First quarter 2019: a strong start to the year

Key figures

First quarter 2019 performance

In the first quarter of 2019, revenue totalled €753 million, representing a 12% increase on a comparable basis. On a reported basis revenue was 29% higher than in the first quarter of 2018 and included a positive foreign exchange impact of €6 million as well as a positive contribution from the newly consolidated BS Payone and Paymark.

The Retail Business Unit reported a revenue of €435 million, showing an increase of 11% over the quarter on a comparable basis. On a reported basis, revenue increased by 44% during this first quarter and included a positive foreign exchange impact of €2 million and the positive contribution of BS Payone and Paymark. Compared with Q1'18, the various activities performed as follows on a like-for-like basis:

• SMB (up 15%): The Business Line performed well this quarter, in line with our expectations. As a reminder, the division no longer recognizes the German assets that are now part of the Payone JV. This performance has been driven by the continuous increase of the merchant base, growing by more than 4,000 new clients per month, as well as the continued performance of the SMB online full-service offering. The acquiring volumes are still growing strongly even if the pace is decelerating compared to last year after rebalancing our risk portfolio. Restated following these changes, volumes were growing at a similar pace to last year.
  
• Global Online (up 11%): The quarterly performance is fully in line with our expectations. The main drivers this quarter are derived from emerging countries where the growth trajectory is accelerating as in Latin America or in India where organic growth was over 30% during the quarter. The deployment of new products and services is on track and participates the growth of the Business Line, such as the recent launch of the Global Online Russian capabilities. The division has started this quarter to leverage the ramp up of clients wins that occurred over the past 12 months. The Business Line has continued to gain new clients during the quarter such as Radial in the United States of America, Intcomex in Latin America or fly365 in Asia.
  
• Enterprise (up 20%): The Business Line experienced a very strong quarter driven by both the transaction activities and the sale of POS. As a reminder, with the exception of the healthcare activity, all the German assets are now recognized under the Payone JV. The targeted healthcare vertical in Germany has grown significantly this quarter, benefiting from a local equipment incentive which started in Q2'18. In North America, the Business Line had a strong quarter after a market share win of a large US retailer. On the transaction side, Axis, our omnichannel retail platform, continues to show a double-digit growth, benefiting from a recurring business model with processed volumes ramping up. In the meantime, our Turkish activities are accelerating benefiting from our local POS footprint and the ramp up of volumes processed by our fiscal gateway, both are creating a more recurring revenue profile. In the Pacific region, the integration of Paymark is on track with our plan and is adding scale to our transaction activities
  
• Payone (up 4%): The performance was in line with our expectations. The integration of all the assets into the newly created entity is on track and is already delivering positive outputs. Nevertheless, the Business Line growth profile is not yet at its cruising speed, expected to be reached in 2020. Moreover, the first months of common activity show that both partners are working closely together. The JV is very well perceived by clients, both on the large enterprise segment and by the German saving banks. An important milestone has already been reached by luring some saving banks away from one of the main local competitors over to the JV. While the integration progresses, growth trajectory of the JV shall accelerate throughout the year.

During the quarter, B&A posted a revenue of €318 million, an increase of 12% on comparable basis. On a reported basis the activity increased by 14% and included a positive foreign exchange impact of €4 million. Compared to Q1'18, the various regions performed as follows on a like-for-like basis:

• Europe, Middle-East & Africa (down 6%): The dynamic was in line with our expectation this quarter. The mature countries are slightly declining while the emerging parts of the market are ramping up. Restated from the Iran business we decided to phase out from in Q2'18 the performance is stable. In parallel, we have benefited from commercial successes in Russia and CIS countries, Middle-East/Africa and an improving dynamic in Eastern Europe (Greece) are fuelling the pipeline of projects over the next quarters. We have received the first signs of interest from clients in Russia regarding the APOS, our Android terminal range. Western Europe is still impacted by the consolidation even if this impact is beginning to fade.
  
• Asia-Pacific (up 8%): The quarterly performance came in slightly above our expectation following a stronger demand in China from the large Chinese banks, third-party processors and a lower price erosion than expected due to APOS shipments accounted for a greater share of the overall business. South East Asia is progressing well with Indonesia benefiting from a strong demand in APOS while Thailand remains challenging as expected. India continues to grow, though benefiting from a low comparison basis. In the meantime, Japan keeps on ramping up in the eve of the EMV migration. Australia, as a mature market, remained stable this quarter.
  
• Latin America (up 99%): The whole region remained very dynamic this quarter driven mostly by Brazil but benefiting as well from good traction in Mexico, Peru, Colombia or Chile. Ingenico Group took advantage of a dynamic Brazilian market in which we invested in production capacity. Our Direct Sales model is a clear differentiator and continue to be deployed within new acquirers. The Group has therefore won significant market share against competition over the quarter. However, even if the Group is benefiting from a very strong momentum, we remain cautious due to the historically volatile Brazilian market.
  
• North America (down 4%): The region has been impacted this quarter by the Canadian activities following a strong performance during the previous semester. The Canadian trajectory will keep on contracting throughout the first semester before benefiting from a more positive momentum driven by the consumption of POS inventories from existing clients as well as the finalization of the Tetra certifications with main customers ensuring higher deliveries. Ingenico US activities were stable throughout the quarter with the EMV renewal cycle still feeding the pipeline of projects for the second part of the year. The verticalization of our go to market continues as more than 150 ISVs certifications were ongoing at the end of the quarter. The team scored a major commercial win on the unattended sector with Red box.

2019 objectives

• Revenue: The Group raises its 2019 expectations to achieve an organic growth of c. 6% compared to the 4% to 6% initial range. B&A revenue is expected to grow by c. 2% (vs. flat initially) compared to last year and Retail to achieve a double-digit organic growth.
• EBITDA (before application of IFRS 16): The Group targets an EBITDA above 550 million. This target factors in c. €45 million derived from the contribution of BS Payone and Paymark and net savings of €20 million related to the Fit for Growth plan. The group expects the Retail EBITDA above €270 million and the B&A EBITDA at c. €280 million
• Free cash-flow: The Group's ambition is to reach a free cash-flow conversion rate of c. 50% (before application of IFRS 16).
• The Group estimates the impact of IFRS 16 to increase EBITDA by c. €30 million, with no impact on Free cash-flow, thus reducing the conversion rate to c. 47%