TCLRY - Vantiva S.A. (TCLRY) Q1 2023 Earnings Call Transcript

2023-04-29 13:25:21 ET

Vantiva S.A. (TCLRY)

Q1 2023 Results Conference Call

April 27, 2023 12:00 PM ET

Company Participants

Alexandra Fichelson - IR

Luis Martinez-Amago - CEO

Lars Ihlen - CFO

Conference Call Participants

Presentation

Operator

Good evening, ladies and gentlemen, and welcome to Vantiva Q1 2023 Revenue Conference Call, chaired by Luis Martinez-Amago, CEO; and Lars Ihlen, CFO. At this time, all participants are in listening mode. [Operator Instructions] Just to remind you all this conference is being recorded. We would like to inform you that this event is also available live on the Vantiva website with synchronized slideshow. During this conference call, statements could be made that constitute forward-looking statements based on management's current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from the future results expressed forecasted or implied by such forward-looking statements.

For a more complete list and description of such risks and uncertainties, refer to Vantiva's filing with the French Autorité des Marchés Financiers. I would now like to hand over the call to Luis. Please go ahead.

Luis Martinez-Amago

Thank you, Thierry. Good afternoon or good morning to everyone in the call, and welcome and thank you for participating in this call. As said by Thierry, we am going to report about our revenue performance in quarter 1. As you will see, we simplified the reporting aligning ourselves with the normal practice of the market. And we will cover in quarter 1 and quarter 3 only the revenues in the first half and full year in -- at the occasion of this quarter.

So let me start by saying that we are delivering a quarter 1, very much in line with our expectations. We -- you will see we have growth in the first quarter in a very challenging economy, as I shared with you in the previous occasion, but we are delivering growth in this first quarter. Connected home activity, you will see delivered a double-digit growth driven by a very still active broadband market. And in our supply chain solution activity, there is a certain decline year-on-year, and I will cover a bit more what is the basis for this decline -- but overall, the most important one is that we are on track to deliver on our guidance. So if we go to the next slide, you will see here that the overall growth has been from EUR 559 same quarter last year to EUR 573 this quarter.

And as you can see, per division, we have a 12.1% growth in connected home from EUR 408 to EUIR 458 and a certain decline in Supply Chain Solutions division, we had declined from EUR 150 last year to EUR 115 million this year. This, as you can see, some variance that is very much in line with our expectation and some decline has been compensated with some additional growth in some other activities. If we go to the next slide, this is the guidance that we shared with you last time. And we are confirming this guidance. We are acting in line with all our expectations.

We are very happy with the support of customers and our teams. They are executing on any event of the market. We have the full support of all our customers, big and small, and we are working together to go through these challenging moments in the global economy, but pretty happy to confirm that we are going to be delivering on our guidance. If we go a bit more in detail BDD, if we get in Connected Home, as you can see here, now is splitting the revenues between the 2 categories, broadband and video. As we keep reporting in video, we are very selective in the things we do.

The overall market is showing a certain decline as we do, but we are pretty happy on the type of deals that we are getting and how we are running that business. We are replacing all activities by new activities in the targeted areas. As you know, it's RDK video and Android TV video. But as you can see, we have a very small decline compared to last year, but in the right direction. And as you can see, there is a significant growth in broadband in a market that is not having this growth is showing that we have a significant traction at BT in the market, so gaining market share.

And this is based on a number of taxes. I think Wi-Fi 6 is a very demanding activity. I think operators keep investing in this activity a bit a lot in North America but also in other geographies. And due to the deals that we won in the past on this activity, this is paying the way to still some significant growth, as you see. There is also a good traction in the fiber.

As I told you, fiber is one of our key priorities to really keep gaining share, and we are doing that. We are dominating the cable segment, as you know. And in fiber, is one of our decondition -- we are working on that and is showing significant gains in this aspect, and we are expecting this to continue. The video has been impacted in economies, a bit more sensible to global macroeconomic situations. I'm refer, for example, to Latam and India in which in general service providers tend to be a bit more cautious when the situation of the economy is impacting much more the demand than in other geographies.

Okay, something that I'm sure will recover. But for the moment, we are very attentive to this type of markets because they are a bit more volatile than others. Overall, the situation is still very volatile, as I was telling you when providing the guidance for the year. All actions are in place to deliver on our promises. I think we were very, very much in line and in partnership with our customers.

We are serving them following the needs that they have. There is -- that different market by market and type of operator or type of operator. In some places, we need to adjust to a weaker demand in some others, they are coming with a very in demand, we took over some commercial needs, and we have all operations in line to adapt to these fluctuations.The chip sets supply keeps improving. I think we are -- even if in some specific we see and difficulties. But overall, I should say that in terms of supply, the situation is coming quickly back to normal.

And the other aspect is we see a lot of activity, what we call commercial activity in helping customers in defining and preparing the future product portfolios. A lot of our customers are preparing new opportunities in fiber, in fixed wireless and mostly to introduce Wi-Fi 7 technology, as I said with you in the past. And I'm pretty happy of seeing the level of engagement that our teams have with these customers. I'm very optimistic that we will accompany them in the future to pay the way to the growth that we are planning to have moving forward in following years. If we move to the other activity to the division supply chain solution, here, as you can see what we have suffered in quarter 1 is in one of the segments, which is the optical disc, which is traditional.

