

This waterfall chart illustrates the key driver behind the revenue evolution from Q1 last year to Q1 this year. So starting with €261,000,000 that we published last year, we see a €4,000,000 positive scope effect from the acquisition of Packets Concierge. Digital and Lockers contributed positively, with Digital adding €4,000,000 and Locust adding €3,000,000 However, the Mail saw a €14,000,000 decline, the majority being related to hardware. Currency effects were neutral this quarter, as you can see on the right hand side, with the U. S.

Dollar stronger at the beginning of the quarter and a softer at the end. The net result is a €3,000,000 decrease or minus 1.1% reported, bringing us to €258,000,000 Over to you, Geoffrey, to give some details on our digital business.

Geoffrey Gaudet, CEO, Quadient: Thank you, Laurent. So let me now comment on some of the key Q1 highlights for our digital automation platform. In the quarter, we announced a strategic partnership to enhance our cloud payment capabilities for businesses globally and of all size. As a result, we are now providing businesses of all size with a unified platform to manage their B2B payment more efficiently, securely and at a scale into our cloud based financial automation solution. Looking at the bottom left of the slide, you’ll see that our share of SaaS customers continued to grow consistently, now even reaching 84.6% at the April.

This steady increase reflects the successful transition of our SaaS digital automation platform. And finally, in the middle and the right section of the slide, you can see that Quadient received again multiple leadership recognition from permanent analyst report this quarter. So I’m not going to detail each one, but I want to specifically highlight our recognition in Gartner and Forrester reports for Financial Automation. And I want to stress that this is particularly important because for years, we’ve been very well positioned in Customer Communication Management segment, as you know, and have also successfully expanded into what we call the Customer Experience Management or CXM. But when we first launched our account payable or accounts receivable automation solutions, we were not even in these rankings.

Now we have achieved the same high rankings in AP and AR as we have in our established CCM and CXM offerings. These recognition truly illustrate Quietro’s strong positioning as a best of suite leader for the Office of the CFO segment. Now I’d like to move to the next topic. I am thrilled to share an exciting development in our digital financial automation strategy. Simply put, the acquisition of Syrensia.

Syrensia, for the one of you that don’t know, is a recognized e invoicing platform, PDP, officially registered with the French government, which is a strategic advantage as France prepares for mandatory e invoicing. Cerensia solutions are already widely adopted, and they process nearly €200,000,000 invoice annually already. There are strong synergies between Quadient customer segments and Cerezia clients as well. Their portfolio of customers include marquee major industry leaders like Total, Energy, Dalkia, ERATEP or ARTP, but also small and midsized business alike. They also have a strong penetration within the established professional networks such as text and CERFrance, the accounting and the business advisory network in France.

Additionally, I wanted to bring that Cerencia brings a number of valuable relationship with recognized institutional partners and key certification for us moving forward. This acquisition significantly enrich our IP, Intellectual Property portfolio from a software perspective, allowing us to expand our addressable market with a truly end to end invoicing platform embedded in our financial automation solution. This strategic move immediately equips us with a first class software IP for its PDP platform, where we call in French the Partner Dematerialization Platform, which is registered again by the French state, and is ready to meet the upcoming regulatory requirements. It also include what we call a PayPal Access Point, which can give us access to the broader European market for invoicing standards. So naturally, this acquisition strengthens Quadient’s finance automation portfolio, providing us with a greater control and more autonomy, which is actually an advantage in this dynamic market environment.

It also help us deliver what we call an enhanced value proposition for our clients, which create for us significant upsell potential as we have more modules within the suite. And as businesses transition to mandatory invoicing, we can now offer them a complete suite, our obviously newly acquired PDP capabilities, online payments, invoicing, account payable, account receivable, credit analysis, hybrid mail, etcetera. We’ve got one of the largest, if not the largest platform in this domain. And finally, I wanted to conclude that this acquisition for us unlocks significant cross sell opportunities within our existing customer base, and obviously, I’m referring to our mail customer base. Our French mail segment alone serve over more than 60,000 customers, small, midsize and large customers, many of whom will naturally transition from paper to digital invoicing.

Cerensia capabilities perfectly position us to meet this demand, and this extend also to our European client as well. This move further accelerate our Mail Customer Digital transformation, providing additional pathways to adopt the invoicing solution, now soon legally mandated across Europe. Over to you, Laurent.

