OVH Groupe : OVHcloud - Chiffre d'affaires du T3 FY2022 - Transcript de la conférence (Anglais)

OVHcloud Q3 2022

Revenue

Thursday, 30th June 2022

Transcript produced by Global Lingo

London - 020 7870 7100

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OVHcloud Q3 2022 Results

Thursday, 30th June 2022

OVHcloud Q3 2022 Results

Operator: Hello, and welcome to the OVHcloud Q3 Fiscal Year 2022 Revenue Call. My name is Courtney, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the presentation. And this can be done by pressing star one on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you will be connected to an operator. Please note that this conference is being recorded.

Today's speakers will be Michel Paulin, CEO, and Yann Leca, CFO. And I now hand over to the OVH team to begin today's conference. Thank you.

Benjamin Mennesson: Good morning, everyone. This is Benjamin speaking. I'm Head of Financial Communication at OVHcloud. We are delighted to have you on this call for the presentation of OVHcloud Q3 revenue. We will start as Michel Paulin, CEO, for the strategy and business update, and then Yann Leca, CFO, for the financial performance and outlook. You will have the opportunity to ask your question during Q&A session, after a few words of conclusion from Michel. Once again, thank you for joining.

Michel, the floor is yours.

Michel Paulin: Hi, everybody. I'm Michel Paulin. Very pleased to be with you this morning. I'll start with the first slide about the fact that OVHcloud delivered a strong growth quarter- after-quarter. In Q3 fiscal year '22, we have a revenue of €202 million, which is a 25.9% reported due to the Strasbourg effect and 11.7% like-for-like.

The Public Cloud is still growing very high with 50% and like-for-like 19.4%. Private Cloud, as you know, a very strong asset of OVHcloud, is growing by 32.5% and 14.6% like-for-like. Our net retention return - net revenue retention rate is up to 120% and like-for-like 107%. The slide after show that we continue to have a strong sales and marketing momentum. And we have won very interesting contracts.

I will not outline all of them. I just want to outline a few things. I will come to Marine Nationale after. But Samsung and Cegid, very interesting deals that we have signed with software editing companies. We already had a partnership with TalentSoft, with Cegid. And we extended that to add new software that will be hosted in OVHcloud.

In the middle, I will start with the bottom with the fact that today we are very active with the start-up community, and we may go - talk a little bit about the start-up situation right now. But we are preparing the future of the next generation of computing with the quantum computing. And we are very proud to have made a strategic partnership with Atos which now is hosted in OVHcloud for the emulation and simulators of 128 qubit.

But also we have strong partnership with companies such as Pasqal, C12, Quandela, which are today the leading start-up in the quantum and they have today quantum computing capability. And for us it's something that we will continue to develop operation - virtualisation and automatization of usage of quantum technologies.

On the upper on the middle of the slide, I just want to highlight one, which is Accenture. Last week, we have announced a worldwide partnership with Accenture. Accenture is going to resell OVHcloud solutions in what they call the trusted and fundamental[?] solutions in Europe and

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OVHcloud Q3 2022 Results

Thursday, 30th June 2022

other world. And we do believe this is for us a very potential accelerator of business, thanks to the fact that Accenture has a coverage of the market which is immense.

Last but not least is continued to, as we already mentioned, to build our PaaS solutions. We have introduced the new enterprise level of MongoDB. We have introduced a few months ago the entry level MongoDB solutions. Now we have the enterprise MongoDB solutions. And we have launched now in general availability the Object Storage Standard and the Block Storage High Performance Solutions. And so we hope to have now revenue creation starting now with these products.

And also we have announced the Atempo partnership with the Tape, which will be another block of solutions in the storage arena.

In terms of what are the four pillars of our growth, I mean, acceleration. The first one is, of course, the business shift. We are growing very fast in Public Cloud and Private Cloud. I would love to repeat the figures because you see that we have today a strong growth. We are preparing the future with the move to PaaS.

We have achieved the objective of adding now 80 IaaS and PaaS solutions in public and private

• public cloud and private cloud. So we have achieved our objective. And we will continue, of course, to enhance and to enlarge our PaaS solutions, thanks to the three layers strategy, our own R&D, potential acquisition and also continue to have partnership with some key and state- of-the-art solutions.

The third one is, of course, the international expansion. We continue to have a very high growth today in US and APAC. This is the figures about the digital channel growing by 62% like-for- like in the US and by 99% in APAC. And we will continue to invest to boost our growth, thanks to the fact that we opened a new data centre in Singapore very soon, a new data centre in India. And we have also, for next year, projects to open new data centre to accelerate our growth in Americas, in Toronto, and in Germany.

The last point is about the data sovereignty and the hybrid multi-cloud. We just illustrate because sometimes the little bit of secrets around the names we can disclose, but the Marine Nationale has agreed to disclose the name. We have won a contract with the French Marine. And we have today a strong momentum in this domain, everything which is about trust. You see that the regulations is moving very fast, and rather in the right directions to protect the data. And we do believe that OVHcloud is so well positioned to provide compelling and distinctive solutions in this domain.

The last element, of course, is about Digital Market Act and the Digital Act, which are formally approved in July 2022 and will be an application in fall 2022. And we do believe for us, it will be, again, an additional argument to continue to provide data protection and data sovereignty solution.

Last mention I'd like to do about that is about the new certification, European certification. And we have already SecNumCloud certification and we do believe it will be for us another argument.

