EVS Broadcast Equipment S.A.

Thank you. Good morning or good afternoon, everyone.

Welcome to the EVS 2020 Results Conference Call.

We will first go through a presentation, followed by Q&A. This presentation will contain forward-looking statements with respect to business, financial conditions and results of operations of EVS and its affiliates.

These statement are based on the current expectations or belief of the EVS management and are subject to a number of risks and uncertainties that could cause actual results or performance of the company to differ materially from those contemplated in such forward-looking statements. EVS undertakes no obligation to publicly release any revision of these forward-looking statements to reflect events or circumstances after the date hereof to reflect the occurrence of unanticipated events.

So with me today, we have Serge Van Herck, CEO of the company; and Benoît Quirynen, SVP, Strategy.

On the agenda on Slide 3, we'll go first through a business update, then the financial update, give you some outlook for 2021, and then conclusion, and question and answers. I hand it now over to Serge for the business update introduction.

Serge, go ahead.

Thank you, Yvan, for that short introduction. So good afternoon to everybody here around the table.

I'm on Slide #4 to give you an idea effectively about the highlights of 2020. Let's say that we're happy that 2020 is behind us now and that we can start a fresh year, and we hope indeed that this pandemic will go away during 2021.

But coming back to our highlights for 2020. We're having certainly that even in a pandemic year, dramatically impacting events in media industry.

We have been able to limit the impacts, and we've been able to prepare ourselves for the recovery in 2021.

So when we look, indeed, to the key figures, we see that revenues, of course, in 2020 has been impacted by the pandemic. You see that our revenues go from EUR 103 million to EUR 88 million, so nearly 15% reduction.

On the EBIT side, we go down from EUR 23 million to EUR 5.7 million. So we are, in this respect, happy that we're still ending the year with positive figures.

I believe that many other companies in our industry are suffering in another way than we do. So EBIT still positive, happy with that.

We see that end of the year order book is quite strong. We jumped from EUR 37.8 million to EUR 54.2 million in 2020, and we'll come back to that later on, of course.

But that's a very good positive segment for the future. And last but not least, our end of year net cash is still strong, from EUR 46 million to EUR 35 million.

We'll further explain why that dropped, but we are still quite in good financial shape.

What will we be talking about today? Well, first, of course, how we've been able to limit the impact of the COVID-19.

And that helped us to still generate a positive EBIT. This thanks mainly also to strict cost control.

We've been able to deliver quite some important projects, especially in our Live Audience Business market pillar.

We've seen, of course, that NAB and IBC events have been canceled, but we've been able to transform ourselves to be able to provide remote virtual events. We've made an important acquisition in May last year, Axon, and we're quite happy with the progress that we made.

But of course, we'll come back on that later on in this presentation.

While, definitely, we have some revenues that have shifted from '20 to '21, revenues linked to the major sport events, we still expect them to happen this year. And we've been able to keep our working capital under control and to also keep a strong cash position.

So those are the elements on the left side of this slide, helping us to limit the impact of the COVID-19.

And on the right-hand side, we're talking about preparing for 2021 and the new reality, of course. We've been obliged to find new ways to collaborate between team members, work from home in many cases.

So we're quite happy with the progress we've been able to do there. We'll come back to that later on.

We've also been reinventing the interaction with our customers, how to sell and how to support our customers in a remote way. We've been able to strengthen our position, of course, in the media infrastructure environment thanks to the integration of Axon and their solutions.

The trends that we've seen over the years for remote production has, of course, further accelerate in 2021, and we see new flavors of that remote production happening in 2020.

We have launched LSM-VIA. That has been a quite important historical milestone in our product portfolio, evolving from the previous one to the new one.

So that was a quite important milestone. And we are quite happy with the way our customers are looking and accepting implementing this new LSM-VIA.

We're happy to see that despite the overall revenue reduction, we've been able to grow revenues in our LAB market pillar, on Live Audience Business pillar. So that's a very strong and encouraging element for the future as well.

And last but not least, Q4 was a very strong quarter when it comes to order intake. And again, that gives us a good feeling for the future.

So that's some of the main messages that we will be talking about today. Going forward to Slide #5, I will pass on the microphone again to our CFO, Yvan.

Thank you, Serge. So our 2020 revenue amounted, including Axon (Media Infrastructure), as we call them now since the 1st of May 2020, total revenue amounted to EUR 88.1 million, which is within the range of the expectations given the new uncertainty around COVID-19.

This represent minus 14% year-over-year, excluding the big-event rental and at constant currency. We have seen a strong growth in our lab market pillar.

