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248. Bull, Bear & Beyond – Quadient: executive interview
22 Plays9 days ago
In this interview, Quadient CEO Geoffrey Godet and CFO Laurent du Passage provide an introduction to the business. Geoffrey describes the group’s evolution from a mail equipment supplier to a global automation platform powering secure and sustainable business connections. He talks through the growth opportunities for the Digital Solution, driven by mid-sized enterprises digitalising their business operations, AI accelerating automation and government regulations. The imminent French e-invoicing mandate presents a significant opportunity for the business, and successful performance in the roll-out should position the company to benefit as other European countries introduce similar mandates. For the Mail Solution, Geoffrey explains that despite the ongoing reduction in mail volumes, which is resulting in a gradual decline in revenues, the business maintains strong profitability. As companies shift from physical to digital mail, Quadient is able to introduce them to its digital solutions. The Lockers Solution is exploiting the ongoing growth in parcel volumes driven by increasing penetration of online retail. Its network of parcel lockers in selected countries combined with its automation platform supports customers to manage their logistics efficiently. Laurent outlines the financial targets set for the current year and the medium term, with Digital expected to become the largest business by revenue and profitability by 2030. He explains Quadient’s capital allocation policy and approach to M&A and wraps up with a summary of the key indicators that investors should monitor to track the company’s progress..
Quadient designs and builds human-centred, AI-driven automation solutions for business communications. It operates through three solutions: Digital, Mail and Lockers.
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Transcript
Introduction to Quadient Management
00:00:08
Speaker
Welcome to Edison TV. I'm Catherine Thompson, technology analyst at Edison, and I'm here today with the management team of Quadient, CEO Geoffrey Godet and CFO Laurent Dupassage.
Quadient's Automation Solutions
00:00:21
Speaker
Quadient designs and builds automation solutions for business communications, including customer communications management, finance automation and mail and parcel management.
00:00:33
Speaker
Quadrant is listed on Euronext Paris. um w Welcome, gentlemen. Welcome, Catherine. Thank you. um Jean-Pierre, just to kick us off, do you think you could give us a brief overview of the business and also kind of recent changes to the leadership structure?
00:00:50
Speaker
Of course, Catherine.
Revenue and Market Presence
00:00:51
Speaker
So Quadiant is a tech company today. It's a providing intelligent automation platform across different processes that we optimize. One of our first activities, obviously, a digital automation platform. The second one is a mail automation platform. And the third one is a parcel of automation ah platform.
00:01:10
Speaker
Quadrant represents 1.1 billion revenue, roughly, ah across two main geographies. ah North America market is our primary market today, with close to 60% of our sales in North America.
00:01:25
Speaker
Europe is our second main market, with roughly 40%.
Transition to Digital Automation
00:01:29
Speaker
And we will see we have also some strong presence in some very unique countries in Asia, in particular in Japan, where we have a stronger a strong presence. It's a company that is 150 million in EBIT, a bit strong profitability driven by the growth, both in terms of top line, but also a growth and improvement in profitability of our two growth engines, which is our digital platform and parcel of business.
00:01:53
Speaker
um The transformation of Quadin has started quite a few years ago. um And naturally, we we have developed the two growth engines that I mentioned, the digital automation platform and the parcel locker business, um to accelerate transformation from our traditional business on the male side that has been slowly declining, though in a predictable way, in the last few years. Recently, we actually have decided to make some some steps. to accelerate ah the transformation of the company as we are driven by some stronger market drivers, AI, invoicing mandates, digitalization, that makes us anticipate that our digital activity is going to become the first activity of the group before 2030. First activity both in terms of revenue, but also in terms of profitability.
00:02:37
Speaker
And as a result, I think it's our role as a management team, as a CEO, to anticipate the good execution and good delivery of this plan.
Focus on Digital Growth and AI
00:02:44
Speaker
And as a result, as recently as March, we have ah adapted the organization of the company and we have brought on board four dedicated executives to lead our digital practice and reinforce obviously the executive presence at the board, which is definitely a symbol of the acceleration and the anticipation of the growth of digital activities for the coming years.
