Vusion S.A. (VU) Earnings Call Transcript

Good day, and thank you for standing by. Welcome to the Vusion First Half 2026 Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Olivier Gernandt, Investor Relations Officer. Please go ahead.

Thank you, Nadia. Ladies and gentlemen, good afternoon to you all, and welcome to our first half 2026 results presentation. With me today are Thierry Gadou, our Chairman and Chief Executive Officer; as well as Thierry Lemaitre, our Deputy CEO, Finance & Corporate. Thierry Gadou will start with some remarks on the Group's business performance. Thierry Lemaitre will then make some comments on our financial performance, and both Thierrys will end the presentation with some comments on our full year outlook. After these remarks, we will 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 Vusion'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, as usual, also be made available on our website after the call. And with that, it's my pleasure to hand you over to Thierry Gadou for his opening remarks.

Thank you, Olivier. Good afternoon. Good morning, everyone. Thanks for joining our conference call. I'm very pleased to present, with Thierry Lemaitre, our results for the first half of the year. So in summary, you already know our sales figures. We delivered around 30% organic revenue growth in H1, including an even higher growth in VAS revenues, which are revenues from software services and non-ESL solutions, and recurring VAS were even up by over 70% year-on-year. Our operating income grew sharply, much faster than our top line, as well as our net income, driven by our product mix and an improvement in both our VCM, viable cost margin, and OpEx ratios. And by the way, this is both true for IFRS and adjusted figures. Our operational free cash flow also surged by over 50%. Vusion's balance sheet is strong with a positive net cash position. Finally, with the strong H1, we reiterate our full year '26 profitable growth guidance. So let's review the semester's performance. As you know, the first half was in line with our expectations, delivering strong organic growth, around 30% and even 37% at constant currency and foreign exchange rates. This growth was mostly driven by America, but with an improving momentum in Europe. EMEA revenues and order intake grew in the first half. The momentum is good in the region. We win more deals and expand the business with our large customer base. Higher growth and more wins are expected in the second half, both in the grocery sector and other verticals. We expect revenue growth of 15% to 20% for the full year in EMEA. In the Americas, we'll have soon completed the very successful deployment of EdgeSense at Walmart in the United States, which is the first stream of a broader partnership. Other projects involving new solutions are underway, as well as expansion in new geographies, which will continue driving the activity. In addition, we have a strong pipeline with major North and South American retailers. We anticipate good momentum in H2 and strong future adoption in the region over the coming years, especially as the strong value of our new EdgeSense platform and the impressive results it delivers is now beginning to be visible at scale. So I won't comment further the detailed sales number; we did that during our last conference call at the end of July. But here are just a few additional comments from an overall market perspective. First, our market share and leadership in the market has strengthened. In H1, our revenues are more than twice that of any of our competitors. And if you look at our leadership in -- it's even stronger in non-ESL revenues as our VAS revenues is worth several times the accumulated amount achieved by our main competitors. Second, what makes us very proud of our performance since the beginning of the year and confident about the future is that, as I mentioned earlier, we'll begin to see a scale the value of the platform we created. I'd like to illustrate a few things around this idea. As you know, over 50,000 stores are now operated in our cloud platform, that's already 2/3 of our total stores installed base, and over 0.5 billion cloud managed devices, ESL, smart trails, AI cameras. Our cloud activity is massive with, for example, over 1.5 billion API calls last month. In terms of new use cases, with our technology, stores [ become ] guided stocking and [ peaking environments ], and we see a surge in the volume of guided tasks, which are guided peak-to-light and guided stock-to-light tasks, which have now reached over 0.5 billion events per month. This is driving productivity, e-commerce growth and better on-shelf availability for our customers. We now begin to see shoppers using in-store product finding and shop-to-light features, already at over 1 million times a week. And this is growing fast. You can see on social media how shoppers are excited by these new features. And we have here a video with the selection of those. So we thought it might be interesting to have a 2-minute video here, for those who are... [Presentation]

And it's not only Walmart, also you've probably seen one of our large customers in France begin to test location-aware, real-time personalized promotions at the shelf. And here again, a little video that you may not have seen on social media. [Presentation]

