Barco N.V.

Carl Bussche - VP, IR Jan De Witte - CEO & Executive Director Ann Desender - SVP & CFO

Guy Sips - KBC Securities NV Beatrice Allen - Berenberg Marc Hesselink - ABN AMRO Bank N.V. Stefaan Genoe - Banque Degroof Petercam S.A.

Good morning, ladies and gentlemen, from pretty much all over the world. I'm Carl Bussche, Head of Investor Relations for Barco.

Very pleased to welcome you to this conference call on the full year results 2017. Today with me are CEO, Mr.

Jan De Witte and our CFO, Mrs. Ann Desender.

Both Jan and Ann will present and provide some extra color on the results of the full year and also the second half. And we will do that using the full year '17 earnings presentation as a script for the call.

The presentation is available on our investor portal barco.com since early this morning, and I assume which you have downloaded or find in the meanwhile. In case you would have trouble finding it, send us an email, send it to me or to Ann Bouckaert, and we'll sort it out.

Following the presentation, we foresee some time for Q&A as well. And that's pretty much it for the introduction.

So let's move ahead. Jan, the floor is yours.

Thank you, Carl. And again, good morning.

It's a pleasure to, together with Ann, lead you through our full 2017 results this morning. 2017, which was a year during which we took many decisive actions to establish a stronger foundation, a foundation for sustainable profitable growth for the company and improved quality of earnings.

We made choices across the organization and, at the same time, intensified our management attention to operational efficiencies and gross margin accretion initiatives. And as you will see over the next presentation, a lot of that is reflected in the financials we delivered in 2017.

Let me start on Page 2 first with a high-level executive summary and then Ann Desender will take you deeper into the P&L. Three main messages on 2017 results.

First, a strong margin improvement, and I'm very pleased to say that we accomplished this across all of our divisions. It's a reflection that we're building capability, we're building attention to, in a sustainable way, operate at a different level.

We got EBITDA rate up by 1.9 points EBITDA, 20% up, very much driven by value engineering initiatives, mix, OpEx controls and several redeployments we did on the cost base. Second, top line in line with last year.

Orders up 2% on a reported basis. Reported sales were slightly below last year and flat if you correct or exclude the impact of the divestiture of the lighting business, a divestiture that we did very early in 2017.

And then third, as part of our focus to perform program, we drove increased focus and stepped up our focus on increasing efficiency, both operationally and commercially. But in parallel, we also did a strategic review of our business, which led to several redeployments of resources, while, at the same time, we kept our focus, we sustained our focus on innovation and growth.

And so overall, I'm very happy with the momentum that we have in the organization, a momentum that we were able to create around the focus to perform initiatives and, of course, with how that translates into the financials. And so with that, I'm going to hand it to Ann to take you into the numbers.

I'll take you through the divisional updates and the outlook.

Good morning from my side. I'm turning over to Slide 4, where we're having the key financials, the key highlights for 2017.

Orders and sales landed at €1.1 billion. You see up 2.2%, as Jan indicated, slightly down reported 1.6%, but excluding the impact of the divestment of lighting being flat.

And little impact from the currencies. If we would correct this one, then we are up in top line 1 percentage point.

Gross profit margin accretion 2.9 percentage points and, as such, arriving at 37.3%. Very glad to report that - and you will see this also later on, that this is also across all of the three divisions.

EBITDA achieved 9.9% on sales. And this in percentage points, up 1.9 percentage points, arriving at €107 million, which as compared to 2016 up €19 million.

Our free cash flow landed for the year at €40 million plus, which is some lower compared to 2016, primarily coming from a net working capital, the impact of lower advances on customer contracts from cinema. With this being said, our total net working capital is very strong and still negative, as a percentage of sales, 3.8%.

After a couple of material restructuring and impairment charges, actually - mainly noncash related, and I'll explain more in detail later on, we arrive at a net income of €24.8 million. Compared to the year before, this is a plus of €13.8 million.

Earnings per share landed at €2.01 per share. Slide #5 gives you more overview of the financials per semester, where we cannot only report a stepped up EBITDA performance over the full year, but you see we'd also did this in the second half compared to the first half.

Some more flavor on the second half. On orders and sales, both slightly lower than year-over-year.

Primarily in the second half, we had more impact on the top line of currencies. This is both from the CNY and from the dollars.

As you might note, the dollar then in the end doesn't impact our bottom line too much as we are very much naturally hedged. Gross margin improvement year-over-year with 3.4 percentage points.

Also here, accretion in all divisions, both a mix effect and then yielding the results from value engineering. With that, we also took care of our indirect expenses, which we contained in the second half.

You see a decrease year-over-year of 4% and also a decrease compared to the first half. And this resulted then in EBITDA for second semester of 10.4% on sales.

Thus, we landed on a full year EBITDA of 9.9%. Slide #6 gives you more the overview, the regional overview on orders and sales.