We'll come back to that one, about 8.3%. And we have shown throughout the year situation improving in H2 in the Asia Pacific region, which suffered at the earlier stage of the year.

In terms of profitability, we maintained a healthy profitability with a gross margin of 66.5%, which includes the mix of product of media infrastructure, ex Axon product into the mix, which we know have a lower gross margin than the traditional EVS product. And that yield to a positive EBIT at the end of the year of EUR 5.7 million, which includes EUR 1.1 million of exceptional costs.

That would have been EUR 6.8 million excluding these onetime exceptional costs. The all operating expenses throughout the year remain under control despite the cost increase due to the onboarding of our new activity from Axon.

Bottom line, the net profits amounted to EUR 7.2 million, which is 63% lower than last year due of course to lower revenue and EBIT margin but partially offset by some reversal of uncertain tax position and all the [indiscernible] incentives that we are benefiting from, mainly in Belgium.

Going up to the next slide, Slide #6. I will hand over to Benoît for more explanation.

Thank you, Yvan. Good afternoon, everyone.

So in fact, during 2020, but not -- because we had commented, we, of course, we're not -- let's say, happy to support our customers in the difficult situation. And that's what we did all along the year.

And also, what we did was really to leverage the growth in the LAB market, which is quite, let's say, surprising or amazing in these conditions that we can have a growth in certain market segments.

So what we did is continue our projects for multimillion modernization contracts that we have signed prior to COVID and also during 2020, and leveraging all the assets of the VIA platform or the modernization that we have done in our product portfolio based on the IP in the 2110 and our architecture -- software architecture, which is really flexible. And then we have won a major U.S.

media group. We have won very important APAC broadcast centers, and then sports and news broadcast centers in Benelux studios in -- of large production in Western Europe, and we have also deployed Western Europe large parliament.

On top of that, after the acquisition of Axon, in fact, we have been deploying the Cerebrum control system and the Neuron stream processing. And of course, we have done that for many customers.

But one very important deal is the one from CanalPlus France, where we manage the overall infrastructure, and we leverage really the assets of the strong portfolio that we have acquired in 2021.

Another important deal to show the kind of business that we are going to is the eSports. And with the eSports, we won the Blast TV deal.

And in fact, we delivered an EVS COMPLETE eSports production environment with, let's say, some former EVS products with the servers, with the platform and so on but as well with the control system Cerebrum from Axon.

And then we had -- besides these important projects. We also had the deployment of a very large U.S.

league sport with our servers XT-VIA for deployment of, let's say, the new format like 1080p and 4K. And we have deployed as well our servers in different locations but also for a major player in China.

And as any year, we have been also supporting the Super Bowl a few weeks ago. And then we are happy to see all these trucks coming together fully equipped with EVS and to really support the huge number of cameras that are usually deployed for these kind of events.

So I will move to Slide 7, in fact, to explain that, of course, from, let's say, an events perspective, from a marketing perspective, 2020 was a very special year because no NAB, no IBC, in fact, all have been done virtually. And we have done this with hundreds of persons from everywhere in the world in different kinds of conferences.

And we could have really personalized interactions and engaged with remote demos so that we can explain the values and the benefits of our products to all the customers attending virtually and remotely these events.

On top of that, because we could not invite our customers in our very nice premises, in our HU, we organized Live Production Anywhere web show. So we did, let's say, practice our own product to do a real remote production.

And then we could present to our customers the level of engagement that we have to support them and also the different kinds of departments that are active within EVS to serve them the best way they

can. And we have -- it was not necessarily linked to these kind of events.

All along the year, we had many different remote interactions with the customer to assist them, to guide them and to design their new solution. And of course, we did that with much less travel due to the confinements and the restrictions.

So in fact, another important milestone of -- and I move to Slide 8, of this year has been the acquisition of Axon and -- on May 1. And Axon was a -- and is also a leader in media infrastructure product and is now complementing the EVS blueprint that we defined early 2020 and late 2019 during the PLAYForward exercise.

So we acquired Axon for EUR 10.5 million. And with the acquisition of Axon, we acquired a set of very powerful products for media infrastructure with Synapse for stream processing, especially in SDI, with Neuron for stream processing within the IP environment, with 100 gig, 1 [ rac ] unit, very powerful box, and also with the control system, which allows us to, let's say, fulfill our blueprint with a very important component so that we can integrate all the production environment in a centralized way, and we can give very performance agile and flexible environment to our customers so that they can really run their production efficiently.

So Axon, the results in 2019 were revenues, EUR 17.5 million. They were more or less breakeven.

So as I explained, they are very powerful media infrastructure product. They have teams in Netherlands, in [ Hillsa ], in U.K., in China.

