Record Gross sales above €2bn in H1-23 FY-23 outlook confirmed, Adj. EBIT expected in the higher range

Operating Performance

  • Record Gross sales of €2.3bn, up 20%
  • Net margin grew strongly to €222m, up 18%
  • Adj. EBIT1 at €84m, up 26% at 37.8% of Net margin

Cash Performance

  • Solid cash generation: Adj. Operating FCF at €105m
  • 116% Cash conversion
  • Leverage ratio down at 1.3x Net Debt/Adj. EBITDA

 


 

BOULOGNE-BILLANCOURT – August 3rd, 2023, at 07:00 A.M. CET 

Exclusive Networks (Euronext Paris: EXN), a global leader in cybersecurity, today announces its financial results for the half-year ended June 30, 2023. Management will hold a conference call at 9:00 am (CET) today, available via webcast. A replay will be available.

Jesper Trolle, Chief Executive Officer, said:

“I am pleased to announce an excellent performance in the first half of 2023, with strong margin progression and sales growth ahead of the cyber security market. Our momentum reflects the differentiation, resilience, and operational gearing of our model, combined with a laser focus on efficiency and cost control. As a result, we have moved closer to our long-term target of adjusted EBIT margins of c.40% with high cash generation. In addition, we continue to grow strongly in the US, a significant market with exciting long-term growth potential. 

Our mission is to create a safer digital world. We do this by giving hundreds of thousands of organisations globally access to the most innovative cyber security technologies. This is built on our global platform, commer-cial expertise and technical know-how. After a surge in demand for cyber technology in 2022 – reflecting the shift to hybrid working, increasing use of cloud technology and threats linked to the war in Ukraine – we are now seeing sales activity return to a normalised long-term trend of double-digit growth. Notwithstanding a lengthening in sales cycles and continued macro uncertainty, our market-leading portfolio of cybersecurity ven-dors, proven ability to grow our addressable market and strong balance sheet support our confidence in achiev-ing our 2023 guidance. On the back of the solid H1 2023 performance, we now expect our Adj. EBIT to reach the upper end of the range.” 

1 Formerly identified as Adj. EBITA. Recurring operating profit before amortisation of intangible assets, adjusted for non-GAAP items.

Q2 2023 GROSS SALES & REVENUE

Q2 2023 Gross sales 

in € million Q2 2022 Q2 2023 Variation
Reported Constant Currency1
EMEA 798 897 +12% +15%
AMERICAS 107 158 +48% +52%
APAC 123 96 -21% -17%
GROUP 1,027 1,152 +12% +15%

Q2 2023 IFRS Revenue

in € million Q2 2022 Q2 2023 Variation
Reported Constant Currency1
EMEA 596 695 +17% +19%
AMERICAS 74 115 +56% +60%
APAC 93 73 -21% -16%
GROUP 762 883 +16% +19%

Gross sales were €1,152 million, an increase of 12% year over year on a reported basis, +15% at constant currency. Most of this growth (8%) was driven by business with existing vendors in their current geographies. The remainder of the growth was due to vendor expansion (4%). Vendor expansion is a combination of vendors entering into new geographies (3%) and new vendor relationships (1%).

H1 2023 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 2022 H1 2023 Change
Reported Constant Currency1
Gross sales 1,947 2,331 +20% +22%
Revenue 1,474 1,776 +21% +23%
Net margin 188 222 +18%
% Gross sales 9.6% 9.5% 12bps
Adj. EBIT 67 84 +26%
% Net margin 35.4% 37.8% +240bps
Adj. net income2 38 45 +18%

1 Variation at constant currency is computed using 2022 rates applied to 2023 Gross sales. The USD, GBP and PLN evolved as follows: 1EUR: 1.081 USD; 1EUR: 0.877 GBP, 1EUR: 4.626PLN respectively for 2023 and 1EUR: 1.094 USD; 1EUR: 0.842 GBP, 1EUR: 4.633PLN respectively for 2022.
2 Adj. net Income for H1-22 was restated to include IAS 34 application effects.

Gross Sales were €2,331 million, an increase of 20% year on year on a reported basis and up 22% at constant currency. Most of this growth (17%) was driven by business with existing vendors in their current geographies. The remainder of the growth was due to vendor expansion (3%). Vendor expansion is a combination of vendors entering into new geographies (1%) and new vendor relationships (2%).

Vendor retention rate improved in H1 2023, supported by increasing demand for our vendors’ solutions and the continued engagement of our channel partners. Net vendor retention rate1 on a rolling 12-month basis at H1 2023 was up 131% (vs 122% in H1 2022) with net reseller retention rate1 on a rolling 12-month basis at H1 2023 at 130% (vs 122% in H1 2022).

Revenue as reported in the Consolidated Financial Statements takes into account the recognition of the sales of support and maintenance on a Net margin basis as per IFRS as Exclusive Networks is not the primary obligor for these solutions. Revenue grew in line with Gross sales.

Net margin was €222 million in the first half of 2023, an increase of 18% year on year, reflecting a mix of geography and deal size.

Operating expenses increased 14% to €138 million, aligned with tight control on new hires and overhead cost structure. Costs are evolving at a slower pace than the top line, improving our operating leverage.