Sales flat in Americas. If you - there we have, of course, the biggest impact of the dollar and also of the investment of lighting.

So it would have been some up, but we report flat. EMEA minus 1%.

And then Asia Pacific minus 3%, which is a combination of the lower sales in cinema in China and then quite some very nice achievements across in the Asian Pacific countries. Some more color on the different divisions per region.

In Entertainment, we see cinema bottoming out. You have the impact of the lighting, which we divested, but this offset by a very nice increase in top line in Venues and Hospitality.

This is following the new launches of products which we did in the second quarter of the year. Enterprise showed a double digit increase.

We broadened the ClickShare portfolio, but also, in Americas, Control Rooms had a strong year, both on orders and sales; and showed there an increase - a very nice increase actually compared to the year before. Healthcare showed a double digit increase on the top line, winning market share primarily in the diagnostics market.

EMEA, minus 1% on sales and plus 1% on orders, so maintaining the level of last year. Cinema down.

Enterprise, up with strong ClickShare sales revenue for further expanding the channels and then also having softness in Control Rooms impacted actually, why we show here in a single digit and not a double digit increase on Enterprise. Healthcare, here, are in a single digit increase in the top line, with diagnostics and also supported by very nice results in surgical.

Asia Pacific down on Cinema China, with the other regions showing very nice results on the top line, both orders and sales. Venues and Hospitality really could deliver very nice results across all of the different countries of Asia Pacific.

Enterprise on Asia Pacific, as a whole, stayed stable. Here, we will see a pick-up of ClickShare.

In percentage, these are big amounts. But nominal wise, we are there really starting.

So quite a nice opportunity to grow there actually, offset then the softer performance in Control Rooms. And again, Healthcare also here gaining share, showing an increase both in modality and diagnostics.

With this being said, Healthcare, we are still not the biggest there but this gives a nice opportunity going forward. With that, I take you to Slide 7.

Our waterfall on EBITDA. You really see here, as we go across, how we achieved from 8% to the 9.9%, the stepped up profitability, the balanced execution, which was one of the things that we really wanted to go for as part of our focus to perform.

Despite impact that we are having on currencies, which was down of €8.4 million, of that actually only - mainly coming from the Chinese yuan. Sales, as reported, flat.

And then the big up on the gross profit, the gross profit margins again here across all divisions. And then the OpEx increased overall, so we maintained our investments both in R&D, growth initiatives, sales and marketing.

But 2017 really has been marked by a redeployment actions, and that's actually how we come here, so acquired a couple of things we really stopped, redeployed, and as such we could contain well our OpEx compared to the additional profit margins, which we realized. Slide #8 takes you from the EBITDA through the EBIT and to net income.

Improved EBITDA results, again that's where we're starting from. Depreciation and amortization for 2017 were some highest impacted by the full impact now of the depreciations of OneCampus and OnePlatform, then increased amortizations primarily on the MTT acquisition, a little or so on that less nominal amounts on Medialon.

The depreciations are better. The amortizations on the previously capitalized development costs were a loss P&L cost in 2016.

So that was down and upper for 2017, where we didn't have that anymore. And then we have the restructuring and impairment charges.

The big number you see, €32 million in 2017, is the result of different pivot decisions we took, with both in Enterprise and Entertainment. In Enterprise, the biggest one is X2O, where we looking for a divestment option.

This being said, we have reviewed the goodwill which we have on our balance sheet related to the previous acquisition, because it was an acquisition. And there we had to decide that we have to impair that amount.

In Entertainment, at year end, we decided to stop Escape. We decided already in 2017 that we would no longer fund the content sponsoring in Escape, and we're looking with partners who would do that.

After a surge there and first or more hopes, let's say, in that area, that didn't come through the results which we wanted, were looking for. And in that sense, efforts of our focused decisions which we take - took in 2017, we decided to stop Escape.

We also impaired a minority participation, which we are having in Entertainment in a company specialized - and one of the things we are doing is Sound for cinema. And we decided, on the operational footprints, to relocate the operations from Norway to Belgium.

For that, we took a restructuring provision. The €32 million primarily includes noncash items, so impairments, and around €5 million is restructuring provision, so cash items.

Taxes were some higher than last year. Effective tax rate landing at 26.5% compared to 20% the year before.

The higher really is the impact of the tax reform, both in the U.S. and in Belgium, which in total together have a nonrecurring impact of about €5 million.

This is a fact that we are having on our balance sheet, deferred tax assets in both countries, deferred tax assets on tax loss carry forwards, also on timing differences, which we adjusted to the lower tax rates. This is, of course, a noncash item and we are looking forward to the next year to, in both countries, pay lower taxes, which is a good thing.

Adjusting for that nonrecurring impact, we arrive at the tax rate of 16%. And then the noncontrolling interest in our EBITDA results, we still fully consolidate BarcoCFG, our cinema joint venture, which we are having in China, and it's 42% corrected so to speak or deducted from the EBITDA on that line.