Very quickly, you see there the road map of the new solutions we have introduced in - on the market with - we are on track on our road map. And we do believe that the next quarter and the first quarter of 2022 will continue to have enhanced solutions in the PaaS.

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The next slide is about international. Just on the map, you see that today we have very good growth in the US and in APAC. We have today the ambition to continue to accelerate this growth, thanks to the investment we are making, either in the sales and marketing with especially the digital channels, which are still and still are very, very active, but also in the investment we've made. I already mentioned the data centres that we are going to introduce and deployed beginning of next year.

Last but not least, and just to repeat what has been said, we believe that OVHcloud is uniquely well positioned for the trusted cloud. And all we see today in the dynamics, which is rising first in Europe, but also very interestingly in Canada, for example, with [inaudible], in India, in Japan, in Korea, we have today a very strong self-dynamics for SecNumCloud solutions, for the French Marine and Marine Nationale is an example. And we believe also that the new regulations which will be introduced and decided for DMA, DSA and Data Act will be key arguments for OVHcloud to differentiate ourselves and to continue to propose trusted and sovereign solutions in Europe but also outside of Europe.

And now, I'd like Yann to mention and to comment the financial results.

Yann Leca: Good morning, everyone. My name is Yann Leca. I'm the CFO of OVHcloud. Happy to be with you today this morning.

So this first chart is about revenue. And as you can see, we reported last year €161 million of revenue. That number needs to be increased by €1 million to report the additional - the acquisitions which we made later. This was the revenue then. Forex impacts, the US dollar grew, so restated for the new US dollar Q3 '22, that's an additional €3 million to make it like- for-like.

And of course €18 million of direct impact of transport, which was at the time in the form of vouchers given of credit notes issued and of absence of revenue. That's €18 million. So the comparable number is €182 million. Therefore, the like-for-like revenue growth is €21 million for this quarter or 11.7%, almost 12%, which is based on €203 million this quarter, because we still have €1 million of Strasbourg direct impact this quarter. As you can see, this impact is fading away, and it will be finished at the end of this fiscal year. So another 2.5 months from now - two months.

An important element is that our net revenue retention rate in Q3 fiscal '22 was 120%, which is also like-for-like 107%, very much in line with previous quarter in the same vicinity, we continue to have excellent stickiness of our customers and to enjoy a good net revenue retention rate.

On the next page, a word about the various product ranges. As Michel indicated on Web Cloud

• Other, we have stayed at €44 million, so like-for-like growth of 0%. The relative share now of Web Cloud & Other is down 3 points versus last year at 22%, which is also the result of the fast growth cloud divisions, cloud segments. Public Cloud grew from €28 million to up to €33 million or 19% like-for-like, and Private Cloud from €110 million to €126 million, which is a very good 15% growth. Private Cloud represents 62% of our total mix and 16% for Public Cloud.

Basically, our performance acceleration is very strong in the Corporate segment. And we have also continued very good ARPAC increase in Public Cloud and Private Cloud.

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A word about the outlook. We are happy this morning to increase our revenue guidance to a bracket of 16-18% growth, which is up from 15% to 17% previously, reconfirming our adjusted EBITDA margin close to 40%. And in terms of CapEx for this year, recurring CapEx to 16-20%, and gross CapEx from 30-34%, excluding the acquisition of additional IPv4 addresses, which is a topic we addressed last quarter. And we are also happy to confirm the mid-term 2025 targets, which are left unchanged.

I want to add to finish on this guidance that our current trading in this Q4, we're not closing the first month of this last quarter, remains consistent with the annual guidance I have just indicated.

Michel, over to you.

Michel Paulin: So just the key takeaways. We have a strong financial performance. We reach, as I already mentioned, a revenue in this quarter of €202 million, which is a 25.9% reported growth, and a 120% net revenue retention rate. We are deploying our strategic - I mean, growth strategy. We have intensified our commercial momentum.

We are today on track on our PaaS road map to serve and to be able to enter new markets for OVHcloud, and we are accelerating our international footprint. We continue to believe that we

• our revenue targets are today above what we already we said in the outlook. So our - I think we have increased our revenue target to 16-18% growth versus last year. We have confirmed targets on the adjusted EBITDA margin and the mid-term objective as today.

Benjamin Mennesson: Hi, Courtney. Benjamin speaking again. Can you maybe proceed with the comments regarding the Q&A what the analysts and attendees should do?

Questions and Answers

Operator: Of course. Q&A will now begin. As a reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad. Please ensure your line is unmuted locally and you will be advised when to ask your question. That was star one on your telephone keypad. And our first question comes in from the line of George Webb calling from Morgan Stanley. Please go ahead.

George Webb (Morgan Stanley): Good morning, Michel and Yann. I'll kick off with a couple of questions on revenues and top line. Firstly, just going back to the demand environment. You've obviously cited some weakness in the broader macro, which I think we can all see. But your overall business growth so far has been pretty resilient. Can you talk through what you're expecting to see as you move through Q4 and beyond? And are you expecting to see any pockets of weakness so far, for example, around the kind of tech and software part of your customer base?

And then secondly, on the Web Cloud business. The reasons in the report seems to be fairly high level around why that business has slowed around improving market offerings and telephony connectivity. Can you go into a bit more detail on what the headwinds you're facing there are? And what some of the measures are you're taking to accelerate the growth? Thank you.

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