And we have the same customers. It's about LSPs and LABs.

They were mostly active in EMEA and APAC. And we have a very significant presence in large OBVans.

So we started this integration project with different waves, and each wave with a different objective. And now we are in the middle of the Wave-4, where we aim to come to lean operation and integrate our business processes so that we can operate, let's say, smoothly from a lead to cash perspective.

During this year, we have already seen some synergies materialize in terms of revenues with first deals that were signed that would not have been signed if Axon would have been still in a stand-alone mode, in a separated mode. And also, we have leveraged our end-to-end value proposition that we can present to the market to really win some deals.

And also, we easily convinced some integrators now to offer end-to-end solutions, and we already positioned some of the MI, because MI is media infrastructure products from Axon, towards these integrators so that they can deliver to the customer.

So first, revenue synergies materialized. Also, in terms of cost synergies, we have already materialized some synergies in terms of volume purchasing.

We have merged some offices already, typically in Singapore. For the moment, instead of having 2 offices, one from Axon and one from EVS, all the team is working in the same office.

And we have also filled in some open position with some Axon team members who play a key role within the overall EVS environment.

So I will now hand over to Serge for the big events and the Slide 9.

Thank you, Benoît. So Slide 9, indeed, and talking about the big events that did -- who have been postponed from 2020 to 2021.

So as we speak, we indeed are preparing those big summer events with the source broadcasters. And we expect effectively that we will be able to deliver on those projects in 2021.

At this moment in time, as I said, we're fully prepared then. So we assume, we expected that those games, those different sport events will happen indeed, and they should have a positive contribution to our revenues in 2021 and also, of course, to our bottom line.

Going forward to Slide #10, let's talk about the impact of COVID-19 on the way we work as a company. So we've seen, indeed, that we have to be agile and to adapt to this new reality with more than health or, I should say, to enhance health of our colleagues.

We are now, more than 550 colleagues around the world. How's that impact R&D?

So most of the LAB teams now have to work from home as well. So we have to put into place new ways of working.

But all in all, we're quite happy with the way the teams adapted and were able to resume work from home, which, at the end, had a limited impact on the efficiency, and in certain cases, even further increased efficiency of our development cycles. So in that respect, we're quite happy, of course.

We've been also able to, of course, reduce our travel and entertainment costs due to the fact that, let's say, we've been able to work from home. So that is also reflected in our fees, of course.

In this new way of working, we were for sure to certain lesson learns for the future. We hope, of course, that we'll be able to come back to the office as soon as possible.

But we expect that part of the panel will be done from home and that we will combine home working and the office, of course.

Going further to Slide #11. We've seen a further acceleration of the trend that we've seen in our industry for quite some years, and that's the remote production.

But on this slide, you see 3 different type of remote productions. And it's fair to say that a new type of remote production has been added in 2020.

That's the one that you see on the right-hand side. That's the distributed production.

We're now not -- we're now the operators and not in the central office that's even working from home. So that has been a new trend, a new flavor of this remote production trend that we've added to our product capabilities and that our customers have been starting using -- have been starting using, of course, for obvious reasons.

So that's an important evolution. We've been helping our customers all around the world to adapt to this new reality by putting equipment in broadcast centers and by helping them to do remote operations from home.

So that was definitely an important evolution for 2020.

And in order to do that, I'll pass on to Slide #12. In order to do that, we have launched a new remote and I think Benoît will take over from here.

Yes. Thank you, Serge.

So yes, to address this fully distributed production, even extreme distributed production, remote production, we have launched the LSM-VIA. And the LSM-VIA is really an evolution from the legendary EVS Remote, which you can see everywhere in [ DOB ] events still today.

Remote that was 25 years old. And we have launched LSM-Via that you can see on the right on this picture.

So it was important for us to really keep the best of the legends and who have the same feeling for the operators so that they can play the same show with the same feeling, same feeling in terms of job, lever, same functions, same robustness, of course, which is a clear differentiator often.

We have further enhanced the remote with new attributes. Typically, it's now fully IP.

It's more scalable. So that means that you can control with a remote, different servers that are located elsewhere.

We also added touchscreen shortcuts. And we can really program the workflow in a very agile and flexible way so that we can create more and more workflows that can be adapted to cope with the constraints of our customers, both on LSP side in [ DOB ] events but as well for the broadcasters in the studio.

And so we have added many more functions with many -- with really more convenience for the operator. So we have done that through an ambassador program, and this has been successfully launched and successfully used already during the summer.

And we see a real strong appetite from the EVS operator community. They are really very proud to use the remote the first time.