Adjusted EBIT rose to €84 million, up 26% year over year. Adj. EBIT margin over Net margin was up 240 bps year on year to 37.8% as the Group benefits from operating leverage, driven at regional level.

Adjusted net income was €45 million, representing an increase of 18% year over year, resulting from the Adj. EBIT improvement, partially offset by increasing financial interest costs.

H1 2023 PERFORMANCE BY REGION

in € million H1 2022 H1 2023 Change
Reported Constant Currency
EMEA

Gross sales

 

1,528

 

1,822

 

+19%

 

+22%

       Revenue 1,162 1,392 +20% +22%
       Adj. EBIT 70 89 +27%
AMERICAS

Gross sales

 

200

 

298

 

+49%

 

+48%

       Revenue 143 221 +54% +53%
       Adj. EBIT 4 7 +59%
APAC

Gross sales

 

219

 

211

 

-4%

 

-2%

       Revenue 168 163 -3% -1%
       Adj. EBIT 11 10 -5%
Total

Gross sales

 

1,947

 

2,331

 

+20%

 

+22%

       Revenue 1,474 1,776 +21% +23%
       Adj. EBIT 67 84 +26%  

1 Defined 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

EMEA (78% of total Gross sales): Gross sales were €1,822 million, up 19% year on year, with strong momentum in the first quarter followed by a return to normalised activity levels in the second quarter. Profitability increased significantly, with Adjusted EBIT rising to €89 million, up 27% year on year.

AMERICAS (13% of total Gross sales): Gross sales were €298 million, up 49% year on year. During the first half of the year, the Americas region benefitted from the strong growth with existing vendors and a fast ramp up of new vendors, with the US entering the top 3 largest countries for the Group alongside with largest historical European countries. Operational gearing drove record growth of +59% for Adj. EBIT, outperforming reported top line growth.

APAC (9% of total Gross sales): Gross sales reached €211 million, a decline of 4% year on year. The region faced a tougher prior year comparator in the second quarter. Q2 2022 benefitted from large deals that were not repeated in Q2 2023. Despite tough comps in the second quarter, profitability was protected in the first half with Adj. EBIT declining €1 million year on year, to €10 million.

H1 2023 CASH FLOW AND FINANCING

Changes in working capital amounted to a negative €81 million vs. H1 2022, this variation is mainly explained by the one-off effect of the pan-European factoring program implementation in new countries in H1 2022 for €41 million and the seasonality of the activity.

Adj. Operating Free Cash Flow reached a strong level, amounting to an inflow of €105 million in H1 2023, compared to €166 million in H1 2022.

Leverage: Financial gross debt at June 30, 2023 was €488 million (vs. €523 million at end Dec. 2022), with Net cash & cash equivalents standing at €262 million and Net debt at €226 million. This resulted in a leverage ratio of Net Debt / Adjusted EBITDA of 1.3x. The leverage benefitted from the decrease of financial liabilities.

2023 Outlook

In an environment still challenged by macroeconomic volatility, we remain confident in meeting our FY 2023 guidance. On the back of the solid H1 2023 performance, we now expect our Adj. EBIT to reach the upper end of the range:

  • Gross sales above €5,150 million
  • Net margin in the range of €450 million to €465 million
  • EBIT in the range of €172 million to €178 million
  • Operating FCF above 80% of Adj. EBITDA

 

Significant Events Since 30 June 2023

FOUR-YEAR LOAN AGREEMENT WITH BPI FRANCE

On 3 July 2023, through its subsidiary Everest SubBidCo SAS, Exclusive Networks signed a four-year loan agreement with Bpifrance Investissement for €15 million. The principal will be amortized in six half-yearly instalments.

COMPLETION OF A SHARE BUYBACK PROGRAMME

On 4 July 2023, Exclusive Networks completed a €25 million share buyback programme, launched on 20 March 2023. As part of this programme, Exclusive Networks has acquired 1,288,819 shares with a view to remitting them in the context of management package schemes such as allotment of Long-Term Incentives plans represented by free-shares and M&A build-up.

Appendix

H1 2023 CONSOLIDATED P&L

EURm 30 June 2022 30 June 2023
Revenue 1,474 1,776
Costs of purchases goods and services (1,283) (1,551)
Freight on sales (3) (3)
Net margin 188 222
Personnel costs (90) (97)
Other operating costs (29) (39)
Amortization of intangible assets (30) (30)
Depreciation and amortization of tangible assets (6) (7)
Recurring operating profit 32 49
Non-recurring operating income and expenses (0) 1
Operating profit 32 50
 Finance debt costs (7) (14)
 Interest on lease liabilities (0) (1)
 Other financial income and expenses (5) (11)
 Financial result (13) (26)
Income before taxes 19 24
Income taxes (8) (6)
Net income 11 18
Net income attributable:  
– To the owners of the parent company 10 16
– To non-controlling interest 1 2
Earnings per share attributable to parent company (in €):
– Basic earnings per share 0.11 0.18
– Diluted earnings per share 0.11 0.18

 