00:03:04
Speaker
Great. And could we dig into the trends within each of the three divisions in a bit more detail? So if if we start with the digital division, and your customer communications management software is very well regarded by industry analysts.
00:03:17
Speaker
um Could you tell us a bit more about the trends that you see in this business and your ambitions for this business? Sure. So we're really benefiting from from two major trends, ah two two, three major trends from a digital perspective that are the underliing underlying growth drivers for this business.
00:03:36
Speaker
ah The first one is the general digitalization that most businesses have to go through from large to mid-sized companies to small companies. Everybody obviously has to transform paper-oriented process to digital automated process. So this has been going on for the last, obviously, a few decades and it's accelerating, driven in part by two additional factors. The first one being intelligent intelligent automation, AI, right? That is an accelerator helping companies to go further in that automation ah opportunities for them. And the second one are usually more driven by change in regulation. And you can talk about regulation in healthcare, in various regulated industries, but also in financial automation. So most European ah countries are going through what we call invoicing mandates, forcing companies to invoice digitally between them themselves and having a an invoice that is digitally sent and agreed by government platform so that tax could be paid on time, The government's happy and obviously the customers could benefit from structured financial information. So these are the underlying drivers, right, that make us look at small, mid-size and large companies that have to equip themselves with those digital automated solutions in the coming years.
00:04:47
Speaker
With an enterprise, large enterprise
Target Market and Platform Capabilities
00:04:49
Speaker
market that is a little bit more penetrated as large companies have large IT and investment. and they have invested already in the previous years. So we're looking at a market where we consolidate different systems and allowing those large companies to be more efficient leveraging AI. But we're really looking at the mid-size segment of millions of companies across Europe and and the US that have not invested yet in those solutions and they're waiting for a regulation as a deadline or as a as a major driver for them to equip them themselves. And this is where we have positioned our digital automation platform to be able to equip all those mid-sized customers. So roughly today, we have 16,000 customers already that have decided to choose Quadiant Digital Automation Platform.
00:05:28
Speaker
And obviously, our platform covers a wide range of capabilities from being able to design and edit and create invoice or other digital documentation, different templates, and helping them to optimize the cash collection of those invoice, the payments of the invoice, the approbation of those invoice for whether or not it matched the purchase orders or the budget that they had in line with that capability. This is all what our suite is capable of handling for those customers. um and And we are obviously recorded nowadays, as you mentioned, by industry analysts from Gartner, Forrester, Omidia, and others, are usually on the top right end quarter, where we're the most advanced, the most penetrated, and having the most sophisticated technology, which is obviously a great appreciation from third parties.
Regulatory Opportunities in Europe
00:06:10
Speaker
ah And also within the digital ah division, as you've kind of alluded to, um you know, the business process automation part of the business should benefit from the imminent invoicing mandates in France. Could you talk about how you see yourself as positioned there and and what opportunities you see for the business? So our ambitions are are great and quite quite high, but in line with the the amazing opportunity that exists on the market. And the France is kind of a use case before we talk about the rest of Europe. So the French government has decided that by September 2026, which is tomorrow in our timeframe, to force and mandate for all companies of all size to be able to register their invoice before they can send it to their counterpart ah with a approved and certified government platform.
00:07:00
Speaker
basically defined and designed by the French government. And this platform would allow companies, before they send an invoice to their customers, to register that invoice, making sure that the granular information on the invoice is spelled out. um And once the government platform is actually approving that invoice, then we have a certified invoice, and then that invoice can then be sent to the customer and for the customer to receive that invoice the same way and being able before payment is authorized to certify that they have received that invoice. right so It's really about the invoicing automation process and it's really trying to help millions of companies in France, all companies of all size, to benefit from this new regulation.
