EXN

Exclusive Networks reports growth significantly above cybersecurity market, Increased profitability ratio and strong cash generation

OPERATING PERFORMANCE

• Record gross sales at over €4.5bn, +38% yoy
• Strong increase in Net Margin at €411m, up 29%
• Improvement in Adj. EBIT1 at €154m, up 29%

CASH PERFORMANCE

• Outstanding cash generation performance, Adj. Operating FCF above €200m
• Deleveraging down to 1.6x leverage ratio

Regulatory News:

Exclusive Networks (Euronext Paris: EXN), a global leader in cybersecurity, today announces its financial results for the full year ended December 31, 2022. 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:

“I am pleased to announce that we had a record-breaking performance in FY2022, with strong revenue growth, profit margins and cash performance. Our momentum continued to build throughout the year delivering three consecutive quarters of Gross Sales of over €1 billion. This further demonstrates our ability to deliver sustainable growth through our specialised approach, unique business model and talented teams around the world.

“Cybersecurity continues to be one of the most challenging issues of our time facing CIOs. Cyber-attacks are accelerating in frequency and intensity with a ransomware attack estimated to occur every two seconds by 2031. Geopolitical tensions continue to threaten nation states and national critical infrastructure, driving new cyber legislation and compliance. Rapid digital transformation projects, new hybrid working practices and the migration to cloud based architectures have created increased threat landscapes and greater vulnerabilities. Add to this to growing cyber skills and talent shortage and it’s clear that investment in cybersecurity will remain resilient in 2023.

“Based on these macro tailwinds, our market leading portfolio of cybersecurity innovative vendors and our global ecosystem of specialist partners; combined with our ability to grow our addressable market through geographic expansion, strategic acquisition, and service innovation, we estimate that in 2023 our addressable market opportunity will increase to more than $80 billion. We are confident that we are well placed to take advantage of this growing opportunity.”

FY 2022 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 2021

 

FY 2022*

 

Change

     

Reported

 

Constant Currency**

Gross sales

 

3,273

 

4,528

 

+38%

 

+36%

Revenue

 

2,483

 

3,404

 

+37%

 

+35%

Net Margin

 

320

 

411

 

+29%

 

-

% Gross Sales

 

9.8%

 

9.1%

 

-70bps

 

-

Adj. EBIT

 

119

 

154

 

+29%

 

-

% Net Margin

 

37.3%

 

37.5%

 

+20bps

 

-

Adj. Net Income

 

72

 

100

 

+39%

 

-

* At the date of issuance of this press release, the audit procedures of the statutory auditors on consolidated accounts were carried out. The certification report will be issued after finalisation of the verifications relating to group management report and the presentation in the format provided for by the ESEF regulations of the accounts intended to be included in the annual financial report.

** Variation at constant currency is computed using FY-2021 rates applied to FY-2022 Gross Sales. The USD, GBP and PLN evolved as follows: 1EUR: 1.054 USD; 1EUR: 0.853 GBP, 1EUR: 4.684PLN respectively for FY-2022 and 1EUR: 1.184 USD, 1EUR: 0.860 GBP, 1EUR: 4.564 PLN respectively for FY-2021.

Gross Sales at €4,528 million, an increase of 38% year on year on a reported basis and up 36% at constant currency. Most of this growth (34%) was driven by business with existing vendors in their current geographies. The remainder of the growth was due to vendor expansion (2%) and 2021 acquisitions (3%). Vendor expansion is a combination of vendors entering into new geographies (1%) and new vendor relationships (1%).

Vendor retention rate2 improved in FY 2022, supported by increasing demand for our vendors’ solutions and the continued engagement of our channel partners. Net vendor retention rate2 for FY 2022 was up 136% (vs 113% in FY 2021) with Net customer retention rate2 at 133% (vs 112% in FY 2021).

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 reached €411 million in FY 2022, an increase of 29% year on year. This change below top line growth evolution is explained by the mix of geography and deal size.

Operating Expenses were up 28% at €257 million, driven by the full year effect of the 2021 acquisitions as well as post IPO structure.