The shopper side, let's look at the computer vision dimension. We have now close to 200,000 shelf AI cameras processing millions of product pictures a day. We train our algorithm now and AI models with massive volumes. And our strong competitive edge in this market is that we can leverage a comprehensive and unified IoT platform where digital label, smart [ trails ] and AI cameras are synchronized and collaborate for more precise recognition and better insights, thanks to the compounding value of signals. In this area, '26 is a major milestone as we're about to finalize the fifth generation of our [ CV AI ] technology, which we plan to scale very fast next year. Vusion AI is -- you know that the next big wave in in-store technology, and Vusion is positioned to be the winner in this market. So you see all these new use cases are not just exciting concepts on PowerPoints or websites. For Vusion, they are already a reality at scale, and no IoT platform in the world is even close to this functional scope and implementation scale. And it's just the beginning. Finally, we're just starting to grow our retail media business with the In-Store Media acquisition, which should be finalized this semester, together with our partnership with Media Performance, we become a leading European player in in-store retail media. The goal here is to gradually digitize and connect stores, to turn store traffic into media dollars and help our retail customers build true omnichannel digital media networks. So a lot is going on, and we clearly have completed our shift from a pure ESL company into a full platform and a retail digital transformation enabler. And that is very visible in this semester's performance. All this is obviously the engine driving our VAS revenue expansion. You know our target of VAS growth for the year is around 40%. And if you take into account on top of that the ISM acquisition, which should be finalized this semester, our VAS business should end this year at pro forma revenue of around EUR 400 million, a figure multiplied by 4x since '22 in just 4 years, representing at year-end over 20% of total revenues. And as you know, we target closer to 30% next year. So again, that's why H1 is such a milestone from a commercial and strategic standpoint. Let's see now with Thierry Lemaitre why it is a major step also from a financial standpoint.

Thank you, Thierry, and we are really proud today to present our first half earnings. Beyond the revenue growth presented by Thierry, a significant increase in profit was achieved, and this is visible on all the lines of the P&L. Plus 34% adjusted variable gross margin, plus 120 basis points. Plus 38% adjusted EBITDA, plus 240 bps. Plus 82% adjusted EBIT, plus 330 bps. Plus 81% adjusted net income, plus 260 bps. Profitability increased faster than revenues and the adjusted net income stood at EUR 77 million, which is 9% of sales, up 2.6 points compared with H1 2025. On the following slides, as always, we are reporting both under IFRS standards and also adjusted terms. And we show here the main adjustments of the key financial indicators. The 2 adjustments impacting revenues, EBITDA and EBIT, are those relating to the warrant fair value amortization impacting negatively the revenues. This IFRS [indiscernible] Walmart has generated $3 billion payment to Vusion, which could take place much before the end of 2028 considering the current project with Walmart. The second impact relates to the average selling price, and this adjustment started reversing in Q3 last year. This explains that, together, these 2 adjustments have a more limited impact in H1 2026 than in H1 2025. Two more adjustments are impacting the financial results. First, the application of the IAS 21 standard applying on the intercompany receivable and payable between Vusion Inc., the U.S. entity and [indiscernible], the parent company. And second, the remeasurement of the fair value of the outstanding warrants granted to Walmart. This first half, the company's share price decrease translated into a lower liability under IFRS and, therefore, a profit in the financial income that amounted to EUR 96 million. Let's now have a look at the drivers of the improvement of the adjusted EBITDA margin. It moved up by 2.4 points from 16.7% in H1 2025 from 19.1% in H1 2026, thanks to, first, the VCM improvement. Here the main driver of the VCM rate improvement is the mix, which gets more favorable to VAS. VAS represented 15% of the total revenue H1 2026, versus 14% in H1 2025, and thus, show a significantly higher VCM rate than ESL, as previously mentioned. Second impact is the OpEx, which are increasing, but at a lower base on revenues, reflecting our continued operational leverage. On the following slide, the items between EBITDA and EBIT [indiscernible] mainly coming from the IFRS 2 expense relating to the performance share plan at EUR 12.3 million and the amortization expense of the assets. For the first time in H1 2026, EBIT margin exceeded 11% of sales, and this should continue to increase in the coming years. The financial income in H1 2026 stands at EUR 83 million, of which minus EUR 90 million and EUR 96 million are IFRS adjustments, which we already presented before. The adjusted financial income stands at EUR 6.3 million, close to the EUR 6.1 million of H1 2025. This is mainly the result of the net financial income coming from the net cash position for EUR 2 million and the [indiscernible] generated by the high volatility of the exchange rates. CapEx, they reached EUR 33.6 million in H1 this year, compared with EUR 98.5 million last year. As mentioned when we presented the full year 2025 results, the investment in the manufacturing lines was completed in H1 this year for EUR 3.6 million, and the cash CapEx, the CapEx funded by the Group, which reached EUR 30 million, which is slightly below 4% of sales. Let's now move to the cash situation to end this financial presentation. The net cash position at stands at EUR 197 million, which is a EUR 241 million decrease compared to the end of 2025. This was anticipated and shared with you previously. The main drivers of this evolution are: first, a continuous improvement of the operating free cash flow, which we define as EBITDA minus CapEx funded by the Group. This one reached [ EUR 127 million ], a 50% increase compared to last year. Then as anticipated, the down-payment credited before 2026 started reversing in H1 and EUR 222 million out of the EUR 415 million of down-payments from the balance sheet at the end of 2025 were reversed in H1 this year. Therefore, there is only, I would say, a more limited portion to be reversed in H2, closer to EUR 190 million. The Group also paid EUR 79 million taxes in H1, which includes the full payment of 2025 income tax for EUR 53 million, plus EUR 26 million down-payment for 2026. All these elements explain the negative free cash flow of EUR 221 million in H1. And in addition, the Group had EUR 15 million in dividends and EUR 15.5 million in share buyback. Regarding share buyback, we are willing to launch a new share buyback program soon to reach the overall EUR 30 million envelope that we had set previously, subject to market conditions, of course. When reviewing all the items impacting the change in net cash over H1, it is clear that 2 of them only impacted H1 and will also impact H2 but to a lower extent. The full year 2025 tax paid in H1 for EUR 53 million will not impact H2. The dividend paid in H1 for EUR 15 million will not impact H2. And the reversal of down payment in H1 for EUR 222 million should not exceed EUR 193 million in H2, which is a EUR 30 million improvement. Considering the minus EUR 241 million change in net cash from H1 and the net cash position of EUR 197 million at the end of H1, the Group should end up the year 2026 with a positive net cash position before M&A. I will now hand over to Thierry for the guidance.

