Vusion S.A. (VU) Earnings Call Transcript

Good day and thank you for standing by. Welcome to Vusion Q3 2026 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, Vusion's Investor Relations Officer. Please go ahead.

Thank you very much, Heidi. Good afternoon, ladies and gentlemen, and welcome to Fusion's Third Quarter and 9 Months 2026 Sales Webcast and Conference call. Joining me today are Thierry Gadou, our Chairman and Chief Executive Officer; and Thierry Lemaitre, our Deputy CEO, Corporate and Finance. Thierry Gadou will begin by reviewing the group's key operational and financial highlights for the third quarter and the first 9 months of 2026. He will also share his perspective on our business momentum and conclude with an update on our full year outlook. We will then open the floor to questions, which both Thierry Gadou and Thierry Lemaitre would be pleased to answer. Before we begin, let me remind you that some of the statements made during today's call may be forward-looking and are therefore subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For further details, please refer to the safe harbor statement included in our press release and on Slide 3 of today's presentation. Our third quarter sales press release was published earlier this evening and is available in both French and English on our website, fusion.com. Today's presentation slides are also available on our website under the Regulated Information section and a replay and a transcript of this call will be made available on the website following the event. And with that, it's my pleasure to hand you over to Thierry Gadou for his opening remarks.

Thank you, Olivier, and good afternoon, good morning, everyone. Thanks for joining our conference call. Very pleased to present with Thierry Lemaitre for our sales figures for the third quarter and year-to-date 9 months. So first, in summary, Vusion delivered another strong quarter with adjusted revenues increasing by 25% at EUR 445 million and 9 months adjusted revenues, up 28%. At constant foreign exchange rates and tariffs, this would be a 41% growth. Order intake were up 10% year-on-year at EUR 462 million. is our best Q3 ever. Our VAS revenues, which are revenues from software, services and all non-SL solutions continue to expand with a strong growth of 45% in Q3. It's our best last quarter ever and 40% for the first 9 months. Within that, recurring VAS revenue increased by 77% over the first 9 months and annualized recurring revenues, ARR reached EUR 154 million, up 82% year-on-year. Finally, with this strong quarter, we are reiterating our full year guidance with global revenue growth of 15% to 20% at constant exchange rate in tariffs around 40% VAS revenue growth and an EBITDA margin increase of more than 100 basis points for the full year. So let's review the third quarter in a bit more detail now. IFRS revenue reached EUR 433 million, up 24% and compared with last year. On an adjusted basis, group revenue reached EUR 445 million, up 25% year-on-year. And at constant exchange rates and tariffs, adjusted revenue growth reached 49%. At this point, I will let Thierry reexplain as the last time the exact adjustment of constant rates and tariffs. So Thierry, if you can just give, again, an explanation on that.

Let me remind first while we made such guidance. First, we experienced significant volatility in euro-dollar exchange rate between 25% and 26%, with the rate moving from 1.1% in H1 425 to 1.16 in H2 2025 and H1 '26. We had anticipated the potential for such currency fluctuations, which is precisely why we set our 2026 revenue guidance at constant exchange rates compared with '25 I would also like to remind you that in 2026, as was the case in 2025, the group expects its U.S. dollar-denominated cash inflows and outflows to be broadly balanced. As a result, foresting fluctuations should primarily affect reported revenues, while their impact on gross margin and EBITDA should be significantly more limited. The second source of volatility relates to U.S. dollars 2026, the U.S. Supreme Court's ruling at two main consequences. First, tariffs spread in 2025 were fully refunded by U.S. Customs and Border Protection in Q3 2026. In turn, Vusion refunded its customers the portion of these tariffs that have been passed on to them and recognize as revenues in 2025. Second, new tariffs ramped in 2026 albeit at a rate, Vusion also passed on part of these additional costs to certain customers. As a result, reported revenues in 2026 is affected by several tariff-related effects, making hole comparisons with net only five less mining full. And this is precisely why we report revenue growth at constant exchange rate on tariffs to neutralize these effects and provide a clearer picture of the [indiscernible] underlying business performance. Now for Q3 2026 more specifically, [indiscernible] at constant tariffs on euro dollar exchange rate stood at EUR 529 million, which is a 49% increase versus Q3 last year.