Adjusted EBIT rose to €154 million, up 29% year over year. Adj. EBIT margin over Net Margin was up 20 bps year on year to 37.5% as the Group benefits from operating leverage, driven at regional level.

Adjusted Net Income reached €100 million, an increase up 39% year over year, benefitting from an increase in adj. EBIT.

GROSS SALES AT GROUP AND REGIONAL LEVELS - HIGHLIGHTS

Q4-22 GROSS SALES BY REGION

Q4 2022 Gross Sales

in € million

 

Q4 2021

 

Q4 2022

 

Change

     

Reported

 

Constant Currency*

EMEA

 

805

 

1,154

 

44%

 

46%

AMERICAS

 

122

 

176

 

44%

 

29%

APAC

 

98

 

123

 

26%

 

19%

GROUP

 

1,025

 

1,454

 

42%

 

41%

* Variation at constant currency is computed using the fourth quarter of 2021 rates applied to the fourth quarter of 2022 Gross Sales. The USD, GBP and PLN evolved as follows: 1EUR: 1.054 USD; 1EUR: 0.853 GBP, 1EUR: 4.684PLN respectively for 2022 and 1EUR: 1.184 USD, 1EUR: 0.860 GBP, 1EUR: 4.564 PLN respectively for 2021.

Gross Sales at €1,454 million, an increase of 42% vs Q4-21 on a reported basis and up 41% at constant currency. Most of this growth (38%) was driven by business with existing vendors in their current geographies. The remainder of the growth was due to vendor expansion (3%) and acquisitions (1%). Vendor expansion is a combination of vendors entering into new geographies (2%) and new vendor relationships (1%).

Vendor retention rate improved in Q4 2022, supported by increasing demand for our vendors’ solutions and the continued engagement of our channel partners. Net vendor retention rate2 for Q4 2022 was up 140% (vs 110% in Q4 2021) with Net customer retention rate2 at 135% (vs 106% in Q4 2021).

EMEA (79% of total quarterly Gross Sales): Gross Sales at €1,154 million, up 44% vs Q4-21. The Group enjoyed a sharp increase of the activity towards the end of the year, boosted notably by the expansion of the Enterprise market. As a result, for the first time EMEA crossed a record threshold of €1 billion gross sales in a single quarter.

AMERICAS (12% of total quarterly Gross Sales): Gross Sales at €176 million, up 44% vs Q4-21. Robust performance of strategic vendors in the region confirmed development in place, market is developing through larger deals, accelerating growth in volumes sold.

APAC (8% of total quarterly Gross Sales): Gross Sales came in at €123 million, up 26% vs Q4-21. The rebound of business activity was mainly driven by an accelerated number of deals above €1 million.

FY 2022 PERFORMANCE BY REGION

in € million

 

FY 2021

 

FY 2022

 

Change

     

Reported

 

Constant Currency*

EMEA

         

Gross Sales

 

2,532

 

3,539

 

+40%

 

+40%

Adj. EBIT

 

118

 

160

 

+36%

 

 

AMERICAS

         

Gross Sales

 

347

 

532

 

+53%

 

+37%

Adj. EBIT

 

9

 

14

 

+62%

 

 

APAC

         

Gross Sales

 

394

 

457

 

+16%

 

+8%

Adj. EBIT

 

19

 

20

 

+6%

 

 

Total

         

Gross Sales

 

3,273

 

4,528

 

+38%

 

+36%

Adj. EBIT

 

119

 

154

 

+29%

 

 

* Variation at constant currency is computed using FY-2021 rates applied to FY-2022 Gross Sales. The USD, GBP and PLN evolved as follows: 1EUR: 1.054 USD; 1EUR: 0.853 GBP, 1EUR: 4.684PLN respectively for FY 2022 and 1EUR: 1.184 USD, 1EUR: 0.860 GBP, 1EUR: 4.564 PLN respectively for FY 2021.

EMEA (78% of total yearly Gross Sales): Gross Sales at €3.539 million, up 40% year on year. In EMEA, the Group benefitted from a continued positive momentum with growth in all countries. The performance was mainly attributed to a strong increase of average deal size while keeping a tight control on new hires.