Thank you, Thierry. Indeed, it's a great financial performance. And well, the good news is it should continue in H2 because we reconfirm our target for the full year. First, an annual adjusted revenue growth expected between 15% and 20% at constant exchange rates and tariffs. And here, maybe I'll just pose -- because Thierry, you could give us maybe a bit more insight on how to anticipate the impact of tariffs and current exchange on our H2 sales target figures.

Yes, of course. On this graph, we want to share with you what we expect for the full year revenues. We confirm that Group revenues should grow between 15% to 20% at constant tariff conditions and euro-dollar foreign exchange rates versus 2025, which means a full year adjusted revenue range at constant tariff conditions and euro-dollar between EUR 1.75 billion and EUR 1.83 billion. We expect the ForEx impact between 2025 and '26 to be approximately EUR 50 million, and the change in [indiscernible] approximately EUR 100 million, of which EUR 70 million or $80 million credit notes issued to customers that we charged for tariffs in 2025. This means that the full year adjusted revenue should stand between EUR 1.6 billion and EUR 1.68 billion.

Okay. So that's the way to take into account these changes in foreign exchange rates and the tariffs change, in particular, the reimbursement of tariffs that were invoiced last year. And obviously, these 2 changes were not anticipated when we issued our first guidance, right, at the end of February. Yes. So back to the outlook. Total VAS revenue is expected, as I mentioned, to increase organically by around 40%, with an even higher growth rate in recurring VAS. And as already said, with the ISM acquisition, we should end the year at around pro forma revenue in VAS of EUR 400 million, i.e., over 20% of total revenue. With our strong pipeline in Europe and America, we are expecting a positive momentum in H2 and a growth of order intake for the full year '26. In other words, we target over EUR 1 billion in order entries in H2, with a particularly strong Q4. So the news flow will intensify over the coming months. The Group also targets improved profitability with adjusted EBITDA margin expected to increase by more than 100 basis points year-on-year. And this improvement in profitability will be accompanied by an increasing operating free cash flow compared to '25. And the total free cash flow should improve in H2 versus H1, as Thierry mentioned, because operating cash flow should increase, and there will be in H2 around EUR 100 million less cash-out than in H1 regarding the tax, the dividends and the lower down-payment reversals. So we will maintain a strong balance sheet at the end of the year with a substantially positive net cash position before ISM financing and even after the complete reversal of Walmart's down-payments. And our strong balance sheet, obviously, is enabling us to finance our organic and external growth. We saw recently a comment somewhere that a capital increase would be necessary some time. Well, let's be clear here. There is no reason, no need, no plans for such a thing in the coming years. And I'll remind those of you who were with us in '22, that within our Vusion '27 projections, we have mentioned that we would keep a very reasonable net debt level of maximum 2x EBITDA. Anyone can see today, we're in a much better position than that. So needed to be said. One last point we're announcing today, Thierry mentioned it briefly, we intend to launch a new share buyback mandate in H2. On March 3, at the beginning of the year, we launched the previous one, which expired on September 14. We have acquired close to 150,000 shares for EUR 16.7 million. So the objective is to continue in order to reach the amount initially planned. That's it for H1. I will now hand over to you for questions.