You see the amounts lowered from €14.7 million to a minus €8 million, and this is coming from the lower results realized in that BarcoCFG, after the peak year actually they had in 2016. With that, we come to a net income of €24.8 million compared to rounded €11 million last year, and an earnings per share of €2.00 per share.

On cash flow and balance sheet. First, starting with our return on capital employed, achieving a 19%, which is 4 percentage points up versus last year.

That's the second year actually that we can show an improve of 4 percentage points compared to the year before. The free cash flow on the year landed at €40 million, helped of course with a continued solid gross operating cash flows.

The cash flow in the second half ended at €73 million. You might remember that the cash flow in the first semester was negative.

Our net working capital - total networking capital staying strong, still negative. And that was less negative, so to speak, compared to last year, 1.3 percentage points, which is impacted by a lower days payable outstanding, so - where we paid, on average, our suppliers on 58 days, which is five days less than the year before, and lower advances on contracts in progress linked to the lower top line in cinema.

DSOs stayed at the same level of the year before at 55 days and the inventory turns also equal at 3.6. With that, we arrive at the net cash, excluding the cash in the China joint venture, of €210.7 million per year-end 2017, which is an up of €24 million compared to the year before.

Okay. Thank you, Ann.

With that, I'm going to take you into the divisional updates, starting on Page 11, with Entertainment. First in terms of the markets, - and I think you've heard us talk about that over the past year, the cinema market is in a transition; as we anticipated, transition among several dimensions we have in China.

After peak year in 2016, the market there is slowing down somewhat and that's linked to, on the one hand, the saturation into the Tier 1 and Tier 2 big cities and moving of new cinema builds to the lower tier cities. In U.S.

last year, we saw the theater owners invest their money into theater layouts, new seats, theater configurations. Before, that money will move to new projectors.

And then on the other hand, in Asia Pacific, outside of China and Latin America, very much behaving like an emerging market with very good activity in terms of new installations. In terms of technology, it's clear now that the market will move to laser-based technologies.

That's what customers ask for, that's also what the different OEMs are working on. And this will lead to the replacement wave that we have been talked about from wave one lamp-driven digital projectors to the next wave with laser-driven digital projectors, as the first wave is both approaching their end of technical life as well as end of economical life.

In the ProAv/Events market, we see solid single digit growth in those markets, but also a move towards laser-driven projection, giving more and better lights to that industry segment. In both cases, cinema and ProAv/Events, we are very well positioned at Barco, with the broadest and the most mature laser portfolio in the industry.

And in addition with the new cinema joint venture that we announced early December, we're really putting ourselves in terms of the go-to-market capability and broadening capability as a depreciated player in the markets going forward. In terms of business highlights, Ann touched it at the bottom of the page, our focus to perform decisions, we decided at the start of this year to discontinue Escape, we had set ourselves a deadline in terms of exploring strategic partnerships.

And in the end, we did not find any that met our requirements in terms of the investments and the will to pull the content site of an Escape format. Second, an announcement that we sent early in January, we will move manufacturing of projection from Norway to Kortrijk and merge that with our existing manufacturing for projection here.

So we're fully going for a play to increase scale and scale efficiencies in projection manufacturing to further drive a capability to do value engineering, to do productive manufacturing and maintain competitive at the cost level, not just today but also in the future. In terms of financial result, you see them in the upper right hand corner.

Despite the negative growth in the Entertainment that we delivered in 2017, we did increase the EBITDA rate by two points. And again, that's a mix of value engineering and focus on some of the redeployments in that part of the business.

If you go to next Page 12 on Enterprise. First on the wireless presentation market, that is a market that remains full of opportunities, a market still in formation, pretty much across all regions.

Definitely an active competitive landscape, with several small new players coming and going, some are blatantly Mitsu and copies, and we leverage our intellectual property protection to deal with that. We also continue to invest in different functionality and the evolution of our ClickShare offering to stay ahead of competition in this dynamic market.

In terms of the control markets, the RPC, the rear projection cube market, that's the top of that market, very strong position by Barco, which we strengthened with a laser-driven RPC cube in the year, but it's also part of the market that is shrinking as the LCD product solutions are taking the midst of the market. That pressure on that segment is leading to a consolidation of a competition.

There's a few players that are in this segment, and it's definitely opportunity for Barco to further increase our market share in a somewhat declining market. In terms of our performance on the corporates, the ClickShare site, we continue a very strong double digit growth track across all regions.

We are further stepping up our investment in our go-to-market, extending coverage and reach within this fast growing market. On the Control Rooms, the order sales were down in the second half last year, in part reflecting some of the investment softness, but also very much reflecting the coming of LCD in the mid-market.

This is why, in terms of business priorities, the launch of UniSee, which is the Barco LCD offering for the control market was a very important event near the end of last year. We're in the midst of developing and delivering demos to our partners, to the integrators and building up the funnel.