Profitability increased, with Adjusted EBIT amounting to €160 million and growing 36% year on year.

AMERICAS (12% of total yearly Gross Sales): Gross Sales were €532 million, up 53% year on year. The very strong performance achieved over the year was driven by the strong activity of historical vendors and the progressive ramp up of new vendors, in line with the ambition to expand in the region. The operational efficiency of the region allowed to achieve +62% growth on Adjusted EBIT, outperforming the growth reported.

APAC (10% of total yearly Gross Sales): Gross Sales reached €457 million, up 16% year on year. The region benefitted from key enterprise deals and the higher level of activity toward the end of the year, reflecting the seasonality of the business.

Net margin growth, coupled with costs tight control, led to an Adjusted EBIT growing 6% year over year, to €20 million.

FY 2022 CASH FLOW AND FINANCING

Changes in net working capital - trade amounted to a positive €49 million, in line with activity growth and benefitting from increase of factoring without recourse.

Adj. Operating Free Cash Flow reached an exceptional level, amounting to an inflow of €201 million in FY 2022, compared to €65 million in FY 2021.

Leverage: Exclusive Networks’ Financial Gross Debt at December 31, 2022, was €529 million, with Cash & Cash Equivalents standing at €268 million and Net Debt at €260 million. This resulted in a leverage ratio of Net Debt / Adjusted EBITDA of 1.6x. The significant reduction in leverage was driven by the strong cash generation in the period.

2023 OUTLOOK & SHAREHOLDER’S RETURN POLICY

Outlook: Amid the current environment still impacted by Supply Chain disruptions and uncertain market conditions (inflation, interest rates increase, geopolitical uncertainties), the Group is aiming to achieve for the full year of 2023:

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

Shareholder’s return: On February 27, 2023, taking into account the strategic priority given by the Group to pursue its development, the Board of Directors, decided to propose to the shareholders not to distribute a dividend.

Moreover, the Board has decided to launch a share buyback program in compliance with the 12th resolution approved at the Annual Shareholders Meeting on June 21, 2022.

As part of its share buyback Exclusive Networks will sign an agreement with an investment service provider, for a maximum amount of the SBB in the range of €25 million.

The shares will be acquired 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.

The price of the shares purchased under this mandate shall not exceed the limit of €30 set by the Shareholders‘ Meeting held on June 21, 2022.

Further information regarding this program will be communicated subsequently.

APPENDIX

FY 2022 CONSOLIDATED P&L

EURm

 

31 Dec. 2021

 

31 Dec. 2022

Revenue

 

2,483

 

3,404

Costs of purchases goods and services

 

(2,158)

 

(2,987)

Freight on sales

 

(5)

 

(6)

Net Margin

 

320

 

411

Personnel costs

 

(153)

 

(183)

Other operating costs

 

(43)

 

(71)

Amortisation of intangibles assets

 

(57)

 

(60)

Depreciation and amortization of tangible assets

 

(12)

 

(13)

Recurring operating profit

 

55

 

85

Non-recurring operating income and expenses

 

(4)

 

(5)

Operating profit

 

51

 

79

Finance debt costs

 

(28)

 

(18)

Interest on lease liabilities

 

(1)

 

(1)

Other financial income and expenses

 

(10)

 

(9)

Financial result

 

(39)

 

(27)

Income before taxes

 

12

 

52

Income taxes

 

(25)

 

(13)

Net income

 

(13)

 

39

Net income attributable:

 

 

 

 

- To the owners of the parent company

 

(14)

 

36

- To non-controlling interest

 

1

 

3

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

 

 

 

 

- Basic earnings per share

 

(0.15)

 

0.40

- Diluted earnings per share

 

(0.14)

 

0.40

FY 2022 CONSOLIDATED BALANCE SHEET

EURm

 

31 Dec. 21

 

31 Dec. 22

ASSETS

   

Goodwill

 

314

 

295

Other intangible assets

 

1,154

 

1,112

Property, plant and equipment

 

7

 

7

Right-of-use assets

 

19

 

26

Non-current other financial assets

 

35

 

40

Deferred tax assets

 

11

 

8

TOTAL NON-CURRENT ASSETS

 

1,540

 