00:07:38
Speaker
So the opportunity for us as a vendor is that we're one of those certified vendors in France. And we've already 100,000 customers, small and mid-sized and large companies in France that are customers of Quadiant, in which we're going to try to promote that solution. And as we establish ourselves with the French mandate, we're obviously looking at the same opportunity that is going upcoming in other European countries, with Germany starting its process in 2028, with Belgium that actually started at the beginning of 2026. And all the other European countries are going to subsequently, progressively get on board the same kind of processes.
Mail Services and Profitability
00:08:13
Speaker
There's European Commission standard mandate calling VIDA that is also nearing itself around 2030, for which obviously we want to be a major player in becoming an investing leader in Europe as a company.
00:08:26
Speaker
Sounds like you've got a really big opportunity there. um Moving on to the mail division, which you refer to as your legacy division. um You know, in a world where mail volumes are declining, if we exclude parcels, what is your strategy for this business?
00:08:42
Speaker
So we we don't call it legacy ah because we obviously are supporting almost 300,000 customers so today. um Mail is still have a lot of value for a lot of companies because some of the most cost effective and most efficient way and certified way and approved by regulation way of being able to share information.
00:08:58
Speaker
While some of it is digitizing, we just talked ah about before. We're serving those customers and we're definitely being number one in Europe, being number two globally, the capacity to extract a lot of value for our business and for customers in the coming years. The benefit with um this business is it's a very predictable industry. So even though mail volume is digitalizing progressively, we also know what are the upcoming regulation that will move some of the physical now to ah digital capabilities in a planned way, in an anticipated way. And we can predict, obviously, the evolution of that business for the coming ah ah decades. um And we have a very recurring business model because we obviously place our automation mail equipment, which we call fronking machine, folders, inserters. It's all suite that really helps automate the ah physical delivery of putting an important document, hence an invoice or payroll a payslip or another important to business transactional information into a letter with the right information, it with the right addressed in a certified way and that's we obviously automate in processes. This business um is ah declining but at a slow level of decline around five percent and from which we're able to extract quite a lot of values in this scaled environment within EBITDA close to 25 percent and we believe that we could maintain the high profitability of this business over the foreseeable
Leadership in Parcel Lockers
00:10:27
Speaker
ah future.
00:10:27
Speaker
And the other third division, so the parcel lockers division, is actually well positioned because parcel volume growth continues to to grow. and What's your strategy for this business?
00:10:40
Speaker
ah This is a another fascinating business. In the same way i mentioned that we're number one in our um software practice worldwide, recognized by DC, I think, last year, was the largest market share. I just mentioned on the male side that we were number one in Europe, number two worldwide. We are actually also having leading position in this parcel local business. We're actually and the number one in Japan with almost more than 70% market a share. We're also the number one in the US market with more than 40% market share. So that's ah something that is quite recurring across our performance. When we enter enter market, we like to be ah know the top top provider.
00:11:18
Speaker
um The Barcel Locker is really ah benefiting from the higher penetration of e-commerce in our respective countries, right, where each one of us order more and more goods online, right? And as a result of us making that purchase online, a physical logistical delivery has to happen because instead of buying in store, we're buying online and somebody has to deliver that goods to us at the office, at home or wherever we are. So there is obviously an increase in those goods deliveries, in those parcels deliveries. And there is a big sort of questions and problems that a lot of stakeholders have to optimize, which is how to deliver more and more of those parcels more efficiently in a regulated environment, in an environment that is more CO2 friendly. So we could reduce the CO2 emission associated to those deliveries where we could deliver more goods with less drivers, with less trucks. Right. So that's why we have created a parcel automation platform that really optimize the first mile and the last mile of the delivery. And it's a technological platform. We're not a carrier. We do not provide the service to deliver the package. We really provide that physical capability of those ah lockers that you may have seen ah everywhere in the cities, in the streets, outside or inside the shops. um And we have the full automated platform on the backend, where the software that really is able to track and trace the order from the moment you place that order online on the website. to the moment where the carriers is going to be able to through their logistical network and their warehouses and their truck and the drivers to be able to take that package and deliver it to you within sometimes just a few hours. So we have that middle um backend. that is integrated with our lockers. We've got 28,000 of those installations worldwide today, and we intend to double and the size of those installations in the coming five years and trying to retain their leadership position and in the US and and in Asia and in Japan in particular, but also to penetrate specific European market, like the French market, the Yuki market or Italy, which we have recently
Growth Strategy and Acquisitions
00:13:17
Speaker
launched.