They share the pictures on the social networks. And more than, let's say, that, in fact, we have been also receiving 2 awards for this launch of this very important product, one from a product innovation by TVB Europe and another one by TV technology.

So with this new LSM-VIA. We are really prepared to help our customer for easier remote production, faster highlights and real custom workflows so that they can operate at their best.

So LSM-VIA was not only in terms of product, the thing that we did in 2020, we also improved many different products in the portfolio. And of course, one category has to be noticed.

It's about media infrastructure, which covers the product that we acquired from Axon and that we integrate now in different kinds of solution with some components that were already present in EVS before the acquisition so that we are now very well positioned on the market to offer an IP network SDN control.

So in the full IP environment, we can really control by software the full network. And to have a full control, to know exactly which stream is going through which cable.

We also have new solutions with live media processing where we can put, depending on the technology, A for the Synapse or Neuron that can be included for all the transformation, the up-down cross conversion or the compression with different kinds of technology. So we are now well equipped to offer end-to-end solutions.

And now I will pass, in fact, for the next slide, the microphone to Yvan for the financial update.

Thank you, Benoît. So let's go through the financial updates in more detail.

So we spoke about the highlights on Slide #15. I'll remind you, revenue, EUR 88.1 million and net profit of EUR 7.2 million, including the reversal of uncertain tax provision and all the R&D tax incentives, like innovation box and detection for innovative revenues that we are using in Belgium.

If I go on Slide 16, where we look at the evolution of revenue over the years and over the half year. So definitely, we see that 2020 was heavily impacted by this COVID-19 situation.

And we had the kind of mixed or reverse situation in -- throughout the years, where, thanks to a strong Q1, the H1 revenue were only slightly lower than in 2019, while in H2, we saw a strong decrease in terms of revenue compared to prior years, especially in Q3. There has been some kind of, I would call, recovery in Q4, where we have been doing one of the best quarter in terms of order intake, which led to a really strong order book as we enter in 2021.

And we can see on Slide 17 that the order book is a record high order book for the last years, both in the short term, meaning for next year, 2021, with EUR 44.1 million of order on hands to be recognized as revenue in the next year. I'll remind you, that includes as well EUR 12.9 million of orders for the big events of the summer 2021.

And it includes as well EUR 10 million for the long-term order book, meaning orders on hand to be recognized as revenue in 2022 and the years before.

Two reason to explain that strong increase in the order book. One is a lot of LAB projects that we have, as Benoît mentioned.

And some of them have been spread of the deployment -- has been spread over several years as well as an increase of more recurring revenues, OpEx and SLEs contract that have been signed at the end or -- at the end -- during 2020 and mainly at the end of 2020 as well. And once again, the long-term order book also almost doubled compared to the average of the last year with EUR 10 million of orders on hand to be recognized in the 2022 and the years after.

If you look at the market pillars segmentation -- or it's not segmentation, but revenue by definitions. Reminder the market pillar LAB, Live Audience Business.

I'm on Slide 18, sorry, LSP, the Live Service Providers, and the last one being the big event rentals. So if we look at the revenue evolution per market pillar, we see in 2020, on Slide 19, a strong growth in the LAB revenues, which is slightly -- or somehow outstanding, sorry, considering the circumstances.

Of course, the LSP revenues have been the most impacted by the submitter re-situation. These customers having their OBVans sitting on the parking lot towards a big part of the year with sporting -- live sporting events and live events being canceled for a part of the year, let -- push them into some challenging situation where they had to focus first on getting the business through the crisis before considering investing into new solutions, into upgrading the environment or deploying new capabilities.

Of course, the big event rental, and for the first time in EVS history, unfortunately, as an even year, there is no big event rental revenues, except the youth Olympic Games in Lausanne that took place in January. But the rest of the event, as mentioned, have been postponed to 2021.

If we look on Slide 20 on the geographical split. So of NALA, looking at the total revenue for the year, which is minus 25% compared to 2019.

2019 was a relatively good year on top of that. So that show how somehow a potentially stronger decrease there compared to a strong 2019 year.

On the EMEA side, we show more or less on the average level, 14% of revenue decline compare to last year. And there you see also the split between H1 and H2.

We follow the general patterns that we discussed before.

And on Slide 21, Asia-Pacific, which has an increase of 2.3%. And they're, definitely, more heavily impacted on the first part of the year with really low revenue, only EUR 7.3 million of revenues, but some stronger revenues in the second part of the year with EUR 12 million, which bring them in for the total of the year with a slight growth of EUR 2.3 million with an earlier recovery on the rest of the geographies and, once again, on the big event rentals even being postponed to next year.