H1 2023 CONSOLIDATED BALANCE SHEET 

EURm 31 Dec. 2022 30 June 2023
ASSETS  
Goodwill 295 295
Other intangible assets 1,112 1,087
Property, plant and equipment 7 7
Right-of-use assets 26 26
Other non-current financial assets 40 46
Deferred tax assets 8 9
TOTAL NON-CURRENT ASSETS 1,488 1,470
Inventories 271 218
Trade receivables and related accounts 1,132 925
Income tax receivables 12 13
Other current financial assets 19 18
Cash and cash equivalents 268 267
TOTAL CURRENT ASSETS 1,703 1,440
TOTAL ASSETS 3,191 2,910
EQUITY AND LIABILITIES    
Share capital and share premium 976 976
Retained earnings and other reserves (27) (31)
Foreign currency translation reserve 4 (4)
Equity attributable to the owners of the parent company 952 941
Non-controlling interests 3 4
TOTAL EQUITY 956 945
Other non-current financial liabilities 488 499
Non-current lease liabilities 20 19
Non-current provisions 4 3
Other non-current liabilities 0 0
Deferred tax liabilities 274 270
TOTAL NON-CURRENT LIABILITIES 785 792
Trade payables and related accounts 1,304 1,072
Other current financial liabilities 128 79
Current lease liabilities 8 7
Current provisions 0 1
Current tax liabilities 11 15
TOTAL CURRENT LIABILITIES 1,450 1,174
TOTAL EQUITY AND LIABILITIES 3,191 2,910

H1 2023 CASH FLOW STATEMENT

EURm 30 June 2022 30 June 2023
OPERATING ACTIVITIES    
Net income 11 18
 Adjustments for:
  – Depreciation, amortisation, impairment and change in provisions 36 37
  – Financial debt costs & interest on lease liabilities 8 15
  – Income tax expenses 8 6
Other adjustments and non-cash items 8 5
Income tax paid (10) (10)
Cash flows from operating activities before change in working capital 61 70
Change in working capital 91 10
NET CASH FROM OPERATING ACTIVITIES 152 81
INVESTING ACTIVITIES    
Additions to property, plant and equipment and intangible assets (3) (3)
Changes in other financial assets (1) 1
Impact of changes in scope of consolidation (1)
NET CASH FROM INVESTING ACTIVITIES (4) (2)
FINANCING ACTIVITIES    
Dividends paid (1)
Disposal (acquisition) of treasury shares 0 (25)
Proceeds from issuance of bank borrowings & from other financial liabilities 12 26
Factoring liabilities (3) (35)
Short-term financing (5) (2)
Interest Paid (8) (14)
Repayment of bank borrowing & other financial liabilities (13) (24)
Other cash-out flows from financing activities (8) (5)
NET CASH FROM FINANCING ACTIVITIES (26) (79)
Effects of exchange rate fluctuations on cash and cash equivalents 0 (1)
INCREASE IN NET CASH AND CASH EQUIVALENTS 122 (1)
Net cash and cash equivalents at the beginning of the period 125 263
Net cash and cash equivalents at the end of the period 247 262

 

H1 2023 BRIDGE FROM NET INCOME TO ADJ. NET INCOME

Reported Adjustments Adjusted
EURm H1 2022 H1 2023 H1 2022 H1 2023 H1 2022 H1 2023
Operating profit / Adj. EBIT 32 50 35 34 67 84
Financial result (13) (26) (13) (26)
Income before taxes 19 24   35 34   54 58
Growth % 9%
Income taxes (8) (6) (8) (7) (16) (13)
Effective adjusted tax rate 42% 25% 29% 23%
Net income / Adj. net income 11 18   27 27   38 45
Growth %     18%

 

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 revenue.
  • Support & Maintenance 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:

  • Formerly identified as Adj. EBITA.
  • Recurring operating profit before amortization of intangible assets, adjusted for non-GAAP items.

Adj. EBITDA:

  • EBIT restated from D&A.

Adj. net income:

  • Net income restated for non-recurring operating IFRS and non-GAAP items, net of taxes.

Adj. Operating FCF:

  • Operating Free Cash Flow before tax and adjusted for non-recurring items.

Cash Conversion:

  • Operating Free Cash Flow before Tax / 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

Jesper Trolle, Chief Executive Officer, and Nathalie Bühnemann, Chief Financial Officer, will present the Half-Year 2023 financial results during a conference call in English today (August 3rd, 2023) at 9:00 am (CET).

You can follow the conference call live via webcast at the following link: https://ir.exclusive-networks.com/.

A replay will also be available for a period of one year.

All documents relating to this publication will be placed online on the Exclusive Networks Investor Relations website at https://ir.exclusive-networks.com/

Regulated information related to this press release and presentation is available at https://ir.exclusive-networks.com/

 

Provisional Calendar

  • Q3 Financial update (Gross sales and Revenue): 7 November 2023

 


 

Exclusive Networks Contacts

Investors & Analysts
Hacene Boumendjel
Head of Investor Relations
[email protected]

Media
FTI Consulting
Emily Oliver / Tom Blundell
+33 (0)1 47 03 68 19
[email protected]

 


 

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.