Exclusive Networks reports solid
double-digit growth in H1-24 Accelerated momentum in
Q2-24 and APAC back on growth track FY24 Outlook
confirmed
Regulatory News:
Exclusive Networks (Paris:EXN):
OPERATING PERFORMANCE
- Double digit Gross sales growth:
- €2,564m, +10% reported
- +11% at constant currency
- Net margin grew to €235m at 9.2% of Gross sales
- Adj. EBIT at €88m, at close to 38% of Net Margin
CASH PERFORMANCE
- Adj. Operating FCF close to 50%
- €330m Gross cash end of H1-24
- Leverage ratio at 1.0x Net Debt/Adj. EBITDA
Exclusive Networks (Euronext Paris: EXN), a global leader in
cybersecurity, today announces its financial results for the
half-year ended June 30st, 2024. Please note that management will
not be holding a conference call on August 1, 2024, as originally
planned.
Jesper Trolle, Chief Executive Officer, commented: “I am
pleased to announce that we had a strong first half of the year,
amidst continued soft market conditions. Gross sales growth
accelerated steadily over the first half, positioning the business
well for second half of 2024.
As a result, we remain close to our long-term target of adjusted
EBIT margin of c.40% with high cash generation. Our momentum
reflects the dedication and resilience of our teams around the
world, whom I thank, and who remain laser focused on driving growth
for the ecosystem. During Q2, we saw our APAC business return to
growth, and we are confident in the renewed growth momentum in this
important region.
This outcome reflects the strength, diversification and
resilience of our business model. Our reputation as a trusted
partner is valued by vendors and customers alike, with retentions
rates consistently above 100%, laying the foundation for our
continued growth.
During the 1H of 2024, we completed the acquisition of Nextgen
Group in ANZ and APAC. The integration is well underway, and we are
pleased to announce that they contributed to a full first quarter
in our books and boosted our Gross Sales growth to 11%1.
The continued emphasis on cybersecurity by CIOs, combined with
our unique business model and established growth strategies,
positions us well for sustainable growth and success. Looking ahead
to FY-24, we remain optimistic about our prospects and are
confident in achieving our full-year guidance."
____________________ 1 Variation at constant currency is
computed using H1-23 rates applied to H1-24 Gross sales. The USD,
GBP and PLN evolved as follows: 1EUR: 1.081 USD; 1EUR: 0.855 GBP,
1EUR: 4.317 PLN respectively for H1-24 and 1EUR: 1.081 USD; 1EUR:
0.877 GBP, 1EUR: 4.626 PLN respectively for H1-23.
Q2-24 GROSS SALES
in € million
Q2-23
Q2-24
Variation
Reported
Constant Currency1
EMEA
897
969
+8%
+8%
AMERICAS
158
173
+9%
+9%
APAC
96
166
+73%
+75%
GROUP
1,152
1,309
+14%
+14%
Q2-24 IFRS Revenue
in € million
Q2-23
Q2-24
Variation
Reported
Constant Currency1
EMEA
275
221
-20%
-19%
AMERICAS
62
66
+7%
+6%
APAC
41
43
+4%
+5%
GROUP
378
330
-13%
-13%
In Q2-24, Gross sales were €1,309 million, an increase of +14%
year over year on a reported basis, +14% at constant currency.
M&A strategy has fuelled our growth in Q2-24 up to 6.6%
including NextGen acquisition. Most of the organic growth was
driven by business with existing vendors in their current
geographies (+5.3%), and to a lesser extent to vendor expansion
(+1.7%), which is a combination of vendors entering into new
geographies (+1.2%) and new vendor relationships (+0.5%). IFRS
revenue is down 13% at Group level due to the market trend in
Hardware business benefitting to higher growth in Software and
Support & Maintenance.
H1-24 PERFORMANCE
Gross sales and adjusted profitability metrics are non-GAAP
measures. Revenue and Net margin are reported in IFRS format. Full
results as per IFRS are presented in the Appendix along with the
reconciliation detailing the differences with non-GAAP measures.
Please refer to the glossary at the end of the press release for
further explanations.
in € million
H1-23
H1-24
Change
Reported
Constant Currency1
Gross sales
2,331
2,564
+10%
+11%
Revenue
776
723
-7%
-6%
Net margin
222
235
+6%
-
% Gross sales
9.5%
9.2%
-34bps
-
Adj. EBIT
84
88
+5%
-
% Net margin
37.8%
37.6%
-28bps
-
Adj. net income
45
46
+2%
-
Gross sales were up 11% at constant currency and up 10%
reported at €2,564million. The major part of the growth was organic
volumes, with existing vendors in current geographies (4.9%), and
vendor expansion (+1.3%), composed of vendors entering into new
geographies (+0.6%) and new vendors (+0.6%). The remainder of the
growth is attributable to pricing effect (-1.0%), to recent
acquisitions (+3.8%) and to currency effect (-0.6%).