[Operator Instructions] And the question comes from the line of Aurelien Sivignon from ODDO BHF.

I have 3. The first one, you mentioned, I think, during the call that nearly 200,000 Captana cameras are now deployed, compared with the full year target of 150,000, if I'm not mistaken. Does it give you confidence that VAS growth could come in above around 40% currently expected for the full year? Then regarding the R&D investment related to the new solution you mentioned on EdgeSense for computer vision. Should we expect a step-up in CapEx during H2? Or would you say that H1 was broadly more or less the run rate for the full year? And last one, has the development of this new solution correlated with the announcement of new contracts as was the case with EdgeSense and Walmart a couple of years ago?

We will start with the questions, but I will ask you to repeat your last question because I didn't really get it. But anyway, let's start with the 2 first ones. No, the difference between the 150,000 and the 200,000 is mostly because -- well, among the 150,000, some which were supposed to be newly deployed cameras this year, some are still under deployment. But the 200,000 is the total, I would say, the total fleet installed today. So it's just a difference between flows and stock, if you want, right? But nevertheless, this is a very, very exciting stream of activity for us. We're investing a lot in this field. We know it's the next big unlock in retail. All retailers need it. There is still a lot to do. But this year, we're very excited about the next generation we are building and finalizing already in large-scale pilots. So our platform is really very promising and, as I already said, Computer Vision will show as a big driver of growth next year for sure: growth in our VAS but also growth in our top line. Second, I think it's for you. I don't believe there's going to be a big change in our CapEx.

No. Absolutely. R&D CapEx should increase in the course of H2 versus H1, but to a limited extent. So you should not expect a significant increase in R&D CapEx between H1 and H2.

And back to you now for the third question, which we didn't get.

All right. The last one was related to the new solution that are currently under development, either EdgeSense, Captana, Computer Vision or others, [ as linked ] to upcoming contract announcements, I mean, similar to the relationship between EdgeSense and Walmart?

Well, the -- I don't know exactly how to interpret your question. Of course, everything we develop today is to engineer growth. And that means to sign contracts, and preferably big contracts. So that would qualify for a lot of the things we do. Innovation in Vusion is really focused on big problems of retailers. And when we crack it, basically, there are big contracts behind that. So the answer is yes, but it's not specific to any of the different solutions we are developing, whether it's in retail media, whether it's in Computer Vision, obviously. And obviously, the development of all our cloud features, because what you saw today, I mean, frankly, this is, for me, the most important thing. When you see the usage of the platform on a number of features of the cloud platform, this is driving revenue. This is driving the value also for our customers. So that's very important. So I guess the short answer is yes.

[Operator Instructions] And the question comes from the line of Gilles Crespel from Alizes.

Congrats for [ good ] results. I had only one, if we can. You mentioned that, and you confirmed, that your Walmart rollout will be completed by end '26. When we look at bookings currently, and sales trends, we can expect in '27 is somewhat substantial sales growth in a way. And I wanted to know if you could shed some color on how you prepare for that phase, how you consider G&A will evolve beginning of next year. I do understand it's probably early to discuss the matter, but still, it's going to be substantial. So keen to have your insights or color on this.

