Exclusive Networks –FY-23 Financial Results

Exclusive Networks reports a new record-breaking year in FY-23 Profitability outpacing top line growth

FY-23 outlook exceeded on all financials Further performance improvement expected in FY-24

OPERATING PERFORMANCE

Record Gross sales growth:
- €5.145bn, +14% reported
- +16% at constant currency
Net margin grew strongly to €468m, +14%
Adj. EBIT close to 40% Net Margin at €186m, +21%

CASH PERFORMANCE

Adj. Operating FCF up sharply at €254m
- 128% cash conversion1
Leverage ratio down at 0.8x Net Debt/Adj. EBITDA

Regulatory News:

Exclusive Networks (Euronext Paris: EXN), a global leader in cybersecurity, today announces its financial results for the full-year ended December 31st, 2023. Management will hold a conference call at 9:00 am (CET) today, available via webcast (https://ir.exclusive-networks.com/). A replay will be available.

Jesper Trolle, Chief Executive Officer, commented:

“Exclusive Networks delivered record sales and profits in FY-23 surpassing our financial guidance.

We are thrilled with the profitability of the year, which exceeded the upper range forecasted in August 2023. Our teams demonstrated resilience and adaptability in sustaining growth momentum following a remarkable performance in FY-22, and I extend my gratitude to them for their unwavering commitment to maintaining high standards of quality.

This outcome reflects the strength, diversification and resilience of our model. Our reputation as a trusted partner is valued by both vendors and customers, serving as the foundation of our ongoing growth. Acquisitions remain an important growth lever for us and we made two acquisitions in 2023 – Ingecom and Consigas – which are an excellent strategic fit and progressing well.

Looking ahead to FY-24, we remain optimistic about our prospects, while the environment is expected to remain soft in the first half. The continued emphasis on cybersecurity by CIOs, combined with our unique business model and established growth strategies, positions us for further advancement in the coming year.

We are excited about the opportunities that lie ahead and are committed to building upon our achievements to drive sustained growth and success.”

_________________ 1 Adj. Operating FCF / Adj. EBITDA

IFRS 15 CHANGE IN ACCOUNTING TREATMENT

IFRIC and ESMA published clarifications on IFRS 15 Revenue recognition principles. The publication implied a change in the accounting treatment for Exclusive Networks on IFRS 15 Revenue recognition. Before the publication, only Support and maintenance services were netted in the IFRS 15 Revenue presentation.

As a result of ESMA precisions and concluding illustrations, the Group decided to change the accounting treatment. For its performance obligation, the Group considers now acting as an agent for the sale of software licenses.

After change in the accounting treatment, distribution of software licences are also netted in the IFRS 15 Revenue recognition, in addition to Support and maintenance services. Group Net margin remains unchanged. Please find below information on the restatement for Q4-23 and FY-23 IFRS Revenue compared to Q4-22 and FY-22. Full quarterly restatement for FY-22 and FY-23 is presented in Appendix.