Thank you, Thierry, for this explanation. So over the first 9 months of the year, our IFRS revenue reached EUR 1.25 billion, while adjusted revenue amounted to EUR 1.28 billion, representing year-on-year growth of 30% and 28%, respectively, and at constant exchange rates and tariffs, adjusted revenue growth reached 41%. In terms of geographical performance, growth was driven by both strong momentum in both our two regions. So in EMEA, revenues reached EUR 330 million over the first 9 months of the year, up 11% year-on-year, with growth accelerating in Q3 at 20% and growth year-on-year. The momentum is good in the region. We win more deals and expand the business with our large customer base. The increase in order entry since the beginning of the year is now translating into a ramp-up in deliveries and revenue, and this momentum is expected to continue over the coming months. business is also well balanced across the region with particularly positive momentum in France, Germany, the U.K., which, by the way, the U.K. is now our third largest market in Europe. Scandinavia, Spain and Turkey. And as some deployments are accelerating in the fourth quarter, we expect a revenue growth of 15% to 20% in the EMEA region for the full year. If we could look at the rest of the world, so the Americas and APAC region, revenues reached EUR 954 million on an adjusted basis over the first 9 months. up 35% year-on-year, primarily driven by the United States. This strong business momentum continues to be supported by the deployment of edge sense at Walmart in the United States, the completion of which is expected in the coming weeks. In parallel, our partnership with Walmart is expanding to new geographies, Mexico and now Canada and several projects involving new solutions are also underway, some of which are at an advanced stage and should lead to deployments in the near future. In addition, Vusion has a large and growing pipeline of pilot projects with retailers in North America among these, Vusion has recently signed an agreement with a prestigious North American specialty retailer in the nonfood sector, now beginning deployment across around 200 stores in the U.S. and Canada. And more generally, our U.S. sales pipeline is at an all-time high, and we anticipate strong adoption momentum over the coming years across our entire ESL and VAS portfolio. Regarding the growth in other entries. In the third quarter, Global entries reached a strong EUR 462 million, up 10% compared with the record level of the third quarter of 25%. This outstanding momentum was largely driven by the EMEA region with significant contract wins from several major retailers in Germany, as well as new orders in France, the U.K., Austria, Scandinavia and Turkey. In the rest of the world, solid order entries were notably supported by the signing of a new agreement to deploy our next-generation platform at Walmart Canada, following you remember the agreement signed in Mexico in the first half of the year and this represents another major deployment project for '27. Over the first 9 months of the year, global order entries reached EUR 1.14 billion and close to EUR 1.6 billion on a 12-month rolling basis. Fusion continues to anticipate strong order intake momentum in the fourth quarter, supported by its robust sales pipeline and ongoing negotiations. The group is targeting approximately no change versus what we said a month ago, EUR 1 billion in order entries for the second half of the year, and we expect full year orders to exceed the level of '25. The other highlight of the quarter is the acceleration of VAS. So in the third quarter, this reached EUR 77 million, up 45% year-on-year, representing slightly more than 17% of total revenue. Over 9 months, VAS revenue reached EUR 202 million, up 40% and accounted for approximately 16% of Vusion's total revenue versus 14% in '25. So within that, the recurring has reached EUR 100 million over the first 9 months. That's a growth of 77% compared with the same period in '25, and it's driven notably by continued strong momentum in Fusion Cloud. Our cloud installed base has nearly doubled over the past 12 months, reaching over 600 million connected devices at the end of September. And on an annualized basis, our recurring VAS revenues reached EUR 154 million in Q3, up 82% year-on-year. So subject to the successful completion of the ISM acquisition, which should be completed before the end of the year. Fusion's pro forma annual VAS revenue is expected to reach approximately EUR 400 million in '26 guidance is confirmed with this third quarter, strong third quarter. So we confirm the growth and profitability targets that we announced with the publication of our annual results in February '26. So adjusted revenue growth of 15% to 20% at constant exchange rates and tariffs. And here again, I will ask Thierry to give a precise explanation of what that means in terms of reported versus revenue at constant dollar and tariffs. Thierry, maybe you can comment showing which is the same this chart...