____________________ 1 Variation at constant currency is
computed using H1-23 rates applied to H1-24 Gross sales. The USD,
GBP and PLN evolved as follows: 1EUR: 1.081 USD; 1EUR: 0.855 GBP,
1EUR: 4.317 PLN respectively for H1-24 and 1EUR: 1.081 USD; 1EUR:
0.877 GBP, 1EUR: 4.626 PLN respectively for H1-23.
Vendor and Customer retention rates1 in H1-24 remained
above 100%, reflecting the continued engagement of our channel
partners. Net vendor retention rate2 on a rolling 12-month
basis at H1-24 was 107% (vs 131% in H1-23) with net reseller
retention rate1 on a rolling 12-month basis in H1-24 at 106%
(vs 130% in H1-23).
In H1-24, Gross sales mix grew towards Software and Support
& Maintenance, in line with the strategy in place and
confirming the relevance of the value proposition. Hardware
on a rolling 12-month basis decreased to 22% of the Group (vs 26%
in H1-23), Software was up at 51% (vs 47% in H1-23) and
Support & Maintenance was 27% (in line with H1-23).
Cloud-based business accounted for 34% of the Group in H1-24 on a
rolling 12-month basis, up 5 points compared to H1-23 in line with
our digital growth strategy.
IFRS Revenue as reported in the Consolidated Financial
Statements considers the recognition of the sales of Software
licences and Support & Maintenance on a Net margin basis as per
IFRS as explained above. IFRS Revenue reached €723million, down -7%
reported due to the decreasing Hardware business mostly in EMEA and
APAC.
Net margin was €235 million in H1-24, representing an
increase of 6% year on year, reflecting the strong execution with a
consistent mix evolution of geography and deal size despite a
challenging competitive environment.
Operating expenses increased by 7% to €147 million, below
Gross Sales growth, aligned with tight monitoring of the cost
structure. Investment have been done to extend capabilities
especially through NextGen, control on costs is a key factor for
the Group.
Adjusted EBIT rose to a record €88 million, up 5% year
over year. Adj. EBIT margin over Net margin stable at
37.6% reflecting investment in capabilities in NextGen. Excluding
these specific investments, operating leverage would have been at
38.0% slightly increasing year over year.
Adjusted net income was €46 million, representing an
increase of 2% year over year, resulting mainly from the Adj. EBIT
growth partially offset by higher financial expenses and income
taxes.
__________________ 1Defined as rolling 12 months Gross sales
generated in year N from vendors/customers active in year N-1
divided by rolling 12 months Gross Sales from the same
vendors/customers in year N-1
H1-24 PERFORMANCE BY REGION
in € million
H1-23
H1-24
Change
Reported
Constant Currency
EMEA
Gross sales
1,822
1,979
+9%
+9%
Revenue
566
519
-8%
-8%
Adj. EBIT
89
92
+4%
-
AMERICAS
Gross sales
298
314
+5%
+5%
Revenue
115
123
+7%
+7%
Adj. EBIT
7
6
-17%
-
APAC
Gross sales
211
271
+29%
+31%
Revenue
95
81
-15%
-13%
Adj. EBIT
10
10
-4%
-
Total
Gross sales
2,331
2,564
+10%
+11%
Revenue
776
723
-7%
-6%
Adj. EBIT
84
88
+5%
-
EMEA (77% of the Group): Gross sales were €1,979 million,
up 9% year on year, following a slower growth in market in Q2-24
and slippage of some large deals into Q3-24. The profitability grew
at a slightly lower pace, with Adjusted EBIT rising to €92 million,
up 4% year on year, consequent to the competitive environment and
pressure on margin levels.
AMERICAS (12% of the Group): Gross sales were €314
million, up 5% year on year, the region rebounded after a low
single digit growth in Q1-24 to +9% in Q2-24 supported by the
progressive ramp up of both new and existing vendors and the
continued high local market demand. The Adj. EBIT decreased by €1m
to €6m resulting from the investment in Sales & Operations to
generate the next phase of growth.
APAC (11% of the Group): Gross sales reached €271
million, up 29% year on year, driven by the integration of NextGen
as well as the initiatives implemented locally leading to a
positive +8% growth at constant rate in Q2-24 on the organic
perimeter of the business. The Adj. EBIT decreased slightly by -4%
reaching €10m for H1-24 impacted by a less favourable vendor mix
and market share regain in ANZ.