in € million

Before Change in accounting treatment

Variation

After Change in accounting treatment

Variation

Q4-22

Q4-23

Reported

Constant currency

Q4-22

Q4-23

Reported

Constant currency

EMEA

911

920

+1%

+3%

331

299

-10%

-8%

AMÉRICAS

116

137

+18%

+24%

+14%

+20%

APAC

-14%

-9%

-19%

-14%

GROUP

1,122

1,139

+1%

+4%

439

405

-8%

-5%

in € million

Before Change in accounting treatment

Variation

After Change in accounting treatment

Variation

FY-22

FY-23

Reported

Constant currency

FY-22

FY-23

Reported

Constant currency

EMEA

2,704

3,072

+14%

+16%

1,084

1,140

+5%

+7%

AMÉRICAS

348

467

+34%

+38%

186

242

+30%

+34%

APAC

352

324

+8%

-4%

195

177

-9%

-5%

GROUP

3,404

3,863

+14%

+16%

1,466

1,559

+6%

+9%

Q4-23 GROSS SALES

in € million

Q4-22

Q4-23

Variation

Reported

Constant Currency1

EMEA

1,154

1,241

+7%

+9%

AMERICAS

176

234

+33%

+38%

APAC

123

110

-10%

-5%

GROUP

1,454

1,585

+9%

+12%

In Q4-23, Gross sales were €1,585 million, an increase of +9% year over year on a reported basis, +12% at constant currency. Most of the organic growth was driven by business with existing vendors in their current geographies (+6.1%), and to a lesser extent to vendor expansion (+1.3%), which is a combination of vendors entering into new geographies (+0.8%) and new vendor relationships (+0.5%). The remainder of the growth is attributable to acquisitions (+1.7%).

_________________ 1 Variation at constant currency is computed using FY-22 rates applied to FY-23 Gross sales. The USD, GBP and PLN evolved as follows: 1EUR: 1.082 USD; 1EUR: 0.870 GBP, 1EUR: 4.592PLN respectively for FY-23 and 1EUR: 1.059 USD; 1EUR: 0.853 GBP, 1EUR: 4.684 PLN respectively for FY-22.

FY-23 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

FY-22

FY-23

Change

Reported

Constant Currency

Gross sales

4,528

5,145

+14%

+16%

Revenue

1,466

1,559

+6%

+9%

Net margin

411

468

+14%

% Gross sales

9.1%

Adj. EBIT

154

186

+21%

% Net margin

37.5%

39.7%

+225bps

Adj. net income

100

108

+8%

Gross sales were up 16% at constant currency and up 14% reported at €5,145 million. The bulk of the growth was organic, with existing vendors in current geographies (13.9%), and vendor expansion (+0.5%), composed of vendors entering into new geographies (+0.3%) and new vendors (+0.2%). The remainder of the growth is attributable to pricing effect (+1.2%), to recent acquisitions (+0.8%) and to currency effect (-2.7%).

Vendor retention rate1 in FY-23 remained above 100%, reflecting the continued engagement of our channel partners. Net vendor retention rate1 on a rolling 12-month basis at FY-23 was 113% (vs 136% in FY-22) with net reseller retention rate1 on a rolling 12-month basis in FY-23 at 112% (vs 133% in FY-22).

In FY-23, 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 decreased to 25% of the Group (vs 27% in FY-22), Software was 49% (in line with FY-22) and Support & Maintenance was up at 26% (vs 24% in FY-22). Cloud-based business accounted for 32% of the Group in FY-23, up 4 points compared to FY-22 in line with our digital growth strategy.

IFRS Revenue as reported in the Consolidated Financial Statements takes into account the recognition of the sales of software licences and support and maintenance on a Net margin basis as per IFRS as explained above. IFRS Revenue reached €1,559 million, up 6% reported.

Net margin was €468 million in FY-23, a sharp increase of 14% year on year, reflecting the strong execution with a consistent mix evolution of geography and deal size.

Operating expenses increased 10% to €282 million, below Gross Sales growth, aligned with tight monitoring of the cost structure. This resulted to the strong improvement realised on the operating leverage.

Adjusted EBIT rose to a record €186 million, up 21% year over year. Adj. EBIT margin over Net margin was up 225 bps year on year to 39.7% as the Group benefits from a decrease in the weight of Opex by 170bps at regional level.

Adjusted net income was €108 million, representing an increase of 8% year over year, resulting mainly from the sound Adj. EBIT partially offset by higher financial expenses.

_________________ 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

FY-23 PERFORMANCE BY REGION

in € million

FY-22

FY-23

Change

Reported

Constant Currency

EMEA

Gross sales

3,539

4,036

+14%

+16%

Revenue

1,084

1,140

+5%

+7%

Adj. EBIT

160

191

+19%

AMERICAS

Gross sales

532

689

+30%

+33%

Revenue

186

242

+30%

+34%

Adj. EBIT

+26%

APAC

Gross sales

457

420

-8%

-4%

Revenue

195

177

-9%

-5%

Adj. EBIT

-5%

Total

Gross sales

4,528

5,145

+14%

+16%

Revenue

1,466

1,559

+6%

+9%

Adj. EBIT

154

186

+21%

EMEA (78% of the Group): Gross sales were €4,036 million, up 14% year on year, the region benefitted from a consistent positive market demand. Profitability outpaced top line growth and increased significantly, with Adjusted EBIT rising to €191 million, up 19% year on year.