I mean, so far, we got a very good reception of the market for this product that's seen as a real innovation, both in terms of quality of the image but also the innovation around the mounting and the serviceability of this proposition. In terms of ClickShare, we've now passed the 350,000 meeting rooms equipped with one of our ClickShare offerings.

We're continuing to build out the breadth of that portfolio as well as the geographic coverage. Other highlights.

On focus to perform, we divested of a small entity called Silex in the hardware for security and video. IP core is a very specialized type business for which we judge that, first, the performance would not reach the level that we expected but also we think other companies are better owners for that type of a business.

And we're looking into strategic options for the X2O, which is a signage and content management activity software that we have, again not reaching the performance that we envision. In terms of pure financials, upper right hand corner, I mean, solid growth in the Enterprise and at the same time increasing EBITDA margin by 1.8 points is this segment.

Page 13 for Healthcare. A market that, for diagnostic and surgical, continued a solid growth.

We did see some weakness for the modalities and that's linked with some of the cycles that big OEMs go through over the years. We do see, in the visualization and diagnostic imaging, a further consolidation of players and competitors in the western markets.

Again, for Barco, opportunity to further increase our share in those markets. And at the same time, in China, we see new emerging local players get into that market.

I'll come back to that in a minute. At Barco, we're playing well in Healthcare.

We're very strong in diagnostic, I mean, definitely the gold standard with the innovations that the business needs. Modality, we saw slower second half.

That's linked to some slowness in U.S., but we see it more as a cyclical. And then surgical was mixed.

We were flat in shipments, and that's in part linked to the longer cycles to get designed into the OEMs. But there, we're making very good progress over 2017 to sign up new OEMs that will go on to our surgical connectivity platform.

Linked to what I said on China, we - in the fourth quarter last year, we decided and stepped up our investment in country for country, with a focus on China. China is a place where, in Healthcare, to do well to get your fair share, you need to be local with R&D, with sourcing, with manufacturing and, of course, commercialization.

And so we are building up, organically, that capability at a very high base. In terms of financials, upper right hand corner, very solid growth on sales, strong growth on orders, and continued good accretion year-over-year in terms of the EBITDA rate for Healthcare.

So before going to outlook, I would say, in summary for 2017, very solid gain in EBITDA margin and EBITDA. I'm very happy to see each division posting gains.

And some of you heard me talk at the Capital Markets Day about building capabilities, making these type of improvements sustained, as we make them part of how we organize, how we manage and how we drive our culture. We did deliver this profitability improvement while maintaining R&D spending at a high level.

This is very important to ensure a healthy pipeline of innovative solutions for future growth. And I'm very pleased with the progress we made on focus to perform initiatives, both the ones focused on initiatives but also the strategic reviews and redeployments we could do.

And as a result of some of the choices we made, we did sacrifice some of the top line growth in the short term but also made our profit less dependent on top line swings. So this performance led the Barco board to the decision to propose a further dividend increase.

And we will propose, on Page 15, to the General Assembly to increase the dividend from €1.9 per share to €2.1 per share in alignment with our objective to deliver a consistent growth of dividend for our shareholders. So until here, 2017.

I'll give you a quick look forward into 2018. So first, while we're pleased with our performance in 2017, and definitely how it demonstrates that we are moving in the right direction.

We don't think we're finished improving our profitability and execution efficiencies. And so therefore, in 2018, we are going to remain focused on our strategic initiatives in order to deliver another year of EBITDA and profit growth; and at the same time, in parallel, continue improving the effectiveness of our sustained R&D investments to secure future top line growth.

And so with the management, we are focusing our executives, our leadership teams on three sets of priorities. The first one is around innovation effectiveness, continue to focus on leadership level investment on foundational technologies, whether they're in laser illumination, whether they're in bonding, whether they're in analytics type solutions, and of course, translate those innovations to commercial successes, combining hardware, software and services.

Second, expanding commercial reach. Many different dimensions.

We're further expanding the channels for ClickShare and UniSee. These are winning products on a global basis, where we're extending our market reach and our geographic presence across the main countries across the globe.

Like I said a minute ago, we're building out our in country for country footprint for Healthcare in China. We're going after our fair share in that market.

And then building out the new cinema JV over the year is going to be an important activity to really position as the continued leader in cinema industry that will go through what's more premium opportunities, premium formats. And then third, continuing to focus on operational and commercial excellence.

That's the initiatives in value engineering, manufacturing efficiencies, ThinkSales, and working capital and service focus. So that's what we're focused on.

In terms - on the next page, in terms of outlook for 2018, first assuming a stable economic environment and currencies at current levels, especially the U.S. dollar, we expect to generate further margin and profit improvements in 2018 on flat sales for 2018 compared to 2017.