Laurent Depessage, CFO, Quadient: Thank you, Geoffrey. So now in numbers, when looking at the sales for digital, the bar chart on the left shows an acceleration in subscription related revenue compared to last year, Q4, and also the full year of last year. It’s growing now by 11.1%, and it’s allowing the total revenue growth from €63,000,000 in Q1 last year to €67,000,000 this quarter. It’s a 7.2% organic increase. This growth is driven by strong performance across all regions, particularly in North America and The U.

K. Nonrecurring revenue was down year on year, reflecting high comparison basis in Q1 twenty twenty four due to some perpetual deals, while Professional Services are up. Our annual recurring revenue has reached €237,000,000 on the up 9.6% on a full year basis. This reflects a robust cross selling with male customers and strong new customer acquisition in the Enterprise segment. While AIR evolution is affected somehow by volume, the commercial momentum remains very solid.

Now over to you, Geoffrey, for a business update on our Mail division.

Geoffrey Gaudet, CEO, Quadient: Of course, Laurent. I’m also very proud to announce that our solution offering, secure mailing and multi carrier cloud based platform has received what we call the FedRAMP authorization. This designation is a major milestone for Quadient as the FedRAMP authorization is the highest level of security review available for the federal government SaaS vendors in The U. S. This designation is significantly expanding the ability for us to serve The U.

S. Federal government agencies and is reinforcing our position as a trusted provider of secure compliance solution across all sectors. We’re also seeing client success, and I’ll give you one example illustrated by the expanded partnership we have with the University of Pittsburgh. Having long used our parcel locker system, they are now integrating our comprehensive mail management solution. This is another example that illustrates that the cross sell potential that exists across our diverse business segments and all our customers.

Over to you, Laurent.

Laurent Depessage, CFO, Quadient: And as anticipated, Mail revenue in Q1 twenty twenty five experienced a notable decline with hardware sales down by 15.8%. This was largely driven by the echo effect of the COVID period. With our contract being five year long, we are seeing fewer equipment up for renewal for this quarter. It’s a direct consequence of the lower hardware placement during the pandemic. In The U.

S, this trend was further amplified by a strong comparison base from Q1 twenty twenty four last year, which had benefited from the decertification that drove up and gave a boost to the sales, obviously, and by the ongoing economic uncertainty, delaying some customer decisions. Despite these headwinds, Quellent continues to outperform the market. Commercial momentum remains strong with double digit growth in cross sell activity to locker and a 50% increase in digital order intake. Looking ahead, we anticipate a stronger second half, supported by a growing portfolio of contracts up for renewal and notably due to the increase of contract that we signed after COVID and of course, also thanks to a robust commercial pipeline. Over to you, Jean Frederic, for our Locker business.

Geoffrey Gaudet, CEO, Quadient: Turning to Slide 15 and our Locker business. Our installed base reached approximately 26,100 units at the end of Q1 twenty twenty five, thanks to an accelerated pace actually of installation within our U. K. Open network. Now I want to share that the performance in The U.

K. Has been quite exceptional. As you can see on the slide, our open network there has expanded nearly now fourfold over the last fifteen months. And if we look at it over the same period, the volume of parcels processed has been multiplied by an impressive 11 times over the same period. Now this strong momentum is a direct result of the strategic partnership that we have established in this country.

And on this topic, I want to highlight that we have now just recently signed and extended our partnership, a significant extension with EVRI through a new deal, contemplates both an enlarged access to our lockers network and the consolidation of returns via our unique Dropbox functionality. Now we didn’t stop there. We also signed another strategic partnership with Stasher, offering travelers nationwide luggage storage service directly through our smart locker network. Both of these collaborations are expected to further drive volume and support continued adoption growth for our parcel locker solutions. Over to you, Laurent.

Laurent Depessage, CFO, Quadient: Thank you, Geoffrey. Lockers continue to be a standout performer, revenue rose from €20,000,000 to €27,000,000 this year. In fact, it’s a 12.2% organic increase and a €4,000,000 COP effect that resulted in this 35.4% reported growth with Packets Concierge performing as expected. The bar chart shows strong growth in both subscription related revenue, up 11.4% and hardware sales, up 12.7%, as mentioned by Geoffrey. This growth is fueled by increased usage in The U.