This chart provides an overview of our full year revenue expectations consistent with the guidance we shared during our H1 earnings call. So we confirm that the group revenue is expected to grow by 15% to 20% in 2026 at constant tariffs on euro-dollar exchange rates compared with 2025. This translates into a full adjusted revenue range of EUR 1.75 billion to EUR 1.83 billion on a comparable basis. We expect the negative foreign exchange impact between 2025 and '26 to be approximately EUR 50 million, assuming a euro-dollar has change rate of 1.16 for H2 this year. But given the current evolution of the eurodollar slate, this impact could even be lower than that. In addition, we anticipate a negative impact of approximately EUR 100 million from changes in U.S. tires. This excludes in credit notes issued to customers to recent tires that have been passed on to them in 2025, the full EUR 68 million impact was recognized in Q3 2026 in both adjusted and IFRS revenues. So taking these two assets into account, we expect full year 2020 adjusted revenues to range between EUR 1.6 billion and EUR 1.68 billion subject, of course, to movement in the euro/dollar [indiscernible] rate during Q4.

Thank you, Thierry. So in other words, no change in our guidance here. We reconfirm also our guidance of approximately 40% growth in VAS revenue with a stronger growth in recurring VAS revenues we anticipate an improvement of more than 100 basis points in adjusted EBITDA margin and a continued growth in our operating free cash flow. And with this, I will hand over to -- for questions.

[Operator Instructions]. We will take our first question. Your first question comes from Hugo Paternoster from Kepler Chevreux.

Great. The first question I have, I would just have three is on pricing and especially the competition in Europe, especially again in Germany. Just wonder how competitive the tender was in Germany. And those your head can allow you to maintain your a follow-up on that, should we expect the German wins to contribute already this year? Or should it flow into the next year? The second question will be on the order intake and especially on the VAS order intake. Currently, what is the share of the recurring VAS the vast that you have in the order book as of the end of September. And the last question is a bit broader question, but - could we have an update on the ramp-up of Carrefour, the U.K. ramp and also the ramp-up that you have in Mexico?

So on pricing, but we are -- any deal that is of significant size as always, an aspect of, let's say, competition. We are not alone. So on the pure hardware side of the deal, there is a competition. We also have differentiation. And because in the cases, particularly of some of these German deals, we have been also selling in the Athens platform, which is unique today in the world. So we have our, I would say, our pricing power when it comes to strong innovations. So that's a general situation of the market. There is obviously a price competition like in any market, but we're also driving a lot of the market with innovation and very innovative products. So that's how we maintain a reasonably good momentum in gross margin, as you have seen over the past few years because our gross margin our -- sorry, viable cost margin are increasing in percentage. The second part of your question on pricing was about the ramp-up? I didn't exactly get the connection with the pricing.

Yes. The part was regarding the German wins and just wonder when it should flow into the revenue, whether there is some revenue that could be generated already in Q4? Or is it mostly for next year?

No, no, it's going to -- most of the other entries, they are usually -- it takes a bit of time with manufacturing time, et cetera. So it's for next year. SP-5 Okay. SP1 Regarding your second question, I think we tried to answer. We give the VAS revenue. We give the recurring VAS revenue when we give the annualized recurring as revenue. So at the end of September, the recurring part of our VAS is in annualized terms, EUR 154 million, which means that is the revenue that we have for starting for the next quarter. So that's a part of the question. I think the total VAS is going to continue to grow significantly. And so as I said, in pro forma terms, given integrating also the ISM acquisition, should be around EUR 400 million this year. So we expect that to be higher next year. And then the ramp-up of Carrefour, you mentioned Morrison, yes, those are projects for which deployments are now underway and visible. So the ramp-up of Carrefour are already visible in a number of markets. but it's the beginning. So it's -- there is still a lot to do. Morrison is also deploying. They are already at over a few hundred supermarkets deployed. So it's moving well, and it's going to continue in Q4 and the first half of '27.

Okay. And the last one was Mexico with Walmart. Just an update on the situation there, please?

Yes, yes, yes. So it's -- the rollout is going well. We have well, we've announced this during the first half. And so the rollout is already started and going very well. And we're very pleased that now we've signed also the rollout in Canada. So we are expanding in Walmart International. And obviously, we couldn't do that if the rollout in Mexico is not going very well, and we also have a few other -- another banner under test in Mexico because we had already two and we had a pilot also working quite well in the third the third banner in Mexico, which has quite a number of convenience stores. So it's an important topic. So everything going well.