This full year outlook on sale anticipates that, in the first half, we'll meet some unfavorable currency comparison, mainly the U.S. dollar; and then in the second half, we'll be offset by stronger sales on a constant currency basis.

And that's two main elements there, translating the launches like UniSee, the LCD offering of Control Rooms from opportunity to order to sales over the year. First quarter this year, very much focused on building the opportunity funnel and getting the forced orders in, but this is a type of product that is project based.

And then second, as well as the new offerings in replacement sales in cinema that we see for the second half of the year. And so with that, I've come at the end of the PowerPoint presentation.

I'm going to hand it back to Carl to lead to Q&A.

Okay. Thank you, Jan and Ann.

I think indeed we can now move to question-and-answer session. The operator will tell you, in a minute, how it works.

I'll make my usual additional comments here. So please limit yourself to two questions at the time.

And in case you would have more questions, please queue again. And by experience, it has shown to be the best way to ensure we keep everyone happy and also that we get a good mix of questions, and essentially we get all the questions eventually answered.

So over to the Operator.

My first two questions are on Entertainment division. Can you give us the split of the €533 million sales in digital cinema and Venues and Hospitality?

And is the EBITDA margin in the two sub-segments equal? And the second question is in the digital cinema.

What is the percentage of lamp-based laser phosphor projectors and RGB laser projectors?

Okay. Guy, I'll take the first question myself.

So 2017 Entertainment, the breakdown is as the following. So cinema is therefore 63% of sales.

Venues and Hospitality is good for 37%. Please take into [Technical Difficulty] '17, is for three quarters of year in terms of comparison to 2016, no longer counting the lighting activity, so that's one to be corrected, let's say; and to take into account when considering this breakdown.

Also looking really to the core segment of Venues and Hospitality, we saw a good mid- to high-single digit growth momentum in the [Technical Difficulty]. And next to that, on your question on laser phosphor, I think it was already mentioned by Jan during the Entertainment section.

So one 1/3 of the total cinema projector volume shift in 2017 was already laser phosphor, and we see actually the momentum increasing as we move on, so almost close to 50% of the projector shift in the fourth quarter of the year. So that transition is really happening quite fast.

Also in Venues and Hospitality, same transition is happening here but, let's say, it's in terms of timing coming a bit later and behind the evolution, we have experienced in cinema. Ready for the next question.

My first question would be, could you give me a bit more quantitive guidance on exactly where you expect EBITDA margin to go in 2018? Are we likely to see more than 20% EBITDA growth again?

Is that possible?

Yes, okay. Jan, you take the question on EBITDA guidance '18 and following.

Yes. So the overall guidance we gave you to was at Capital Markets Day last year is that, that we see medium term performance levels for Barco in the 12% to 14% range, and let's say that's 2020, with an ambition to steadily move towards that.

So that internally translates to an annual increase of about one point of EBITDA, and that's what we hold as guidance. We clearly did more in 2017, and that's result of some of the choices we've made.

But in terms of steady improvement, we're aiming for about one point year-over-year.

You announced discontinuation of Escape and working with customers to find the kind of satisfactory outcome. Does that mean that there are still additional costs to come?

And could it damage your relationship with better cinema customers later on?

Sorry. Okay.

Soover the past few weeks, we've communicated in person with the, let's say, 2000 max of customers that were early adopters of Escape. So we're handling this on a case-by-case basis to ensure, in terms of the transition, we help our customers deal with that.

We don't foresee big commercial issues. And we did, in some of the accruals, plan in some costs, if some activities - physical activities would be needed at those customers.

The first one is on the - on your growth target for sales growth. And if I calculate correctly, it's for currencies, your organic growth is more like mid-single digits for the full year.

And if you could confirm if that is true? And secondly, what will be the big driver?

And I think last year ClickShare was very strong. Do you still see a strong outlook for that business?

Is that, on the group level, the key driver for that mid-single digit growth going into 2018? And my second question [Technical Difficulty].

So the second one is on the margin. Last year, the 190 bps improvement was predominantly caused, I think, by the gross margin improvement.

You actually had little bit extra costs. How do you see them going forward?

Also there, I think, ClickShare helped on the gross margin price. And so what would be the moving parts of that 100 basis points improvement, given that you already took quite some cost measures also on the cost side?

Yes. Okay, Marc.

So first question on our top line growth guidance and then also the drivers towards the second half of the year. Jan, you're willing to take that one?

Yes. So maybe answer your one big question first.

In terms of the drivers for growth in 2018, if I first look at Healthcare, that's a steady growth that we've seen year-over-year in this business and we'll continue to see that. As I said, we're stepping up our focus on China in being more local, but I see that as having a visible effect in 2019.

So Healthcare, steady growth. In terms of our Enterprise, ClickShare, strong double digits.

Like I said, we're investing to further the hold or even accelerate that growth in the market that is growing strong double digits. In terms of Control Rooms, that's where, last year 2017, we saw negative growth.