If we look at the consolidated income statement, so we spoke about the revenue -- on Slide 22. We spoke about the revenue with 15% decline year-over-year.

The gross margin of 66.5% due to the lower revenues and -- on one side but also due to the lower margins on the media infrastructure product and the mix. We have revenues of media infrastructure since 1st of May included into this EUR 88.1 million.

On the operating expense side, the operating expenses increased only, I would say, 1.9% compared to last year following the -- or despite -- or the inclusion of the media infrastructure cost within our P&L. If we look at just the ex EVS parameters, the same operating expenses are -- were declining close to 10% compare to last year, mainly coming from lower travel cost, lower marketing expenditures, where the big trade shows like the NAB in Las Vegas and the IBC in Amsterdam being held virtually this year but as well as lower people-related costs, such as bonuses that have been contributing to this reduction of cost year-over-year.

We have the EUR 1.1 million of other exceptional expenses in 2020. And we have on the tax side the positive tax impact of EUR 2.8 million, which include a reversal of uncertain tax position and this R&D tax effect.

That leads to an earning per share of EUR 0.53 compared to EUR 1.40 in 2019.

If you look at the Slide 23, the total number of team members and the evolution. This is a picture taken at the end of each semester period.

So compared to the end of last year, we have an increase of 86 full-time equivalent compared to last year. Of course, 80 of them are coming from the Axon integration, and we have already seen this increase in the month of -- end of June.

This is a picture of the end of the year. Of course, will depend on the timing of arrival and departure of employees.

On the balance sheet side, the balance sheet remain really strong with EUR 52.7 million of cash available on hand, declining EUR 6 million compared to last year due to the acquisition of Axon, which has been paid partly in cash, partly with external financing. On the balance sheet as well, the changes compared to last year includes the goodwill from the Axon acquisition for EUR 2.8 million as well as 2 other intangible assets that have been recognized as part of this purchase price allocation for Axon, EUR 5.1 million for the customer-related assets and EUR 2.5 million for the technologies.

On the land and building, that's mainly the increase coming from new investment and the increase in right of use of leased assets regarding the norm IFRS 16.

On the inventory side, it increased by EUR 5.7 million, of which EUR 2 million coming from the Axon environment. And the trade receivable decreased, thanks to better collection but also, of course, thanks to lower revenues at the end of the year by about EUR 6 million and includes about EUR 2 million of receivables from Axon.

On the liability side, we have the long-term debt, which is just a small debt we took to finance the acquisition of Axon, plus the long-term lease that -- for the lease obligations. And on the short term as well, we have finalized in 2020 to pay back the loan that we have taken 5 years ago for the building of the new headquarter in Liège.

That has been fully repaid. And we are -- and we have the short-term portion of the debt for the Axon acquisition.

On the tax payable, that's mainly the adjustment of the global EVS tax position, which lead us to a net cash position of EUR 35.7 million versus EUR 46.2 million at the end of 2019. Once again, this includes all the lease obligation debt that are also reflected in that cash position, and one of them coming mainly from the renewal of a new building lease contract from one of offices abroad.

In terms of operating working capital, still high, I would say, in absolute value, but declining compared to the position at the end of June. I'm on Slide 26, sorry.

Operating capital declining 4% compared to the position we were end of June by about EUR 2 million, both on the inventory side as well on the receivable side but offset by the increase that we see usually at the end of the year due to the higher level of revenues in the end of the year.

I go now to Slide 27 to give you some outlook and guidance for 2020.

And on Slide 28, given the uncertainties linked to the COVID situation, including the uncertainties or potential uncertainties around the summer event, the resulting -- we have some difficulty, sorry, to make some projections, hence, we are not putting any revenue guidance for the year 2021. Of course, how the situation evolve, and we hope to give some updates in our -- trading updates at the end of Q1.

On the other side, the operating expenses is expected to slightly increase compared to prior year as we are now integrating a full year cost of the Axon integration and while we maintain our cost under control throughout 2021.

I'll give you now both -- back the floor to Serge for the concluding remarks.

Thank you, Yvan. So let me go through the final slides.

And so we talk about the focus points of '21, and then we'll talk about the conclusion.

So I'm on Slide #30. So what will be the key activities for 2021?

So of course, we are focusing to deliver those major summer events by helping our customers to do the live production of those events. We are focusing on delivering those -- I'm sorry.

We're focusing on delivering those large multi-mobilization projects that we have won there in 2020. So that is an important topic for this fiscal year 2021.

We're also making sure that we further help our customers to get through the space by supporting them overcoming their challenges and help them also to recover to get in a better shape. And last but not least, as key activities, we look forward to further expand our EVS solution offering, this organically, through acquisitions or through strategic partnership.