We had some weakness in quarter 1, a bit more than expected. There are a number of reasons that are justifying that. One of them is some of the big titles that were planned to launch in quarter 1 has been delayed for later quarters. Some of them will do in quarter 2, some of the in quarter 3. And this is a significant part of growth in volume.

So this is just a delay that we will see coming later. We have some of our big retailers in North America that had some rearrangement of the spaces in their stores that were pushing out a little bit the new demand just for them to end the replanning of these activities. So there is a number of small reasons. We are not very much concerned. We see the year will come back to what we were expecting gradually, okay, but we need to go through the motions.

We keep working on our efficiency in this business. In the traditional one, I shared with you, we are working in the productivity improvements in trying to rationalize the activity rate to make it more efficient, to keep extracting profitability in a lower top line -- but we keep investing in all the diversification activities. As you know, we are investing heavily in the vinyl capacity because the demand is there and will be there for the years to come. Our key customers, the key music studios are accounted on us to put as much capacity as we can in place to provide us with this activity, and that will be growing quarter-on-quarter over the year. And that will -- that will -- is part of the plan, but we are considering that, that could even compensate a bit in the optical this business keeps showing some delays or weakness.

So we are pretty optimistic in all the actions we have in the vinyl, we will keep growing quarter-on-quarter. On the other diversification activity, which is what we call fulfillment and brokerage of transport is showing good dynamics with in brands on the portfolio, and that should be over access of diversification. As you know, this business is all about increasing the productivity in the traditional business optical days and keep investing and growing in the diversified business. So this is a major axis and we'll keep reporting on you moving forward. Okay.

And with this, I think this gives you a quite wide panorama of our performance in quarter 1. Remember, growth in a complex economy if we are quite happy of this performance in quarter 2, and we will keep executing throughout the year. And coming back to you with more updates. And with this, [indiscernible] maybe we should go to the Q&A.

Question-and-Answer Session

Operator

Absolutely. [Operator Instructions]. Do you want any one other waiting for a question?

Alexandra Fichelson

We have [indiscernible] Williams from Edison.

Unidentified Analyst

You talked about gaining market share in Connected Home. Is this down to any change in the competitive landscape? Or is it your technical capabilities? Or is it pricing? Or is it a combination?

That's my first question. And on Supply Chain Solutions, I just wondered if you felt -- you referenced the destocking in the statement and then talked about customers doing a bit of refurbish and realized. Do you think that has actually worked its way through now? And also, is the investment program on the vinyl intact on track?

Luis Martinez-Amago

Okay. On the first question, which is a very good question. It's a very difficult thing because it's a combination of many things. and is not an event of 1 quarter is all everything that we are doing over the past. So it's the positioning we have, not only in the portfolio of customers that we are addressing, but also on the technologies that we are present.

And okay, it's a bit that you do. And normally, after that, it depends in which geography you are and in which secondly you are that depending on the market events, you can take advantage of some market evolution, but sometimes it could go in the other direction. But I would say our section of markets. As you know, we have very predominantly in North America, and the performance of North America market has been quite robust in the first quarter, and this is helping us. Our presence in the cable, our focus on fiber, our position in Android TV, all these fundamental and it's a combination of things that if you find that this is the places where our customers are investing are preparing their campaigns, then you go with this way, okay?

So -- but there are many factors. It's very difficult to mention one of them. But look, this is what I can answer on that question. On the second question, if I understand well, you say as if our plans to execute in the capacity expansion of finalizes still in place, -- the answer is yes. And the only thing I can share with you is that in the past quarter 4, we were reporting that we were having a bit of the equities of finding the press, the machines to produce the vinyls and some of them were arriving with a bit delay.

Now what I can report to you is that what we see before this year is that we can even be a bit ahead of the original plan that we see that some of these machines are arriving a bit in advance. So I'm pretty optimistic that if anything this year, the capacity plans will be a bit ahead of plan that will allow us to even deliver a bit more vinyl than what we had in the plan. It still to be seen. It's a plan, but if something I would say with you is that I'm optimistic that we could execute a plan or a bit better than plan the capacity expansion.

Unidentified Analyst

Yes, there was one more about whether you felt the destocking in the DVDs in the retail sector have actually worked its way through now.

Luis Martinez-Amago

You mean the inventories that we are depleting the inventories -- this is okay. First, this is not basically a problem for us because the inventories we have on this belong to our customers. So our business, we produce their -- the DVD's that they ask us to produce. They own the DVD's, we store them. And after that, we have the business of shipping these to the different stores.

So having more or less inventory, it is not our objective. I think it's something that they manage. But what I would say with you is that, yes, I think they are pulling out of the inventory, and it is a mixed bag, and we normally control that. There is new titles that is normally what is a significant part of the new volume. And then when they go to the long-tail catalog, they control what they need to sell or not sell or reproduce, but I don't see any major important KPI to share with you on this as a business as usual.

Operator

Thank you. We have no more questions for the moment. [Operator instructions]. Thank you.

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