The challenge we're going after is to turn that growth trend around with the UniSee new launch. That's a launch that - I mean, this weekend, I'll see where - it's the first big fair, where we show the product.

Like I said, very strong commercial interest, but Q1 is a phase of demoing the products, getting the funnels going, getting some first orders in and second quarter will get that orders. And then in the second half, we should see revenues start to come from that.

So it's one of these growth drivers that will be more visible in the second half. In our Entertainment, the Venues and Hospitality, good growth definitely in the second half last year, good portfolio, and so we continue that growth.

And then cinema, last year, negative growth. We definitely see the tendering for the next wave in progress.

We do expect that the first movement really will start to come in the second half. Okay, so that gives you the different factors driving the growth.

On top of that, there is the reality of the currency in the first half, with the dollar at $1.23, $1.24 that is significantly different than a year ago around this time. So that's a headwind that will mask some of the growth that we have in the business.

Sorry, can I follow up on that one? I tried to make a calculation on how big that impact is on my numbers, because - as you have definitely more details, that's a mid-single digit impact, so like around 5% impact.

Is that correct?

No, we don't see it at that order of magnitude really. It's indeed then masking a bit the growth with currency effects, it's more into the low single digit effects.

Okay. So, Marc, we move to the second part of your question on gross margin and what has been done and mainly what is feasible going forward.

Ann?

Okay. And I took the question of Marc.

Mark, also on EBITDA accretion for next year, the 1% which Jan indicated is - primarily are coming from gross margin or whether it's coming from the gross margin accretion, which we could deliver this year, the 2.9% up, is nonrecurring. So that's indeed a very high one.

Year-over-year, we are counting still for the next years on 0.5 percentage points there, meaning that the other 0.5 percentage, if the top line stays flat, comes between the balanced execution between keeping the OpEx investments in line or under control, and there actually also the redeployment or the weakness in follow up of different business activities stays crucial. Next year will still having some call it, upsides in our results of business activities, small ones which we stopped or divested more towards the end of this year.

So still having some impact last year and then that will be an upside towards the next year. So it's not that we are going into a huge cost restructuring mode.

In that perspective, it's really versus redeployment that's doing - selling more of what delivers more margin and doing more activities carefully reviewing the different growth initiatives and businesses we have, and getting more profitability out of the different segments.

Okay, that's clear. Maybe then for me - for my - to understand the gross margin a little bit better, the improvement that we saw in 2017, how much of that is mix, and I think against driven by ClickShare, and how much of that is the value engineering that you did throughout the product range?

It's a combination of both, it's a combination of both. As you are seeing in our different divisions, with all three divisions, it's an increase in our gross margins.

So - and there within the different divisions, we can say that it's both due of a positive mix, so selling more products which have a higher margin. The UDX, for instance, the F-series which we launched in the Venues and Hospitality segment within Entertainment - as an example within Entertainment.

Within Enterprise, ClickShare for sure is one, but we see our different laser offerings which we bring to the markets, delivering a nice uptake each time in gross profit margins, whereby value engineering really yield its results not only in reviewing after a launch and keeping your products steady, good in the sense at a decent cost and with the features included that a customer values and want to pay for, but also throughout our new NPI turning into a new product introduction, and we have the price points there right from the start. Through our value engineering efforts, that brings directly its impacts.

And call it on mix or call it on value engineering, they both actually are getting a little bit interest lines.

Okay, good. Next question?

It's Stefaan Genoe, Degroof Petercam. I thought I heard in the call that you indicated dollar hedging is almost - you're almost fully naturally dollar hedged, which surprises me a bit because I think most of your production is still here in Europe, less in the U.S.

You have still acquired some significant U.S. sales.

And so if the orders, which look very strong for the American region, could you give us an indication that, with the negative dollar evolution for next year, we should see a negative impact - transaction impact in 2018, which is negatively impacting the margin expansion you could see in 2018? That's the first.

And then on ClickShare, one of the target markets is Asia to develop the ClickShare. Could you indicate the deposition currently of ClickShare in Asia, with a competitive landscape and how large is the market opportunity compared to Europe currently?

All right. Stefaan, first question on hedge situation against the dollars, I'll pass it over to Ann.

Stefaan, on average, actually 90% natural hedge which we've achieved on the U.S. dollars comes from the fact that we source largely in also Asian countries in dollars.

So within cinema, the components, and also ClickShare, a lot of our COGS are in dollars or dollar related currency, that's primarily really dollars. So that's where we achieve that high natural hedge.

What you see this year-end 2017, and that was actually also the case in '17, it's where we achieved that very high natural hedge on our dollars. We didn't achieve yet on our Chinese yuan, where in both years the currency impact, which we have on our EBITDA evolution, was coming from the Chinese yuan.

This has been different in the past. But in 2016 and '17, that's the case.