So those are the main topics on the agenda for 2021.

When I go to Slide #31, to wrap up and give you the conclusion now of how we summary 2020. Well, we're happy to see that we have a positive EBIT despite the pandemic.

And I'm also happy to see that we still have a strong cash position, which puts us in a good position to get the stronger out of this difficult situation. 2020 definitely has seen an impact revenue-wise.

The COVID-19 has heavily impacted certain of our customers, mainly the Live Service Providers, and that has negatively impacted our revenues.

Regarding Q4. We're quite happy to see such a strong order book.

That gives a good start of the year. And that gives us some optimism for the rest of the year, of course.

The fact that in 2020, we've been able to further grow our revenue in the life of this business market is also a very good sign for the future as we've been focusing on this market for quite some time. And we expected to see growth in that environment.

I'm happy to see that happening even in 2020.

On the OpEx side, definitely, we've been focusing to reduce that in the most appropriate way. We did not let go people or put them on unemployment.

We kept everybody on board, and -- but we'll let them work further on our road maps. But still, by doing that, we've been able to keep our OpEx under control.

It slightly increased due to the fact that we acquired Axon, of course.

Given the uncertainties, as you've all -- given the uncertainties about COVID-19 situation, at this stage, we are not in a position to make projections or giving a revenue guidance.

What -- when we talk about OpEx for 2021, we expect it will slightly increase compared to this year, mainly following the fact that we have integrated Axon for the full year -- and that the impact will be felt for the full year, while last year, it was only starting in May of 2020.

So as a last point here, I'm able to say that we feel we've been able to prepare ourself for recovery that we all hope will effectively start in 2021.

So that's it from our side. All in all, we're happy that the year is over, of course.

We all know we're happy that we've still been able to limit much impact of the damage of the COVID pandemic on our figures. And we feel that we're ready indeed to start a fresh year 2021.

And we look forward, of course, that we will be able to get back in a growth mode this year.

So that concludes our part of the presentation. And actually, we'll be able now to take your questions, and we'll provide you some answers, of course.

Can you here me?

Yes, we can hear you.

So yes, first question from my side. Looking at 2021, so -- and given the direction of the order intake in Q4, having in mind what your salespeople are telling you, so the sales lead, the pipeline of order, what can you tell us about the sustainability of the remote investments from the LAB clients, the sustainability of that trend in 2021, being understood that it's complicated to make forecast, but I guess you have a view?

Then quickly, yes, your view on Tokyo 2022, of course -- of Tokyo 2021, sorry.

Then on M&A, I would say, what is your view now? So you did Axon.

How do you view the potential for M&A in 2021? Probably some peers are under pressure or are valuation evolving?

So what is your view here?

And then last question from my part, on -- from my side, on Axon, in term of top line synergies, we were supposed, I think pre-COVID, to get some traction this year and the coming years on top line synergies. Where are you in term of expectation?

As you evolved has your view changed in this respect?

Okay. David, thank you for those questions.

So let me answer them point by point. So first question is about order intake Q4 and how we expect that to further evolve in 2021, especially on the Live Audience Business side.

Yes? And what is the feedback from our salespeople well, I think it's safe to say that, at this moment in time, we feel a good traction in the market.

Customers definitely see the need to do those modernization projects. And while we won some important ones in 2020, we expect to see more of them in 2021, and it used to come, so this trend.

Also, remote production is definitely putting further pressure on our customers to evolve. But it's not only that one.

And it's also, for instance, the move from SDI to IP, which is an important trend, which is there since some time now and which is accelerating in certain cases. So that will -- that is continuing to put pressure on our customers to rethink their plans and invest.

So all in all, we are, at this moment in time cautious but optimistic about, effectively, that order intake and how it will further continue this year as we speak. So that, I hope that, in that respect, that we answer your first question.

On Tokyo probability, we are, of course, following the situation closely. At this moment in time, the Olympic Committee still confirms that they will happen.

Question mark is will there be any fans in the stadium? I think chances are high that there will be no foreign fans in the stadium but maybe only Japanese.

And at the end, maybe even very little fans. But that is no -- I would say, not a big issue for us, as that will put even more focus on making sure that it's available on television.

So the conclusion on our side is we are preparing for those games and for the sport events. We have no reason for the moment to believe they may not happen.

So this are clear to understand.

On the M&A side, I'm happy to pass on the word here to Benoît, who is also in charge of our M&A strategy.

Thank you, Serge. In fact, for what concerns the M&A, we continue our plan, meaning that we want to, let's say, identify companies that can complement our blueprint.

