Banqup Group SA (BANQ) Earnings Call Transcript

Good morning, everyone, and welcome to the Banqup half year financial results presentation. Thank you for joining us online today. I'm Alex Nicoll, Head of Investor Relations at Banqup. This morning, our CEO, Nicolas and CFO, Koen, will present our half year results and provide further insights into our continued transformation into a pure-play SaaS provider. Following the presentation, we'll open up the floor to a Q&A session. [Operator Instructions] Before we begin, I would just like to draw your attention to the disclaimer, which is presented in front of you under which -- under which outlines the legal framework, which this presentation should be presented. I'll assume you have had an opportunity to review. I'll now hand you over to our CEO, Nicolas.

Thank you, Alex. Good morning, everyone, and thank you for joining the call and listening to this replay if you are listening to this replay. When we last spoke at the end of FY '24 and our results in February, I outlined a clear strategy, focus, product excellence and execution. And I'm pleased to report at the end of H1, we are exactly where we expect it to be. Banqup is today the only listed company combining e-invoicing, e-payment and e-reporting. Comparisons are not straightforward. As our growth follow a trajectory rather than a linear progression, it's sometimes very frustrating to look at these numbers. Our focus remains on our 3 core markets as I described in February, France, Belgium and Germany, while transforming Banqup into a true SaaS company. That's very important for us to become at the end of December, a true SaaS businesses. The execution has been visible for H1 and remain the main focus for 2025. In June, we confirmed the divestment of 21 Grams in Sweden. And shortly after H1, we also completed the sale of our U.K. printing business in beginning of August. Based on our messaging, our auditor also recommending removing the Belgium print operation from continued operation, Koen will share more details in a moment. This is important for our analyst friend when you put a note and you refer to achievement of target or missed targets to really compare apple-to-apple. Operationally, we reduced OpEx by almost 3.5% year-on-year, which represents EUR 1.1 million of costs. It's an FTE optimization going from 636 to 570. Other major milestone, obviously, is our rebranding of Banqup, a new ticket. But it's also aligning the name of the company to the full value proposition of our solution. Our product line continued to be differentiated through its integration between e-invoicing, e-payment and e-reporting and the market is noticing. Starting in early September, we will announce major customer wins. I wish I can do it today, but we will wait to beginning of September. New partnership, I can tease some of the large big 4 accounting firms. And also, we are very proud of some new government contracts around our eFaktura World product. All this information will be disclosed in early September and continue to showcase how Banqup will achieve and overachieve I would say, our guidance. Finally, we appointed Chrystèle Dumont as our new CRO. It's important to notice our true impact inside the transformation of our revenue operation. Our pipeline is strong, giving us full confidence, giving me full confidence on delivering our FY '25 targets. So referring on the free markets, and it's important to me to ensure all of you on this call that as of today, we don't see any delay on the regulatory side. This is a very important component. On the Belgium side, it's important to notice that Belgium is moving as planned, as planned to us as we have experienced to other markets where we see the market usually choosing to go live last minute on this solution. The example of Serbia in January 2023, when they went live, a few weeks before going live, only 20,000 companies were registered into the government e-invoicing solution and in January, it was 200,000 company. We see the same case today in Belgium. Last minute is almost cultural. As we look at the people registration, which is the only data that we can find today on the market, you have 300,000 company in Belgium register over 1.2 million VAT registered company, which means in the next 4 months, we will be very busy. And this is quite exciting that will also increase revenue very much at the end of the year, which stress often my dear Koen -- my dear CFO. In France, the communication is -- communication is kind of a king in France right now. Everyone talks about PDP, about e-invoicing but we're still far away from the mandate. The mandate will be live September 1, 2026. For Banqup, we are -- we are positioned in a market under another brand called [ eFaktura ]. The eFaktura platform has been selected as one of the 10 providers to do a pilot for the government out of 90-plus other solution in the market. We are feeling very good about our positioning in France, it's via ECMA, the accountants in France, and we are looking forward to our continued partnership with ECMA. In Germany, we've seen -- Germany has a different mandate. They started in January, the possibility to receive e-invoice. It was mandatory if you had a certain size of company. And the mandate will be live in January 1, 2027. So there is still time to go. But because of this January 1, 2025, we saw a growth in volume of almost 50% in the first H1 on our platform. So we are feeling significantly good about our positioning in Germany as well. So in terms of highlights, in terms of numbers. So again, very, very important to keep in mind that this number needs to be comparable to what are we aiming to be continued operation and discontinued operation, Koen will go deep in his notion in a minute. Today, we are excited to report almost 21%, 20.6% growth -- in organic growth in subscription. This is the right direction and reinforce our guidance that I will give a little bit later. We are still challenged on our gross margin, on digital gross margin, it should be a lot higher. As I explained previously, this has to do with all the different legacy products that we have inside the organization. As we are migrating to one platform, we will see a significant improvement over a few months on the digital gross margin. With that, Koen, I'll let you take it.