And as of today, currently it is. When we look now to 2018, indeed the dollars and with the evolution that it has now made compared to last year will certainly have a material impact on our top line, but again there we don't see a drastic change on the natural hedge.

So in that sense, we do not expect a different major swing or negative impact on our EBITDA results. On the Chinese yuan, yes, currently this currency is staying stable actually versus euro and dollar.

So there, if it stays as it is, the impact negative on EBITDA which we have this year, then not to be repeated, all being at current currency level. So an impact on the top line, yes.

That's contained on gross margin and bottom line.

Yes. Thank you, Ann.

Jan, I'll pass it over to you on ClickShare growth opportunity in the APAC region.

Yes. So ClickShare in Asia, today, I would call it markets that are at the very beginning, where the notion of wireless presentation still has to take off, and I'm talking here primarily, China, Japan, South East Asia and India.

So we're working focused on building awareness in the - mainly the business segment, of course, in those countries and also identifying, levering the channel partners to go-to-market. It's a bit early to really identify how big those markets can be.

The markets are different. Now on the other hand, China is so big.

Japan, in itself, is big. And we're only at the very beginning of building the channel there.

But the assumption is that these are markets that, in a focused way, are very much worthwhile to bring ClickShare there and build out the channel.

Thank you, Jan.

I know you've mentioned this little bit before, but in terms of timings, the new laser technology wave, would you say it's already started or when is it really likely to take off? I mean, for example, are you seeing any customers starting to renew their project profiles already?

Okay, good. I'm going to take that question first, and then Jan to speak to - add on that.

So on laser and the laser portfolio, actually we launched our complete portfolio at the end of 2016. So that's where we indicate on shipments in cinema in 2017 that already 1/3 of the overall volume was based on that new technology.

And so going forward, this is becoming the standard in the industry in cinema but also, let's say, in the overall projection markets and segments so to speak. So in terms of timing, it is happening as we speak and it's taking over from lamps.

Your question is also referring to the renewal cycle in cinema, then 2017 was characterized by a couple of hundreds of replacements or renewals, also driven by some upgrades to premium cinema, in which then exhibitors, they actually renew and replace the former conventional lamp projector by a laser or a laser phosphor based unit. So it's not yet the big renewal really that we see it in - bit globally in projects left and right, and we see that the renewal is actually starting to take place, yes.

And also in terms of your UniSee, which is expected - I think, expected to contribute to sales in H2 2018. I mean, it was launched in November 2017, so why aren't we seeing it coming through sooner?

Okay. Jan, this is one for you.

So it was launched in November. We're ramping up the factory.

The first production of December also generally goes to demo systems. The way UniSee is brought and shown to the market is primarily through our integrator partners, then work with other system integrators to build them into the next Control Rooms.

And so the production out of factory very much has been an investment in the demo systems. They are out in the field now.

So the next phase we are entering is to translate this to opportunity funnels, which then our sales force, together with our partners, near the end of Q1, we expect first orders to come in; and then in the second quarter, it's going to be an orders month. In terms of sales, typical lead time between opportunity, order and implementation is in the 3 to 6 month range, depending on the region.

Okay, so that brings a bit of a - between ramping up the factory and seeing first revenues, there's a easily 6 to 9 months of lead time.

First of all, just one more clarification on the organic growth. So the number you're guiding, that is you're guiding for an absolute number, so the number that you reported in 2017, it's going to be roughly flat in 2018, right?

So also the fact that you've divested some of the businesses doesn't have an impact?

Yes, we're comfortable guiding absolute numbers, yes.

And so, again [Technical Difficulty] that the organic growth - that the organic - yes, sorry. So again when compared to organic growth it's a little bit higher again than the low single digit that you mention because of currencies?

Correct.

Okay. And the other one is on the working capital.

So we saw the lower payables, predominantly in the China business, if you start to actually joint venture there, we still have that negative outflow of capital because of the payables in cinema?

On average, if we indeed look to our free cash flow compared to the year before, we now arrive at an average days payable outstanding of 58 days. If you compare that to the average DSOs, so the average payments of our customers, this is 55 days.

So on a group level, this is okay. So it's three days difference.

So that's quite balanced. The free cash flow indeed then was impacted by this.

Next to that indeed the lower advances to see some customer contracts, which as we have across Barco, that for sure in cinema, not only in China, across the road actually, is being set. If you - on a group level report, negative working capital, if tomorrow after the deconsolidation of BarcoCFG, because that's I think what you're pointing at, that will have an impact.

Yes, it will have an impact. Understand that we will then more going closer to, call it, a new net working capital.

Do not expect, all of a sudden, a huge increase to net working capital of tens of millions above the breakeven level, if I call it like that. So our investments in net working capital is still a very, call it then modest one.

But it has an impact.

Yes. So maybe then put it little bit different, will the working capital be a net inflow or outflow over 2018?

What's your expectation yet?