And so -- yes, with the same profile, the -- in terms of value, in terms of the way to support customers. And -- okay, we are let's say, [ crowding ] around the market and the different markets to identify these players.

So for what concerns the traction of Axon or, let's say, the synergies in terms of revenues, so we continue according to the plan. So we see a real traction for end-to-end solutions.

And as I mentioned before, we have already won some important deals where we can deliver both sides. And it's really strengthened not only, let's say, the Media Infrastructure products that were not necessarily as available through Axon.

It also supports the position of EVS products that are now integrated as well, for example, under the umbrella of a common control system, and so presenting to the customer a real unified and integrated solution which brings value for the customer but also for the integrators. And we see this already materialize.

So in terms of synergies, we continue according to the plan, and we didn't change our plan since the acquisition.

And if I may, a quick follow-up on the M&A. So did you see competitors or companies that you have insight because I think you have a quite -- yes, you have your short list of potential target.

Do you see some that would be under some more pressure? Do you see pressure on the valuation or not at all?

Could you comment on that, the environment, financially?

That's not something that we observe, in fact. And we were, in fact, surprised that it was not necessarily a decrease of the valuation or that even companies that are in challenging situation would be ready to sell now.

So we don't perceive an urgency to sell or a decrease of the values for the moment in this specific market.

So yes. I have a question on the structure of the order book.

So excluding the big events, is this structure different in an, let's say, Olympic year? Or is it as usual?

Meaning is there more LAB or more LSP involved in the order book today compared to previous years?

And then second question, on the order book, is it more front-end loaded or back-end loaded compared to other years? Or is this a normal distribution of the order book?

Thank you, Guy. On -- if you look at the structure of the order book, there is no -- we mentioned a big part of the increase in the order book.

So it's not a normal order book in an Olympic year. Is coming from the LAB side and modernization of the environment of the LAB customers.

So that's not the historical type of order book we have seen in the past. Additionally, in that order book, we have also more recurring revenue, as we mentioned, coming from OpEx licenses being sold and from SLA support contracts that have been sold as well.

And also, keep in mind that these SLA support contract are usually sold in these LAB customers following this upgrade of the customer environment. So there is no -- I would not call it a big-event effect.

The big-event effect is the EUR 12.9 million. That is the second part of the order book, which is for the summer big event, either directly with the organization companies organizing this event, for which we have the direct relationship to put our solution at their disposal during these events and/or to support some of our customers who will adopt extra requirement, extra needs or extra capacity that they will need during these big events.

So I would not call it a specific change structure there.

In terms of back loading or front loading, it's a normal structure. I would say a big chunk of these orders in 2021 will be recognized in the first part of the year as normal.

There is no specific front end or back end there. Of course, the amount -- total amount being higher, there will be also a part of that back order that will be recognized in the second half.

And once again, you see it as well, there is a part of the whole back order that is recognized in 2022 because there, we have EUR 10 million of back order compared to about EUR 4 million to EUR 5 million the prior year. So yes, there is some backloading effect in there as well.

But the majority will be still in the first half of the year.

Yvan, let me just add to that to make sure that we fully acknowledge that the increase of the order book in 2020 is not linked to the big event rental, as that figure was already in our order book also at the end of 2019.

And let's say the order book for next year and beyond is now higher than it used to be. Is that structurally?

Or is this a one-off? Or is that something that we can expect going forward that your order book will be also, let's say, wider spread than in years.

So that's what we are working on. It's to ensure that we are building up this part of recurring revenues.

Will it stay over the years? The future will tell us, of course.

But I expect that this -- we hope that this will stay at level going forward, of course. With these SLA being renewed, now we've also seen a renewal of longer-term SLAs so not only for 1 year, but some customers signing up directly for 2, 3 years of support contracted front as they are buying the new solutions.

So that piece, we're not being built up because, of course, we're already in the second year and the third year in the order book now. But as we keep increasing the sales in the LAB side, we should -- we expect that it will also increase the part of the SLAs that goes along with it.

With the introduction of certain new products or new services, which will be OpEx-based, we also expected that this will further increase this order book on the longer term.

Yes. And if I look at the structure of order book on the -- I have about -- the bigger growth, it's not a big amount, but the bigger growth of the recurring part -- there's a big growth, sorry, of the recurring type of revenues in that order book.

So we used to have at the end of 2019 about EUR 4 million of recurring revenue in the order book. Now we have close to EUR 8 million of recurring revenues in -- or recurring type of services and OpEx and SLAs in that order book, while the -- so almost doubling the numbers while on the nonrecurring type of order book, that's an increase of only about 16%.

So there are no further question, yes?

I've a question. We're now almost 2 months into the new year.