1,488

Inventories

 

150

 

271

Trade receivables and related accounts

 

956

 

1,132

Income tax receivables

 

4

 

12

Other current financial assets

 

10

 

19

Cash and cash equivalents

 

130

 

268

TOTAL CURRENT ASSETS

 

1,249

 

1,703

TOTAL ASSETS

 

2,789

 

3,191

EQUITY AND LIABILITIES

   

Share capital and share premium

 

976

 

976

Retained earnings and other reserves

 

(44)

 

(27)

Foreign currency translation reserve

 

0

 

4

Equity attributable to the owners of the parent company

 

932

 

952

Non-controlling interests

 

2

 

3

TOTAL EQUITY

 

934

 

956

Other non-current financial liabilities

 

485

 

488

Non-current lease liabilities

 

12

 

20

Non-current provisions

 

4

 

4

Other non-current liabilities

 

5

 

0

Deferred tax liabilities

 

294

 

274

TOTAL NON-CURRENT LIABILITIES

 

801

 

785

Trade payables and related accounts

 

950

 

1,304

Other current financial liabilities

 

90

 

128

Current lease liabilities

 

7

 

8

Current provisions

 

2

 

0

Current tax liabilities

 

6

 

11

TOTAL CURRENT LIABILITIES

 

1,054

 

1,450

TOTAL EQUITY AND LIABILITIES

 

2,789

 

3,191

FY 2022 CASH FLOW STATEMENT

EURm

 

31 Dec. 21

 

31 Dec. 22

OPERATING ACTIVITIES

   

Net income

 

(13)

 

39

Adjustments for:

   

- Depreciation, amortisation, impairment and change in provisions

 

69

 

74

- Financial debt costs & interest on lease liabilities

 

29

 

19

- Income tax expenses

 

25

 

13

Other adjustments and non-cash items

 

15

 

8

Income tax paid

 

(18)

 

(25)

Cash flows from op. activities before change in working capital

 

107

 

129

Change in net working capital - trade

 

(54)

 

49

Change in net working capital - other

 

(11)

 

9

NET CASH FROM OPERATING ACTIVITIES

 

42

 

186

INVESTING ACTIVITIES

   

Additions to property, plant and equipment and intangible assets

 

(5)

 

(6)

Changes in other financial assets

 

()

 

(2)

Impact of changes in scope of consolidation

 

(22)

 

(2)

NET CASH FROM INVESTING ACTIVITIES

 

(27)

 

(9)

FINANCING ACTIVITIES

   

Proceeds from Share capital issuance

 

235

 

-

Dividends paid

 

()

 

(19)

Proceeds from issuance of bank borrowings & from other financial liabilities

 

502

 

44

Factoring liabilities

 

(15)

 

12

Short-term financing

 

35

 

(14)

Interest Paid

 

(27)

 

(17)

Repayment of bank borrowing & of other financial liabilities

 

(765)

 

(24)

Other cash-out flow from financing activities

 

(10)

 

(16)

NET CASH FROM FINANCING ACTIVITIES

 

(44)

 

(33)

Effects of exchange rate fluctuations on cash and cash equivalents

 

(9)

 

(6)

INCREASE IN NET CASH AND CASH EQUIVALENTS

 

(37)

 

138

Net cash and cash equivalents at the beginning of the period

 

162

 

125

Net cash and cash equivalents at the end of the period

 

125

 

263

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 amortisation of intangible assets, adjusted for non-GAAP items.

Adj. EBITDA:

• Adj. 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.

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 2022 financial results during a conference call in English today (February 28, 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

• Q1 2023 Financial update (Gross Sales and Revenue): May 4, 2023
• Annual General Meeting: June 8, 2023

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.

__________________________ 1 Formerly identified as Adj. EBITA. Recurring operating profit before amortisation of intangible assets, adjusted for non-GAAP items. 2 Defined as Gross Sales generated in year N from vendors/customers active in year N-1 divided by Gross Sales from the same vendors/customers in year N-1

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

Media FTI Consulting Emily Oliver / Tom Blundell +33 (0)1 47 03 68 19 exclusivenetworks@fticonsulting.com