00:13:17
Speaker
Great, thank you. and I'm going to shift over to Laurent now and just um ask you about the financial side of things. So you've set guidance for both the short term and the medium term on the divisional basis. Could you talk us through what the targets are that you've set?
00:13:33
Speaker
Sure. So in the short term, I mean, we mentioned this year, revenue growth, organically revenue growth expected between minus 2% and plus 2%.
00:13:43
Speaker
DBDA targets have been reminded for each solution during our Q1, above 20% in digital, above 25% in mail, and above 10% in locker for the year 2026.
00:13:55
Speaker
Over the midterm, we expect by 2030 revenue at around 550 million euros for digital, that's what brought up after our full year publication, which is above and beyond the 500 million euros we expect for mail and above 200 million euros expect for locker.
00:14:12
Speaker
The respective EBDA on this midterm guidance of 2030 is about 30% digital. That would be the most contributive and and the highest EBDA of clients.
00:14:23
Speaker
Between 20 and 25% in mail and the about 20% in lockers. Thank you. and Over the last few well the last three years or so, you've made a few acquisitions. Could you talk us through your capital allocation strategy and also your views on M&A?
00:14:41
Speaker
So in the past years, you're right, we've been opportunistically adding capabilities to our platform. and So to be on the digital side with the acquisition of Daylight in 2023 and last year, Serendia and CDP.
00:14:54
Speaker
We also nicely consolidated the Locker's business in the US with the acquisition of Packet Concierge back in December 2024. We also consolidated the mail business in Europe with the acquisition of Froma early 2024.
00:15:06
Speaker
That being said, the trajectories I just mentioned are organic and do not require subsequent acquisitions. And back to your question from a capital allocation standpoint, the priorities remain in organic growth and capex and with a €300 million euro um envelope over the 24 to 26 period.
00:15:24
Speaker
Opportunistic bolton acquisitions, but maintaining healthy balance sheet with a leverage extreme leasing at 1.5 target by 2030.
Investor Insights and Strategy Execution
00:15:30
Speaker
target by twenty thirty and the return to shareholders 20% minimum in dividend. As an example, this year, 46% of return is submitted to the AGM validation.
00:15:46
Speaker
Great. Thank you. and And finally, what are the events that investors should look out for in both the short and medium term to kind of evidence that you're executing your strategy?
00:15:58
Speaker
So during our Q1 publication, I think we need to to flag two i think important items. The first one was the acceleration we had on the AAR, which is obviously the matrix that we would look at on the digital side, which basically reflects the level of contracts that are signed and and live and that will generate future revenue.
00:16:21
Speaker
um And I think this is a metric that we need to continue following and to see how this ah improvement, this increase, this acceleration is coming up together, notably light with the invoicing mandate coming up in in many countries in Europe. I think that's really ah something investors need to look at. The second part I would say would be the the quality of ah the management of the mail business, notably the fact that in Q1, again, we did the significantly reduce the decline of that business.
00:16:50
Speaker
And we expect this year, as mentioned earlier, more than 25% ABDN that business, meaning we need to continue controlling, as we did in the past, strongly the level of profitability and cash flow we're getting from that.
00:17:03
Speaker
Last but not least, lockers.
Conclusion and Growth Opportunities
00:17:06
Speaker
Utilization rate that we publish on the Open Network in Europe, but also the ability to progress in the margin side are going to be key in the coming quarters and n years.
00:17:17
Speaker
Great. Thank you both for for taking the time to speak to me. it sounds like you've got lots of growth opportunities there. So thanks again. Thank you, Catherine. Thank you, Catherine.