H1-24 CASH FLOW AND FINANCING
Adj. Operating Free Cash Flow reached an inflow of €45
million in H1-24, compared to €105 million in H1-23 mainly driven
by the increasing working capital requirement and the geographical
mix. Consequently, the ratio of cash conversion is 47% in H1-24 vs
116% in H1-23.
Leverage: Financial gross debt at June 30, 2024,
was €532 million (vs. €516 million at end Dec. 2023), with Cash
& cash equivalents at €330 million and Net debt at
€212 million, including the acquisition of NextGen. This resulted
in a leverage ratio of Net Debt / Adjusted EBITDA of 1.0x
compared to 0.8x as of Dec 31, 2023 and 1.3x as of June 30,
2023.
FY-24 OUTLOOK
Amid the current environment still challenged by macroeconomic
volatility (inflation, interest rates, geopolitical uncertainties),
the Group is aiming to achieve for the FY 24:
- Gross sales growth in a range between 10% and 12% at
constant currency
- Net margin in the range between €500 m and €515 m
- Adj. EBIT in the range of €200 and €210 m
- Adj. Operating FCF above 80% of Adj. EBITDA
Consolidated Financial
Statements
The Board of Directors approved the consolidated financial
statements on 23rd July 2024. The consolidated financial statements
have been audited.
APPENDIX
H1-24 CONSOLIDATED P&L
€ million
30 Jun
2023
30 Jun 2024
Revenue
776
723
Costs of purchased goods and services
(552)
(484)
Freight on sales
(3)
(4)
Net margin
222
235
Personnel costs
(97)
(108)
Other operating costs
(39)
(39)
Amortization of intangible assets
(30)
(29)
Depreciation and amortization of tangible
assets
(7)
(7)
Recurring operating profit
49
52
Non-recurring operating income and
expenses
1
(5)
Operating profit
50
47
Finance debt costs
(14)
(13)
Interest on lease liabilities
(1)
(1)
Other financial income and expenses
(11)
(14)
Financial result
(26)
(28)
Income before taxes
24
19
Income taxes
(6)
(5)
Net income
18
14
Net income attributable:
- To the owners of the parent company
16
14
- To non-controlling interest
2
0
Earnings per share attributable to parent
company (in €):
- Basic earnings per share
0.18
0.15
- Diluted earnings per share
0.18
0.15
H1-24 CONSOLIDATED BALANCE SHEET
€ million
31 Dec. 2023
30 Jun. 2024
ASSETS
Goodwill
297
369
Other intangible assets
1,055
1,052
Property, plant and equipment
8
9
Right-of-use assets
26
27
Other non-current financial assets
51
29
Deferred tax assets
7
7
NON-CURRENT ASSETS
1,444
1,493
Inventories
220
185
Trade receivables and related accounts
1,381
1,376
Income tax receivables
10
18
Other current financial assets
9
12
Cash and cash equivalents
369
330
CURRENT ASSETS
1,989
1,921
ASSETS
3,433
3,414
EQUITY AND LIABILITIES
Share capital and share premium
976
976
Retained earnings and other reserves
(47)
(15)
Group net income
43
14
Foreign currency translation reserve
(13)
0
Equity attributable to the owners of
the parent company
959
975
Non-controlling interests
2
(1)
EQUITY
961
974
Other non-current financial
liabilities
500
480
Non-current lease liabilities
19
19
Non-current provisions
3
4
Other non-current liabilities
0
0
Deferred tax liabilities
253
261
NON-CURRENT LIABILITIES
776
764
Trade payables and related accounts
1,583
1,539
Other current financial liabilities
91
120
Current lease liabilities
8
9
Current provisions
0
0
Current tax liabilities
14
8
CURRENT LIABILITIES
1,696
1,676
EQUITY AND LIABILITIES
3,433
3,414
H1-24 CASH FLOW STATEMENT
€ million
30 Jun 2023
30 Jun 2024
OPERATING ACTIVITIES
Net income
18
14
Adjustments for:
- Depreciation, amortization, impairment
and change in provisions
37
36
- Financial debt costs & interests on
lease liabilities
15
14
- Income tax expenses
6
5
Other adjustments and non-cash items
5
6
Income taxes paid
(10)
(14)
Cash flows from op. activities before
change in working capital
70
62
Change in working capital
10
(39)
NET CASH FROM OPERATING
ACTIVITIES
81
23
INVESTING ACTIVITIES
Additions to property, plant and equipment
and intangible assets
(3)
(3)
Disposals of fixed assets
0
0
Changes in other financial assets
1
(0)
Interests received
-
2
Acquisition/(disposal) of subsidiary, net
of cash acquired/(disposed of)
-
(32)
NET CASH FROM INVESTING
ACTIVITIES
(2)
(33)
FINANCING ACTIVITIES
Dividends paid
(1)
(0)
Disposal (acquisition) of Treasury
shares
(25)
(1)
Proceeds from issuance of bank borrowings
& from other financial liabilities
26
4
Factoring liabilities
(35)
9
Short-term financing
(2)
1
Interests paid
(14)
(14)
Repayment of bank borrowing & other
financial liabilities
(24)
(25)
Other cash-out flow from financing
activities
(5)
(5)
NET CASH FROM FINANCING
ACTIVITIES
(79)
(32)
Effects of exchange rate fluctuations on
cash and cash equivalents
(1)
3
INCREASE IN NET CASH AND CASH
EQUIVALENTS
(1)
(38)
Net cash and cash equivalents at the
beginning of the period
263
358
Net cash and cash equivalents at the end
of the period
262
320
GLOSSARY
Gross sales:
- Gross sales represent revenue recognized by the Group on a
gross basis for each revenue stream.