AMERICAS (13% of the Group): Gross sales were €689 million, up 30% year on year. The Region pursued its fast organic development, with the progressive ramp up of both new and existing vendors and supported by the continued high local market demand. Operational gearing increased +26% for Adj. EBIT, resulting from the business model in the US and reflecting the constant focus to drive profitable growth.

APAC (8% of the Group): Gross sales reached €420 million, a decline of 8% year on year. The initiatives implemented locally have managed to bolster the business activity trend that improved towards the second half of the year. The high focus on cost control resulted in protecting the profitability with an Adj. EBIT of €19m for FY–23.

FY-23 CASH FLOW AND FINANCING

Changes in working capital was up €18 million at €76 million vs. FY-22, mainly linked to the stock decrease resulting from the strict inventory monitoring in place and normalization of lead time.

Adj. Operating Free Cash Flow reached a strong level, amounting to an inflow of €254 million in FY-23, compared to €201 million in FY-22 mainly driven by business growth and working capital improvement.

Leverage: Financial gross debt at December 31, 2023 was €516 million (vs. €523 million at end Dec. 2022), with Cash & cash equivalents at €369 million and Net debt improvement at €158 million. This resulted in a significant deleveraging of the company with a leverage ratio of Net Debt / Adjusted EBITDA of 0.8x compared to 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

Shareholders’ return On February 28, 2024, amid the current environment still challenged by macroeconomic volatility, as well as the highly competitive environment, the Board of Directors decided to propose to shareholders not to distribute a dividend and to give priority to the development of the Group to support the external growth and the expansion of the organic business.

Consolidated Financial Statements The Board of Directors approved the consolidated financial statements on 28th February 2024. The consolidated financial statements have been audited.

APPENDIX

Changes in IFRS 15 Revenue Accounting treatment

Up to Q3-23 Gross Sales publication, Exclusive Networks IFRS 15 Revenue was recorded based on the principle that the Group was qualified as agent on the sales of vendors’ support and maintenance.

Following IFRIC and ESMA publications, the Group revised its accounting treatment and considered being agent on the sales of software licenses that should be recognized on a net basis (Net margin) vs on a gross basis (Gross Sales and COGS).

Exclusive-Networks has applied this restatement for FY-23 publication with a pro-forma on FY-22 as follows:

IFRS 15 Former Accounting Treatment

€ million

Q1-22

Q2-22

Q3-22

Q4-22

FY-22

Q1-23

Q2-23

Q3-23

Q4-23

FY-23

EMEA

567

595

630

911

2,704

698

695

760

920

3,072

AMERICAS

116

348

106

115

109

137

467

APAC

352

321

Total

712

762

809

1,122

3,404

893

883

948

1,139

3,863

IFRS 15 New Accounting Treatment

€ million

Q1-22

Q2-22

Q3-22

Q4-22

FY-22

Q1-23

Q2-23

Q3-23

Q4-23

FY-23

EMEA

233

252

268

331

1,085

291

275

299

1,140

AMERICAS

186

242

APAC

195

177

Total

309

344

373

439

1,466

399

378

405

1,559

FY-23 CONSOLIDATED P&L

€ million

31 Dec 2022

31 Dec 2023

Revenue

1,466

1,559

Costs of purchases goods and services

(1,048)

(1,084)

Freight on sales

(6)

(7)

Net margin

411

468

Personnel costs

(183)

(200)

Other operating costs

(71)

(81)

Amortization of intangible assets

(60)

Depreciation and amortization of tangible assets

(13)

Recurring operating profit

114

Non-recurring operating income and expenses

(5)

(3)

Operating profit

111

Finance debt costs

(18)

(28)

Interest on lease liabilities

(1)

Other financial income and expenses

(9)

(26)