K. And France and higher monetization in The U. S. A one off placement in the international region also contributed to hardware sales. I’m also very pleased to say that we have signed another hardware sales deal in international for around €5,000,000 that will be recognized throughout H2 twenty twenty five.

With this new significant contract, a growing installed base and large volumes perspectives, notably in The U. K, as mentioned by Geoffrey, Lookers are well positioned for continued expansion. Moving to Slide 17. This slide summarizes our Q1 twenty twenty five performance across all business lines as described. Despite the overall 2.5% organic decline, a strong performance in digital and lockers, notably on recurring revenue sets a solid foundation for the rest of the year.

Now over to you, Geoffrey, for the outlook.

Geoffrey Gaudet, CEO, Quadient: Thank you, Laurent. So we acknowledge that Q2 is expected to face probably similar market condition to the previous quarter and that the ongoing global economic disruption, particularly their impact on The U. S. Market, remain difficult to predict at this stage. With this said, I also want to be very clear.

We remain very confident in our ability to deliver a stronger performance in the second half of the year. Obviously, our confidence is supported by clear drivers. First, we have had a good start of the year and profitability with an improved EBITDA margin across all our solutions. Moving forward, we anticipate, first, a recovery in Mail, particularly in H2, as the renewal cycle of our Mail equipment installed base should reverse and presenting naturally greater opportunities for us to place new equipment. We also project sustained strong momentum in digital and in lockers and both also with further improvement in their respective profitability.

We also have quite a promising order pipeline across all our solutions. So naturally, in this context, we are maintaining Quadient full year 2025 guidance. We continue to expect an acceleration in both organic revenue growth and organic EBIT growth compared to our 2024 growth rate. Thank you. And with that, we are ready to take your question with Laurent and then Sophie.

Conference Operator: Thank you. Our first question comes from the line

Geoffrey Gaudet, CEO, Quadient: Can

Gabriel, Analyst: you hear me?

Maxon Suri, Analyst, BNP Paribas: Yes.

Gabriel, Analyst: Okay. Okay, okay. Just one question on my side. We are seeing a slowdown in ARR organic growth, three points, I think, on Q1. Can you just tell us in which sector and countries specifically the quarter was more complicated in digital, please?

Laurent Depessage, CFO, Quadient: I will take this one, Gabriel. So thanks for asking the question.

Gabriel, Analyst: I can tell you, Laurent.

Laurent Depessage, CFO, Quadient: Can you hear me now?

Gabriel, Analyst: It’s better.

Laurent Depessage, CFO, Quadient: Yes? Is it better?

Gabriel, Analyst: Yes. That’s

Laurent Depessage, CFO, Quadient: So good question. So first thing, I think, is that the ARR extrapolated growth over four quarters is basically the first quarter time frame. So obviously, the sensitivity is higher. Q1 is usually lower in terms of booking due to phasing. But the real impact is probably the volume that, as you know, we have volume non committed volume on which basically we take the average of the past six months.

And yes, notably in France, we have lower volume, which is not necessarily a bad thing because it means that those volume that for part of it are production volumes are, in fact, digitalizing, which means that overall, this is probably taking us 1.4, one point five to two points of growth on this ARR. And I think that’s the main topic that explains the gap between the full year last year and this Q1, which I don’t think is a strategic part of the ARR. And I think it’s good news probably on the margin side. Okay.

Geoffrey Gaudet, CEO, Quadient: And then if I can complement Laurent on the regional side, we had probably a double digit growth in The U. S. The U. K, in particular in Europe was also a very strong country, stronger than the growth rate of the ARR. That’s probably the two outliers in terms of stronger growth in this first part of the year.

Also, the indirect channel represented by the mail sales organization has clearly started the year from a very strong footing because they had a growth rate of their booking of more than 50%. So in the contribution, the channel from the Mer side, the cross sell has definitely been stronger than the direct sales in Q1.

Gabriel, Analyst: Okay. Very clear. Thanks a lot.

Geoffrey Gaudet, CEO, Quadient: You’re welcome.

Conference Operator: Thank you. Our next question comes from the line of Maxon Suri at BNP Paribas.

Maxon Suri, Analyst, BNP Paribas: Yes. Evening, everyone. Thanks for the presentation. Maybe a first question for me is regarding mail. Could you give us a sense of a breakdown between the COVID echo effect that led to less clip material and the end of a decertification in The U.