On our KPIs, actually we are expecting to keep them steady, so both the DSOs, the turns and DPOs, because they are all at a healthy level. And where we can have an impact, call it working capital or call it free cash flow, or in general as to the investment is the kick in of a couple of OpEx models, or on retrofit or in cinema kick in, that will have an - a more material impact, which as of today, it's too early to disclose how fast, how quick or how material that will go.

Okay, that's clear. And maybe the final question is, you talked already about the tax - the cash from impacts due to changes in the tax rates.

Will that also impact your tax rate going forward? Or will it be around the 15% that we've seen historically?

While we certainly shoot below the 20%, which we had in the previous year, if we now calculate for this year really excluding that one-time impact, it was 16%. So, yes, we should - it will be in the teens, so to speak.

So would be very lucky with 16%, that's for sure. To give it a range now, actually it's between the 16% and the 20%.

On the slides, you mentioned in digital operating rooms more competitors coming in, and you mentioned a mature market. Do you believe, in this market, you need additional size going forward and could you see consolidation with Barco playing a role in that market?

That's my first follow up. And the second follow up is on the LCD in Control Rooms.

In the mid-segment, how do you look at future potential markets in this mid-segment, which tends to be quite crowded and then quite competitive?

All right. I think the first one on wireless presentation, competitive landscape and how we move with that, with the ClickShare product...

No, I thought the question, Stefaan, was on - in surgery, right? Or operating...

Yes, surgery.

So, yes, so what we're talking about here is the Nexxis networking product, IP based networking for operating rooms. When we say the competitors come in, this is something that, a couple years ago, Barco kind of opened this up.

Today, we see 2, 3 competitors, and a bit, let's say, the usual suspects. We first saw Sony come in.

We see Eizou try to get in. So, let's say, the few competitors that we've known in other places in healthcare visualization are trying to - to your question, consolidation or scale, the answer is, no.

I think what makes success here is the work we're doing with the OEMs, OEMs that are present in the operating room to design in our technology as part of their operating room offering. And that's where the focus of our R&D people is going, that's also where - sometimes it takes a year to be designed in and then you have, of course, a life cycle of pull from that.

And second question was on Control Rooms, the mid-segment.

Yes. So the Control Rooms, mid-segment, are typically Control Rooms that are not 24/7 high mission critical, like we see in the big process industry, some of the security parts, but these are still Control Rooms, large video walls.

The innovation with UniSee is not just a great looking screen, I think the total cost of ownership of that product with its very innovative mounting structure leads to a step change improvement in maintenance time for the owners of the video wall. We'll make this a cost - total cost of ownership, competitive product in the mid-segment.

In addition, what we see, and definitely I see in Amsterdam this week is that there's a corporate segment that's interested in the UniSee. Things like corporate showrooms, experience centers, some high-end retail applications are very much attracted by, again, the high quality of UniSee but also the serviceability of the product.

So we definitely understand the Control Rooms markets well and we're discovering the potential in new segments with UniSee.

Yes, sorry. One follow-up.

If we look at the ClickShare, I think 2017, we got, if I estimate, a bit volume growth, around 30% sales growth, closer to 20%. The difference between both could you explain it in terms of the down-scaled product versus price pressure or regional differences?

So growth of ClickShare items, that's quite straightforward, that's close to 30% growth. In the corporate section of the Enterprise division, we have sales of ClickShare, we also sales of Silex and some other smaller initiatives.

So don't take, let's say, the sales of ClickShare one-to-one into the corporate reported sales for the non-Control Rooms activities, I would say. But indeed you might deduct maybe that ASP of ClickShare is somewhat lower than reported in 2016.

However, that's not really what we feel. So in terms of pricing positioning of the product, we're doing quite okay, we can keep stable.

And in the mix of selling products, you might, of course, in the year, have more of the smaller units being sold compared to the larger and the higher priced units, which might cause then a slight difference from on ASP level. So as you can read through the numbers in Enterprise margin levels, EBITDA levels remain quite solid, also for ClickShare.

Yes, I think we can conclude the Q&A session here. I'd like to add two nice takeaways for the people in the Benelux these days.

Jan, already made reference to the big ISE trade show in Amsterdam this week, till today, still tomorrow. A great opportunity, by the way, to see our Enterprise and Entertainment solutions, including products we discussed, ClickShare, the laser phosphor projectors and also the UniSee at work and in a great set up.

ISE is one of the best attended trade shows on our kind of market globally. And then finally, also very, very pleased to inform you that our complete Annual Report 2017, including the company report, including the financial disclosures and including an impressive sustainability section, is becoming online as we speak.

It's already available on the home page of our investor portal. Check out the button Annual Report 2017.

Great stuff. Okay, closing, let me thank you all for participating in the call.

And should you have any more questions coming up, we're there to help, so don't hesitate to reach out to me and we'll try to help you as good as we can. Thank you, and have a great day.

Thank you.