Yes. Thank you, Nicolas, for your business update and for maintaining a strong focus on transforming Banqup Group into a pure digital SaaS company. In addition to driving focused business development, we continue to prioritize the divestment of noncore activities. In H1, we qualified, conform IFRS criteria, the print business in U.K. and Belgium has discontinued operations, as Nicolas already said. I will not explain all the technical details of that, but there is an appendix to this presentation, providing you with the information over the 7 divestments that we have completed or that are ongoing at this moment over the past 18 months. Where it is explained how these certain divestments impact the presentation of our figures. I think this presentation will be published on our Investor Relations, please consult that appendix to get more insights and more details on that one. I recognize that this matter makes the reading less straightforward of our figures. In the attached figures, results from Belgium and U.K. print businesses are excluded from the line items and are presented separately at the bottom as discontinued operation. Just for information, annual revenue of these discontinued operations amounts to EUR 16.5 million. Of course, historical figures were restated as well. So as Nicolas already said, for analysts in this call be careful in comparing your models with the presented figures. Digital service revenue grew 3.4% overall and 7.7% -- 6.7%, sorry, organically. Within this segment, subscription revenue increased by 20.6% year-on-year organically, reflecting our strategic focus. We expect a strong H2 supported by the mandatory rollout of e-invoicing in Belgium. Transaction revenue growth is primarily driven by our client money portfolio, which began ramping up in H2 2024. Gross margin in Digital Services, as Nicolas already said, but on top, I mentioned the following statement, is temporarily under pressure as we scale our platform infrastructure to accommodate expected volume growth in H2 2025. On top of that, we have the legacy migration software that we are executing at this moment and will continue in H2. Traditional communication service revenue continues to decline, in line with expectation, but this trend weights on overall gross margin. The loss, you can see at the bottom from our discontinued operations approximately EUR 7 million. It's largely noncash. I would like to stress that one, driven by goodwill impairment of EUR 3.7 million and currency -- historical currency exchange variances on the 21 Grams, so the Swedish krone of approximately SEK 4 million, alongside less significant items. As Nicolas already said, we further reduced for the second year, our year-over-year operating expense structure despite a challenging inflationary macroeconomic environment. The reduction was primarily driven by a decrease in full-time equivalents from 636 to 570. As depreciation was stable compared to H1 2024, actual cash outflow decreased at same level as the operating expense, namely 3.4%. An additional cost saving plan has been installed to reduce expenses in the second half of the year with a structural saving amount of EUR 1.2 million, which will yield, of course, further benefits in 2026. Overall CapEx remained stable compared to last year. However, we observed a strategic shift. We noticed increasing investment in payments and a decrease in our e-invoicing document business. The CapEx in documents investment focused on finalizing requirements for the Belgium and French markets as well as enhancing features to improve the accountant user experience. In the context of payments, investments are primarily addressing new regulatory requirements under the EU QTSP and DORA frameworks. On this slide, I will highlight 3 key financial parameters, cash flow statement, equity evolution and net financial debt position. We reported a negative cash flow from operations of EUR 5.5 million mainly driven by cash flow from operations of EUR 3.5 million and the variance coming from our working capital management of EUR 1.8 million. Investing cash flow was positively impacted by EUR 23.7 million in proceeds from our divestments partially offset by EUR 8.8 million CapEx in the continued business, see previous slide. The financing cash flow resulted in a cash outflow of EUR 5.4 million, primarily reflected EUR 4.9 million in debt and lease repayments and EUR 0.8 million in interest payments. The last bar in this graph is -- represents cash held by companies classified as assets held for sale or cash movements due to divestments. Our equity position decreased from EUR 148.3 million to EUR 125.6 million, mainly due to the current year's net loss of EUR 26.2 million inclusive of the discontinued activities, and partially offset by EUR 3.7 million positive impact from currency exchange on the 21 Grams transaction, as earlier announced. Our net financial debt position improved, decreasing from EUR 29.5 million at year-end to EUR 24.7 million or decreased by EUR 4.8 million over the first half year, largely thanks to the divestment proceeds. Management continues to actively work on the refinancing of the group. Summarizing this insight and our financials, I do hope you remember the following key points. Digital subscription grew organic with 20.6%. The gross margin in our digital business is temporarily under pressure due to the scaling of our platforms in advance of expected volumes boost in the second half year. Simultaneously, the indirect cost structure as well as the cash spend are declining with 3.4%. Cash proceeds from divestments are supporting the further decrease in the net financial debt position. Nicolas, I hand over back to you.

Thank you. Thank you, Koen. That was very clear. I know it's a complex organization as we are transforming this business. And so I thank you all to stick with us and with this complexity. We will look forward to be a lot more simpler when comes H1 next year. I look forward to this call in a year, to be honest with you. But in terms of targets, we are maintaining our guidance. We're feeling extremely comfortable in the position we are today and the guidance that we have. So we have one guidance on growth -- subscription growth at 25%, and we have also another guidance on free cash flow that we will be free cash flow positive by the end of 2025. So with that, I want to thank you all for the time you took of your day to listen to us. There will be a publication with more details on our Investor Relationship website to ensure all the legal documentation are published. And we look forward to seeing you. I think the next time we see each other will be in the result of FY '25. And we have a Q&A. Alex?

Thank you, Nicolas, and thank you, Koen. We don't appear to have any questions today. So that concludes our H1 2025 presentation. As always, please feel free to reach out and contact me and enjoy the rest of your week. Thank you very much.

Thank you.