S?

Geoffrey Gaudet, CEO, Quadient: That’s a good question.

Gabriel, Analyst: You could

Maxon Suri, Analyst, BNP Paribas: give a broad breakdown.

Geoffrey Gaudet, CEO, Quadient: It’s a good question. So for Q1, definitely, it’s probably the vast majority of the gap is coming from the COVID effect. Really, the opportunities, if you put yourself back five years ago, minus a few months, obviously, because we’re not waiting for the customer contract to be renewed, right? We’re engaging with customers before the renewal time. If you remember, we had those Q1, Q2 that were the deepest drop in contract renewal at the time and placement of hardware.

And therefore, you see that five years later on that. So that definitely is the reason why in Q3 and Q4 last year, we’ve seen already some dip in the placement of hardware. That being said, Q3 and Q4 twenty twenty four, it was definitely mitigated because then we had the de certification boost. So the de certification gave the opportunity on the other hand for salespeople to engage with customers to make sure we could obviously upgrade the machine before the densification. And so that’s why they were balancing those effects, which we’re not seeing anymore in Q1.

But definitely, I think it’s the lack of opportunity to create in the pipeline the discussion with the customer is probably the biggest portion of the impact that we see in Q1. And it’s also why we feel confident that we should and we do expect a recovery in Q2, in Q3 and Q4. We see at the beginning of Q2 the size of the pipeline naturally increasing as we see more opportunities coming up.

Maxon Suri, Analyst, BNP Paribas: Okay. Very clear. A few additional questions. It’s regarding the Sorencia deal. Could you come back, explain a bit more of synergy as you already have a PDP platform in France.

So what was lacking in your offer? And could you tell us a bit more regarding the origin of the deal? You approach them or there were per sale? And maybe for the future, what is the time line to integrate the solution into your offer?

Geoffrey Gaudet, CEO, Quadient: Good question. Thank you. So we’re going to try to be as complete as we can. So if we step back a little bit before I answer specifically the question in terms of approach on market, when we look at customer requirements, whether they are industry driven like a standard for the invoicing mandate or particular features that we believe our customer needs, always have an approach of basically make by a partner. And we decide from many criteria from time to time, either for tactical reason, bandwidth reason or opportunities under the value that we see to a partner.

In the case of the PDP, we had actually white labeled and we had made partnership with people that had made the development in that PDP capabilities. And therefore, we didn’t have the full IP of that particular solution. So that was the driver at the time. We felt that the partnership a few years back was a better way to spend our time in terms of R and D so that we could focus on other priority in terms of the development we wanted to do ourselves. We came across the Cerencia opportunity voluntarily because we obviously have we survey all the vendors in the market.

And we were quite impressed by Cerencia on multiple fronts. They’re one of the three players that did work actually at the time on the platform for the government, even though this one was abandoned. But we felt that they had a level of expertise and have demonstrated a know how in that particular domain that we were always appreciating. So we they were obviously on their radar for that reason for quite some time. The opportunity came to evaluate them and therefore, we could see that the PDP was an opportunity for us now to switch from a partnership to actually a buy.

And that is giving us the opportunity to have a lot more agility to integrate this technology within our stack. So we felt that the integration versus the partnership, right, with the other modules of the suites can give us more flexibility as we get into, I said, the early phases before the mandate comes. Just to remind you, the first date is going to be September 2026, so we still have quite some time in front of us. We felt that we could obviously provide stronger upsell opportunities and more flexibility to our customers, especially in our suite and platform approach, where obviously a customer can use one part of the platform and buy or upsell and we could upsell them additional module later. So that’s really the core drivers.

In addition to that, Serenzia is bringing to us a PayPal access. So aside of just having also the capability to address the French standards for invoice, with the PayPal access point being built into the IP of Cerencia, we can now have a similar approach in an accelerated view not just for the French market, but for the rest of the European countries that benefit from the paperless standard. And finally, we were also very impressed with the framework we call it on ETL, the capability to handle data, data manipulation. And we believe that should also provide us an advancement in the way we integrate with accounting and ERP systems because we have now more than hundreds different of those connectors built. And we believe that this should allow us to bring productivity, cost reduction in terms of the new connectors, but also the connectors we need to maintain.