Yes. So I think the general sort of point we made already at the end of July is that our pipeline is very substantial. We again expect a quite substantial amount of order entries -- new order entries for this year, which obviously will fuel growth next year, and an acceleration in H2 around EUR 1 billion of orders. That is coming from both existing customers and new logos and also new products because, as I mentioned, we are significantly scaling today our non-ESL solutions revenue. And this is going to continue to accelerate. I mean, I think I mentioned the numbers. They are very impressive in terms of growth since we started that strategy. So we are really -- so I mean, there are several drivers of growth to compensate for the end of that part of the world map program, which is rollout of EdgeSense in the U.S. So there are new projects around new solutions. There are new geographies and you know that [indiscernible] international. And there are a lot of existing customers who expand the business with us, and new logos. We've announced some in '25, we've announced some in H1. We announced some new -- we'll announce some new in H2. So all this is -- there is not something that's [indiscernible] just the overall growth of the portfolio, of customers, of products, of projects with all customers. And at the end of the day, we consider that our pipeline is sufficient today to continue to target our initial plan, which, again, initial ambition, which we set ourselves in '22, at the end of '22, which is to be north of EUR 2 billion. I think it was EUR 2.2 billion. We are obviously going to achieve that with a significant increase in the VAS business, but you see that business is increasing, and there will be new projects. So it's not -- it's a lot of things contributing to the continuation. The market, again, is not finished with the Walmart rollout in the U.S. There is around 20% penetration in the market today. There is a lot to do. And there is a much lower penetration in our VAS solution, which are computer vision, digital retail media, obviously, all the cloud services and the EdgeSense services that we deliver. So I think it's multiple streams of business that will contribute to compensating the cliffs as you mentioned. And so it's going to be gradually visible over time. That's -- it's sure that fact of accelerating the program has been putting in some revenue. And so it's more difficult to achieve. But nevertheless, the market is excellent. Our performance is excellent. So we see a very promising pipeline.

Okay. What I see is that you would focus on the top line and would not consider any, well, lower cost reductions should this expectation not materialize over the next quarters. At this stage, we don't see such an -- well, we don't see bookings going up so much that this would be completely smooth, and hence my question, but I can understand your point.

No, I understand your point. It's -- I see your point. You mean adjusting OpEx for the case where -- okay. Well, I think, as you said, we are confident on the top line. We have shown in the past, I remember the COVID period, that we know how to adjust. We've had those moments in our times where there was also ups and downs and we've seen our ability to adjust. But frankly, in a market that has a potential, that we will talk about on the -- in November about our Vusion '30 Plan, it would be a very strange thing to start about restructuring or this is -- I mean, the market has very strong potential in the future. There is still -- there is strong needs. The stores, I don't know if you all realize how much the stores and the modernization of stores is becoming central, more and more central in the strategy of retailers all over the world, and we are embodying this strategy, like -- so I think -- yes, we're not in the mindset of saying we're going through preventive restructuring because we think there might be moment. I think that's not what the market desires. There is strong, strong needs in the market. And so yes, it's not the right, I think. But we also show, I think, every quarter, every semester that we do care about profitability and that we make very careful choices in managing cash, in managing costs, in managing -- our revenue per employee, just to give you a sense, I mean, has been nearly multiplied by 3 over 15 years, right? So we're talking about -- we're very careful about managing financials. But yet, we're in a growth business and there is growth potential in our portfolio of solutions. So we need to be also betting on that and not looking only at a short-term volatility but also the structural growth. Sorry for this long answer.

[Operator Instructions] And the question comes from line of Loco Douza from Berenberg.

Just one question on my side, on the guidance on the margins. So H1 adjusted EBITDA margin was up 2.4 points year-on-year, but your full year guidance is more than 100 bps of improvement. So should we expect the margin improvement to slow down in H2? I understand the In-Store Media integration plays a part, but is there anything else?

Well, I think that what drives the EBITDA margin up is, on one side, the VCM rates, and on the second side, the OpEx to sales ratio. We do not expect the VCM rate to significantly increase in H1 versus H2. And on the OpEx side, the OpEx to sales ratio used to improve the past years in H2 versus H1, but it was on the back of the strong growth of revenues between H1 and H2. We do not anticipate a significant revenue growth this year between H1 and H2. Therefore, the OpEx-to-sales ratio should show a limited improvement, and we do not feel the need to change the guidance that you've got on the EBITDA margin.