Could you tell us a bit how the order intake so far has been progressing compared to Q4 of last year?

So if we looked at the order intake at the beginning of the year, and that's what we see in most of the year, so the -- we have on both side, on our side internally and on the customer side externally as well, the beginning of the year effect. So we are -- we have a few months yet we have not reported yet or -- internally even our total order intake for the months of February.

But we see some fairly good tractions. We have seen as well that our funnel is solid.

The question is the timing of conversion of the funnel into orders in the coming months. I would say we have normal order book building for the beginning of the year, I would say.

Okay. Good.

That's clear. And then on Axon, 2 questions.

First of all, do they have a backlog just like EVS has?

And the second one is on the gross margin, which is below that of EVS. Is it lower simply because of the nature of their products?

Or is it because, as a stand-alone company, they had limited scale?

So to answer your first question. So yes, they have a smaller order backlog, the time to convert an order into revenue at the MI, media infrastructure, Axon side is faster than on the EVS side.

So they are contributing, but there are just a couple of millions of media infrastructure products in the backlog because of that reason. Concerning the gross margin side, they have lower margin because their, -- so far, their majority, yes, I think the majority of the revenue is coming from the Synapse product, which is still, I believe, hardware linked, while as we look at the 2 other products range, which are the Cerebrum, the control system, and the Neuron, they are still a smaller portion of the revenues, but they are more software-oriented.

And so they will have -- and they have a higher gross margin, per se, because they have a product mix between the Synapse, which is the legacy type of product, versus Neuron and Cerebrum. This gross margin -- overall gross margin of Axon so far is around 50, 55% compared to 70% that we have in EVS.

As more -- as they move more and more into the future generation around Neuron certainly, which is more software-oriented, then there will be some increase of gross margin but there's still -- always still a component of hardware into that one.

Okay. That's clear.

And then now that you are tendering more often together with Axon and EVS together, that basically implies that the order backlog of Axon can only lengthen further and increase compared to what it was stand-alone. Is that right?

That is your own understanding as well.

Well, your own order backlog is longer or for more months than Axon because your lead times are longer. But if you turn it together, then Axon will get contracts that have to be supplied later than very short term.

So your order backlog for Axon could grow simply because of tendering together.

Well, we expect that the business of that together we do will be added to what they have been doing before. So it will increase, indeed, the revenues that are being generated by media infrastructure products.

If I may add, yes, if I may add, in fact, within modernization project as well, for media infrastructure, the time scale is not necessarily synchronized with, let's say, the EVS product. There can be months delay before you install, let's say, the EVS product.

And usually, you start by media infrastructure. So even in the deployment of the project, time scale is not the same.

Infrastructure first, and then let's say, the tools second.

I have 2 follow-up questions. First, on the gross margin, actually.

Could you give us a bit of a rough idea of where you would expect it to be in, let's say, logically in 2021 compared to 2020, given that you -- yes, you now have a higher exposure to LAB versus LSP? Should we basically -- and on top of that, of course, yes, you have Axon.

So should we expect structurally a further pressure on the gross margin in 2021 versus 2020, taking into account also regard the impacts from the Tokyo Olympics?

And then second follow-up, would you say that the size of your addressable market has increased given the investment in remote production? Or is it actually just an acceleration of the replacement cycle in your market?

So I can take the first question. So of course, as we are integrating a biggest part of a full year of Axon product, the total gross margin will be slightly diluted compared to the historical EVS gross margin but are still positive in terms of percentage, but that's definitely a positive contribution to the absolute value of the gross margin of the combined company.

Depending on the mix and the transition between the Synapse product to the Neuron and Serum product, should expect to have a slightly increase of the gross margin compared to 2020. So there will be a kind of mix answers.

That will depend on the speed, but on one hand, to increase that -- but on the other hand, a full year integration would slightly push it downward. So I would expect it to stay around the 67% or between 65% and 70%.

And if I can answer the second part of the question. If we just have a look at the remote production side, it didn't increase the TAM.

In fact, we stay with the same TAM. It's just structured a bit differently, and sometimes, with different, let's say, roles for different players.

And -- but it's -- as you mentioned, accelerated the transition. In fact, the COVID accelerated the transition.

So thank you very much, everyone, for attending. So I'll remind you, this year, we are, as mentioned, all happy that it's behind us.

We ended up with a positive EBIT despite this pandemic and still a really strong cash position, a strong Q4 order intake, which gives us a strong order book as we enter 2021. And we have prepared ourselves to -- for recovery in the year 2021.

If there are no further question at this stage, then now we can, I think, conclude the call. And thank you, again, everyone, for your participation and your questions.