So that’s a very relevant IP acquisition for us. And then finally, side of the team is the customer synergy. We obviously have some customers that are using both our solution and theirs, and we believe we can also leverage the customer base for the French market and penetrate further on that. And for the last part, I forget what was the third part of the question. Laurent, if you could help me.

Anne Sophie Jean, Head of Investor Relations, Quadient: The timeline.

Laurent Depessage, CFO, Quadient: Timeline is in the

Maxon Suri, Analyst, BNP Paribas: Well, it’s regarding the new timeline to integrate the solution, but my guess is that it’s going to be quite easy if the solution is already up to date and with a lot of connectors. Yes.

Geoffrey Gaudet, CEO, Quadient: We’re looking for a very fast integration because we also have looked at the architecture and the compatibility with our stack. So both on the solution level, but also from a pure corporate level, we’re looking for a very fast integration over the next few months.

Maxon Suri, Analyst, BNP Paribas: Okay. Very clear. Maybe just another quick one. So with Cerence, you have several PDP platform solution. Are you going to keep those different PDP platform?

Or is the goal to switch to only one based on the second tier IP?

Geoffrey Gaudet, CEO, Quadient: So it was related to different with the PDP we had connected with was corresponding to different needs, particularly that PayPal access in Europe, but also the different platform that we have. It is true that now that we have obviously our own PDP, we probably don’t have the same need for moving forward from those third parties.

Gabriel, Analyst: We

Conference Operator: will now take our next question from the line of Flavian Bourdemont at Bernstein. Please sir, go ahead.

Gabriel, Analyst: Good evening to the three of you, and thank you for taking my question. I have still few questions on the Cerence acquisition. Maybe we have more detail on the acquisition, but in terms of revenue and valuation, is it fair to estimate that the company generated between EUR 2,000,000 to EUR 3,000,000 of revenue last year? And in terms of valuation, considering that I understand that Transjar bottom line is negative, can we say that you acquired the company based on the low to mid single EV2 sales growth?

Geoffrey Gaudet, CEO, Quadient: So for those questions, Flavin, at this time, because it’s a fairly competitive market, we do not intend to share specific information as it relates to the revenue or the valuation of the company. That’s probably something we could do more later on as the time passes a little bit. But your ratio in terms of revenue, it’s a little less than 40 people in this environment. So I think that can help you get a good guess of what the revenue could be.

Conference Operator: We are now taking our next question from the line of Jean Francois Rongjo at ODDO BHF. Please sir, go ahead.

Jean Francois Rongjo, Analyst, ODDO BHF: Yes. Good afternoon. Just a question regarding The U. S. Situation.

You are well exposed to the North America with 59% of the global sales. With the current situation and the tariffs, could you appreciate the risk for your business on the potential impact in terms of the business and the earnings for the coming months?

Laurent Depessage, CFO, Quadient: I can take that one, Jean Francois. Thanks for the question. So as you all know, the tariffs assumption has been evolving up and down and then change the trust. So it’s not it’s a moving target in the end. That being said, since there was probably a couple of weeks that it was put on hold for ninety days, and we got back to about 10% tariff impact.

Clearly, for us, it’s, at this stage, still a relatively limited impact, and we are talking about a couple of million euros And we obviously took the decision very quickly to increase our prices on the North American hardware, I mean, U. S. Hardware, mostly dockers and mail, to offset completely that impact. So for us, at this stage, it’s a contained and, I would say, offset by price increase. Might have more good news because basically, U.

K. For us is one of the only facility we have because we outsourced the rest, but we produced the high end of food and entertainment in The U. K. That negotiated the free trade, so it’s helping also in that front. So we don’t know how things will evolve, but I think we are pretty much covered.

And we did anticipate with more stock as well during the year, so it gave us a little bit of visibility to the end of the year.

Geoffrey Gaudet, CEO, Quadient: If I can add a different perspective. Historically, Jean Francois, as you know, during the years where we had high inflation too, we have demonstrated our capability to increase the price. So we do have the capability in our relationship within our contracts and with our customers to be able to deliver in what Laurent mentioned about the price increase.

Jean Francois Rongjo, Analyst, ODDO BHF: Okay. Thank you very much.

Conference Operator: Thank you. I hand the conference back to the speakers for written questions sent through the webcast. Thank you.