Financial result

(27)

(55)

Income before taxes

Income taxes

(13)

(11)

Net income

Net income attributable:

- To the owners of the parent company

- To non-controlling interest

Earnings per share attributable to parent company (in €):

- Basic earnings per share

0.40

0.47

- Diluted earnings per share

0.40

0.47

FY-23 CONSOLIDATED BALANCE SHEET

€ million

31 Dec. 2022

31 Dec. 2023

ASSETS

Goodwill

295

297

Other intangible assets

1,112

1,055

Property, plant and equipment

Right-of-use assets

Other non-current financial assets

Deferred tax assets

NON-CURRENT ASSETS

1,488

1,444

Inventories

271

220

Trade receivables and related accounts

1,132

1,381

Income tax receivables

Other current financial assets

Cash and cash equivalents

268

369

CURRENT ASSETS

1,703

1,989

ASSETS

3,191

3,433

EQUITY AND LIABILITIES

Share capital and share premium

976

Retained earnings and other reserves

(27)

(4)

Foreign currency translation reserve

(13)

Equity attributable to the owners of the parent company

952

959

Non-controlling interests

EQUITY

956

961

Other non-current financial liabilities

488

500

Non-current lease liabilities

Non-current provisions

Other non-current liabilities

Deferred tax liabilities

274

253

NON-CURRENT LIABILITIES

785

776

Trade payables and related accounts

1,304

1,583

Other current financial liabilities

128

Current lease liabilities

Current provisions

Current tax liabilities

CURRENT LIABILITIES

1,450

1,696

EQUITY AND LIABILITIES

3,191

3,433

FY-23 CASH FLOW STATEMENT

€ million

31 Dec 2022

31 Dec 2023

OPERATING ACTIVITIES

Net income

Adjustments for:

- Depreciation, amortisation, impairment and change in provisions

- Financial debt costs & interest on lease liabilities

- Income tax expenses

Other adjustments and non-cash items

Income tax paid

(25)

(26)

Cash flows from operating activities before change in working capital

129

144

Change in working capital

NET CASH FROM OPERATING ACTIVITIES

186

220

INVESTING ACTIVITIES

Additions to property, plant and equipment and intangible assets

(6)

(7)

Disposal of fixed assets

Changes in other financial assets

(2)

(10)

Interests received

Acquisition/(disposal) of subsidiary, net of cash acquired/(disposed of)

(2)

(5)

NET CASH FROM INVESTING ACTIVITIES

(9)

(20)

FINANCING ACTIVITIES

Dividends paid

(19)

(1)

Disposal (acquisition) of treasury shares

(1)

(25)

Purchase of non-controlling interest

(3)

(25)

Proceeds from issuance of bank borrowings & from other financial liabilities

Factoring liabilities

(31)

Short-term financing

(14)

Interest Paid

(17)

(28)

Repayment of bank borrowing & other financial liabilities

(24)

(36)

Other cash-out flow from financing activities

(12)

(10)

NET CASH FROM FINANCING ACTIVITIES

(33)

(103)

Effects of exchange rate fluctuations on cash and cash equivalents

(6)

(2)

INCREASE IN NET CASH AND CASH EQUIVALENTS

138

Net cash and cash equivalents at the beginning of the period

125

263

Net cash and cash equivalents at the end of the period

263

358

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 Jesper Trolle, Chief Executive Officer, and Nathalie Bühnemann, Chief Financial Officer, will present the Full-Year 2023 financial results during a conference call in English on February 29th, 2024 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

Q1-24 Financial update (Gross Sales and Revenue): April 29th, 2024
Annual General Meeting: June 6th, 2024
H1-24 Financial Results: August 1st, 2024
Capital Market Day: Autumn 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240228123936/en/

EXCLUSIVE NETWORKS CONTACTS

Investors & Analysts Hacene Boumendjel Head of Investor Relations ir@exclusive-networks.com

Media FTI Consulting Julien Durovray / Charlotte Hewitt +33 (0)6 25 04 57 73 exclusivenetworks@fticonsulting.com

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