Verimatrix (ISDCF)

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Verimatrix: improvement in operating profit.

source
https://www.boursedirect.fr/fr/actualites/categorie/resultats/verimatrix-amelioration-du-resultat-operationnel-boursier-e68c2610c6ae5d2b8d68a74e2faa244a0fbd95f0

03/10/2021 6:52 PM

Verimatrix's 2020 revenue was $ 94.9 million, down 11% from 2019 (on a pro forma basis).

Verimatrix's 2020 revenue was $ 94.9 million, down 11% from 2019 (on a pro forma basis). As a reminder, in 2019, revenue included the income of $ 3.9 million generated by the NFC patent license program managed by France Brevets (nil in 2020).
If we exclude the non-recurring revenue from the NFC program, revenue from the strategic software activity was down 8% over one year.

From a general point of view, the management of Verimatrix considers that the published turnover does not fully integrate the positive commercial dynamics, which is better reflected if we take into account both the published turnover and the increase in the amount of multi-year subscription contracts. The inherently volatile nature of the perpetual license activity further validates the strategy aimed at increasing recurring revenues through the deployment of the subscription offer and SaaS.

In 2020, the company made further progress in its strategy to deploy its subscription and SaaS offering. During the year, Verimatrix signed 56 contracts under this new model in total, while limiting the termination rate, multiplying CAAR by 2.4 year-on-year, to $ 9 million as at December 31, 2020, corresponding to a Total Contract Value (CTV) of $ 20 million.

Adjusted gross margin was $ 78.1 million in 2020 (82.3% of revenue), compared to $ 85.7 million in 2019 (on a pro forma basis). In 2019, excluding the contribution of the NFC patent license program (which typically generates a gross margin of 70%), the adjusted gross margin stood at 81.3% of revenue.

Adjusted operating income from continuing operations grew 3.5% year-on-year in 2020 to $ 19.7 million, reflecting the operational leverage effect as well as the impact of cost synergies and demonstrating the resilience of the business model of the Company.
EBITDA increased 2.4% to $ 24 million (from $ 23.4 million in 2019) while pro forma EBITDA margin increased 580 basis points year-on-year to 21.1 % of sales.

Strong improvement in operating income and net income from continuing operations (IFRS)

In 2020, the company significantly improved its consolidated operating income from continuing operations to $ 11.8 million in 2020 (12.4% of sales), compared to operating income of $ 3 million in 2019 (3, 1% of consolidated sales), in particular due to the decrease in non-recurring charges.

In 2020, adjusted operating income from continuing operations of $ 19.7 million was partially offset by two factors:
- A one-time charge relating to the acquisition costs of Verimatrix, Inc. for $ 1.3 million (fees and commissions and provision for retention bonuses) and the implementation of the cost synergies plan for $ 1.1 million (compared to $ 9.9 million in 2019);
- Various items with no impact on cash for $ 5.5 million, relating to the amortization resulting from the purchase price accounting of acquisitions made by the Company for $ 5.1 million and an expense related to payments based on shares up to $ 0.4 million.

The company recorded a financial loss of $ 10.3 million in 2020, relating to interest paid on financial debts (final bond loan due 2026, convertible bonds due 2022 and rental debts resulting from the application of IFRS16 ) for $ 5.7 million, as well as non-cash charges (including the fair value measurement of the convertible bond derivative).

In 2020, the company achieved a consolidated net loss (IFRS) from continuing operations of $ 1.4 million compared to a net loss of $ 5.9 million in 2019. This figure results from operating income from continuing operations of $ 11.8 million, a net finance charge of $ 10.3 million and an income tax expense of $ 2.8 million.
The company recorded a consolidated net loss (IFRS) of $ 10.4 million (vs. positive net income of $ 27.3 million in 2019), including a net loss of $ 1.4 million from continuing operations and a net loss of $ 9.1 million on discontinued operations.

Financial situation

As of December 31, 2020, the company posted consolidated cash of $ 48.6 million, compared to $ 46.5 million as of June 30, 2020 and $ 54 million as of December 31, 2019.
Net debt stood at $ 25.3 million. as of December 31, 2020 (and net cash of $ 6 million if we exclude convertible bonds and debt relating to finance leases recognized under IFRS 16), compared to net debt of $ 27 million as at June 30, 2020 and $ 19.6 million as at December 31, 2019.

Business outlook and objectives

In 2021, Verimatrix is ??focused on continuing to execute its strategy. The company intends in particular to support the OTT market, which is experiencing significant growth and to increase commercial opportunities for application protection solutions, in particular for Fintech, Healthtech, and the digital revolution in the industrial sector. Verimatrix also aims to increase business synergies related to cross-selling and additional sales (up-selling) and to gain market share in conditional access to video services, while continuing to grow the business model. 'subscriptions and SaaS solutions.

As a result, the company is targeting 2021 revenue from the strategic single-digit business growth in the mid-single digit range, with double-digit growth in recurring revenue. Investments intended to fuel the growth of SaaS solutions and subscriptions combined with the strength of the euro against the US dollar9 should weigh on results and the Company is therefore setting itself an objective of broadly flat EBITDA compared to 2019. These Objectives include an exchange rate of $ 1.235 to 1 euro and the absence of income from the non-strategic NFC patent licensing program, or from business or company acquisitions.

The revenue targets for 2021 should be read taking into account this gradual change in the composition and revenue profile of the company, which implies a lower recognized level of short-term revenue but with more sustainable subscription revenue at long term.