Anne Sophie Jean, Head of Investor Relations, Quadient: Thank you. So we have no further questions on the line, so we can start by answering the questions that have been asked in writing. So starting with the questions on Serendia acquisition. Will Serendia be included in your AIAP solution? Or will it remain an independent solution?

Geoffrey Gaudet, CEO, Quadient: So the goal is clearly to have that part of the platform that we have. Our approach to the market is that we do believe that for most companies, with a few exceptions when they’re very large, that companies, in particular CFO, because that’s the one we’re really focusing on, do not intend to have independent solutions from independent vendors that they have to integrate, connect and have multiple training. We believe that the simplicity of having one platform that could respond to most of their requirement and their need is what the customers are asking for today. And that’s why we see those acceleration in terms of the bookings and the various aspects. So naturally, we do part to offer the PDP as part of the platform.

That being said, on the PDP itself, because of the unique need in the French market, in particular, for coming, there are other vendors that may not have a PDP. So we do feel also that we could develop the business and allow other people to use our PDP technology, and therefore, we will resell the access to that PDP independently. But the ballpark and the majority of what we expect is obviously on our platform. This would be a slight benefit for us.

Laurent Depessage, CFO, Quadient: But just one comment as a CFO. For sure, being able to be equipped by Quayient invoicing here acquired from Cerncia It can be a first step, and we all know what is management of invoices incoming or outgoing. We need also to integrate the processes of the cash collection and the process of the payment. And that’s what we will offer on top of that with APR and the integration that Geoffrey mentioned that will be swift.

Anne Sophie Jean, Head of Investor Relations, Quadient: Okay. So next question, also on Cirendia acquisition. Will you continue to do M and A this year following the acquisition of Cerenzia? What kind of targets will be interesting for Quadient’s growth?

Geoffrey Gaudet, CEO, Quadient: It’s a good question. As you know, today, we are one of the largest platform in our environment. There’s nothing hidden about this, but we were obviously larger even than the Esker platform in terms of revenue and size and numbers of customers. And we have one of the largest in terms of module and capabilities that are being integrated to date. So we definitely ourselves more as a consolidator.

That being said, in all the target that we have shared with our community, with the investors, the 2030 target, the 2020C target, we do not need any acquisition to achieve those numbers. So our approach and also, I should add that we have also a large team of developers that is based that is super efficient and that the edge of everything that we do to the interim of technology, integrating AI capabilities. So we feel that we have the organic capability to build the capabilities that we need. That being said, we remain opportunist. Like we’ve been in the past, we have integrated in the platform a few other capabilities such as the form digital form capability a year ago.

There was an acquisition that was made out of Canada. So when we see some opportunities and we think that they are valuable for us and we can have a good return on them, obviously, we do not hesitate.

Anne Sophie Jean, Head of Investor Relations, Quadient: So now we can move to lockers. First question on lockers. What is the utilization rate of lockers in The U. K. In the first quarter of the year?

Geoffrey Gaudet, CEO, Quadient: So we do not share, unfortunately, the utilization by base for various reasons. What we could say is that the increase on the different flows are significant in Q1 even over Q4. So we’ve seen now probably for six quarters in a row, almost 100% increase quarter over quarter. So we see really the an exponential adoption, which is the combination of the numbers of players we integrate and they were not integrated all at the same time. So as the quarter passes, we integrate new partners.

And for each partner or the carriers in that particular case, we do not enable all their capabilities in the same quarter or same months. And if I summarize, even though there are probably 10 different point of integration, two of the main one could be delivery flow or it could be the capability to manage the returns. So those capabilities are being enabled over time. And on top of that, we obviously have an installed base that increased and we have been accelerating the numbers of installation. And in addition, there is obviously the patterns and the usage of the consumers that take the habit to use a locker.

And as you could see definitely that as there’s a curve of adoption and that makes all the reason why quarter over quarter we still have today an increase in usage at a significant quarter over quarter. That being said, our locker are still not full naturally in The U. K. Even though some location already full, but not the entire network. And we’re looking at obviously managing the profitability of each location.

So when we have a locker that have reached full profitability or usage, then we look sometime at either finding another location close by or increasing the numbers of boxes or column in that particular location. And that’s the progress that we are enjoying today from The U. K. Utilization.

Anne Sophie Jean, Head of Investor Relations, Quadient: Our mini lockers represent the €5,000,000 deal in the International segment.