- Net of returns, discount and rebates.
Revenue:
- IFRS 15 revenue.
- Vendor Support & Maintenance and Software licenses margin
accounted for revenue.
- Net of returns, discount and rebates.
Net margin:
- Revenue less costs of purchased goods and services and freight
on sales.
Adj. EBIT:
- Recurring operating profit before amortization of intangible
assets, adjusted for non-GAAP items.
Adj. EBITDA:
- Adj. EBIT restated from Depreciation of tangible assets.
Adj. net income:
- Net income restated for non-recurring operating IFRS 15 and
non-GAAP items, net of taxes.
Adj. Operating FCF:
- Operating Free Cash Flow before tax and adjusted for
non-recurring items.
Cash Conversion:
- Adj. Operating Free Cash Flow / Adj. EBITDA.
Non-recurring items:
- Items defined as unusual, abnormal and infrequent, of limited
number and presented separately in order not to distort the
understanding of the Group’s underlying performance.
CONFERENCE CALL
As mentioned at the beginning of this press release, please note
that management will not be holding a conference call on August 1,
2024, as originally planned.
Regulated information related to this press release and
presentation is available at https://ir.exclusive-networks.com/
PROVISIONAL CALENDAR
- Q3 Sales: 5 November 2024
About Exclusive Networks
Exclusive Networks (EXN) is a global cybersecurity specialist
that provides partners and end-customers with a wide range of
services and product portfolios via proven routes to market. With
offices in over 45 countries and the ability to serve customers in
over 170 countries, we combine a local perspective with the scale
and delivery of a single global organisation.
Our best-in-class vendor portfolio is carefully curated with all
leading industry players. Our services range from managed security
to specialist technical accreditation and training and capitalize
on rapidly evolving technologies and changing business models. For
more information visit www.exclusive-networks.com.
DISCLAIMER
This press release may contain forward-looking statements. Such
statements may include projections, estimates, assumptions,
statements regarding plans, objectives, intentions and/or
expectations with respect to future financial results, events,
operations and services and product development, as well as
statements, regarding future performance or events. Forward-looking
statements are generally identified by the words “expects”,
“anticipates”, “believes”, “intends”, “estimates”, “plans”,
“projects”, “may”, “would” “should” or the negatives of these terms
and similar expressions. Although Exclusive Network’s management
currently believes that the expectations reflected in such
forward-looking statements are reasonable, investors are cautioned
that forward-looking statements are subject to various risks and
uncertainties (including, without limitation, risks identified in
Exclusive Networks’ Registration Document available on Exclusive
Networks’ website), because they relate to future events and depend
on future circumstances that may or may not occur and may be
different from those anticipated, many of which are difficult to
predict and generally beyond the control of Exclusive Networks.
Actual results and developments may differ materially from those
expressed in, implied by or projected by forward-looking
statements. Forward-looking statements are not intended to and do
not give any assurances or comfort as to future events or results.
Other than as required by applicable law, Exclusive Networks does
not undertake any obligation to update or revise any
forward-looking statement.
This press release does not contain or constitute an offer of
securities for sale or an invitation or inducement to invest in
securities in France, the United States or any other
jurisdiction.
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EXCLUSIVE NETWORKS
Investors & Analysts
Nicolas Leroy Global Communications Director
ir@exclusive-networks.com
Media FTI Consulting Emily
Oliver / Jamie Ricketts +33 (0)6 28 73 45 15 +44 (0)7976 718 948
exclusivenetworks@fticonsulting.com
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