Laurent Depessage, CFO, Quadient: So we don’t disclose for each deal that we do a number of lockers because depending on the configuration of the size of what comes into it, it would vary. So it wouldn’t mean that an ASP lower or higher would be better or worse. So in a nutshell, it’s a couple of hundred that we are talking about, but we don’t disclose specific number on that.

Anne Sophie Jean, Head of Investor Relations, Quadient: And we have one more question on loggers. Could you elaborate on the Avery contract? Does it make a difference to the profitability of the local base?

Laurent Depessage, CFO, Quadient: Let me take it. Okay, I can take it. So Avery, as you know, is one of the carrier that is extensively using our network in The U. K. Obviously, as any open network, the more volume and the more usage we get, the more profitability we get because basically, you have apart from that, you have almost only fixed cost.

So that’s the beauty of the model is how do we maximize the volume. And with already a good partner, we’ll have the opportunity to become an even better partner in the coming time and will generate more volume than generated for the given open network that we have. So yes, it’s good news for both, clearly, revenue but especially for the bottom line.

Anne Sophie Jean, Head of Investor Relations, Quadient: Thank you, Laurent. So now let’s move to the questions on mail. Could you detail the performance in Europe? What was the performance for mail in Europe, which has not been suffering from The U. S.

Base effect? Is it due to is the decline due to the pharma attrition?

Laurent Depessage, CFO, Quadient: So in Europe, the performance in Mail is quite consistent with what we had in the past. So there is no significant drop. As I mentioned in the first slide, the revenue by geography at the group level, you saw the NORM segment was declining, which used to be growing in the past, and that’s purely the impact of mail. In Europe, the performance has been relatively similar to the past quarters. So there is nothing specific to be mentioned apart from the fact that Geoffrey mentioned the profitability by for the group and by solution was have been all evolving positively.

And that, of course, one of the reasons is the integration of Pharma. It is now delivering the benefits of the restructuring that has happened last year.

Anne Sophie Jean, Head of Investor Relations, Quadient: So next question, still on mail. So from a general perspective, the decrease in revenue is mainly from nonrecurring revenues. Are those nonrecurring revenues less profitable than subscriptions? Is this effect explained the good performance of EBIT in the Q1, while overall, the revenue decreased?

Laurent Depessage, CFO, Quadient: There is a dilutive effect of hardware. That’s true. So that’s part of the answer. And the other part is the pharma integration.

Anne Sophie Jean, Head of Investor Relations, Quadient: Thank you, Laurent. So last question on mail. If mail customers have not renewed their subscription in Q1, does it mean they stopped using their mail equipment and returned it to you?

Laurent Depessage, CFO, Quadient: So I’m just going to take that one as well, Olivier. Thanks for the question. I’m trying to get the sense of the question behind. I will answer in two ways. The first way is here in Q1, the drop is not necessarily due to the fact that people have stopped their contract.

It’s really due to the fact that when we position the hardware or when we change the hardware of a customer, we recognize the hardware. Here, the phasing of the installed base made the Q1 relatively low comparatively to the past in renewal, also due to the COVID effect because five years ago, we had lower placements. So five years down the road, after the five year contract, we have less opportunity to replace this machine and to generate again the revenue. That being said, in a normal situation, regardless of Q1 or any other quarter, if one day a customer decide to stop, he only has the opportunity at the end of the contract. If he wants to before he has penalties, he needs to pay basically to the amounts to the end of the contract.

And if he stops, he will hand us back the machine, which is a good news for us from a supply chain standpoint because we do remanufacturing for most of it.

Geoffrey Gaudet, CEO, Quadient: I think for Monet, we could say that our consolidation rate have not moved. It’s really what you described, which is the missed opportunity of new discussion that just didn’t happen, which could be delayed, by the way, but it doesn’t mean that there is an end to the contract.

Laurent Depessage, CFO, Quadient: It’s not the reason for the decline in Q1 for me.

Anne Sophie Jean, Head of Investor Relations, Quadient: Thank you, Laurent and Geoffrey. So we have no further questions at this time, so we can close the call. Thank you very much for attending this presentation and for your questions. Our next call will be on the September 24 for our half year ’20 ’20 ’5 results release. In the meantime, we look forward to meeting some of you in the coming days during our shows.

Thank you, and have a good evening.

Laurent Depessage, CFO, Quadient: Thank you. Thank you.

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