Quadient S A : 2020 Non financial performance report

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NON-FINANCIAL PERFORMANCE STATEMENT

Message from the Chairman	2
Three questions for the Chief Executive
Officer	3
Profile & activities	4
"Back to Growth" strategy	6
Business model	8
Quadient, a responsible company	10
A largely independant Board of Directors	12
An international management team	13
Financial performance	14
Investor relations	15

SOCIAL, SOCIETAL,

AND ENVIRONMENTAL INFORMATION 16

Preamble	16
CSR strategy and policy	16
Empowering Quadient's people
to achieve the company strategy	22
Enabling a culture of excellence
and integrity	28
Reducing Quadient's environmental
footprint	32
Build the best customer experience
possible by offering innovative, reliable
and sustainable solutions	36
Engage and support local communities	40
Other non-financial information	43
Notes regarding methodology
and the CSR reporting scope	45
INDEPENDENT THIRD PARTY'S
REPORT ON CONSOLIDATED
NON-FINANCIAL STATEMENT
PRESENTED IN THE MANAGEMENT
REPORT	47

Non-financial performance statement

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QUADIENT IN BRIEF

MESSAGE FROM THE CHAIRMAN

DIDIER LAMOUCHE

CHAIRMAN OF THE BOARD

"AFTER THE SUCCESSFUL

COMPLETION OF THE FIRST PHASE OF THE TRANSFORMATION, THE BOARD HAS FULL CONFIDENCE IN THE SUCCESS OF THE SECOND PHASE OF THE BACK

TO GROWTH PLAN."

To the Shareholders,

The health crisis suddenly interrupted a series of seven consecutive quarters of organic revenue growth. From the very start of the pandemic, every effort was immediately made to protect our employees while ensuring business continuity. In this dramatic and unprecedented context, the Board of Directors promoted and recognized the outstanding agility demonstrated by the Company in order to mitigate the financial impact from the crisis as much as possible. Beyond the resilience of the business, Quadient maintained strong profitability through cost control, generated strong free cash flow and preserved its solid financial position.

In parallel, Quadient continued to invest in the future and implement its Back to Growth strategic plan. The Board supported a number of initiatives aimed at continuing the transformation of the Company and taking full advantage of the acceleration of the shift to digital and booming e-commerce: divestments, acquisition of two North American FinTechs, implementation of new distribution partnerships and further development of the parcel locker business.

The first phase of the plan enabled to conduct an in-depth transformation of the organisation, refocus the business portfolio and implement a number of synergies. However, half-way through this plan, it was necessary to review our major orientations and take into account the effects from COVID-19.

To this end, the Board supervised the preparation of the second phase of Back to Growth. After reviewing the various options available to us, we set a bold new target for the next three years, with the aim of creating sustainable value for Shareholders. In keeping with our deleveraging objectives and maintaining our dividend policy, we will allocate excess cash between organic investments, acquisition opportunities and share buybacks.

By becoming a signatory of the United Nations Global Compact, Quadient also confirmed its CSR commitments. As a responsible company, the Board is very proud of the recognition granted to the Company by non-financial rating agencies, with the renewal of the "Prime" status by ISS ESG, the "Gold" medal awarded by EcoVadis or its sixth place in the overall ranking of Gaïa Research.

Lastly, the Board is very pleased with the closer dialogue engaged with our shareholders, especially during the "Governance" roadshow organized at the end of the year: this increased communication, which is ever more necessary in this turbulent time, enabled us to explain the relevance of our strategic choices and address topics representing major areas of concern for some of our shareholders. After the successful completion of the first phase of the transformation, the Board has full confidence in the success of the second phase of the Back to Growth plan.

Didier LAMOUCHE

• Non-financialperformance statement

QUADIENT IN BRIEF

THREE QUESTIONS

TOTHE CHIEFEXECUTIVE OFFICER

GEOFFREY GODET

CHIEF EXECUTIVE OFFICER

"OUR OBJECTIVES ARE NOW EXCLUSIVELY BASED ON ORGANIC GROWTH, WHICH MARKS

A SIGNIFICANT SHIFT IN OUR DEVELOPMENT STRATEGY."

How did Quadient make it through the crisis this year?

Our revenue proved relatively resilient. At a little over €1 billion, it recorded a 7.3% organic decline in 2020. The high proportion of recurring revenues enabled us to mitigate the decrease in hardware and license sales. We also saw a strong rebound as soon as the economy started to recover: after a decline of around 13% in the first half of the year, our sales fell by only 2% in the second half, with even better profitability compared to the second half of 2019. Strict cost optimization measures enabled us to save €46 million in operating expenses and record a high EBITDA margin of almost 24% in 2020. We posted current EBIT of more than €150 million and net income of €40 million. We generated free cash flow of €167 million, allowing us to further reduce our debt and end the year with a strong liquidity position. In parallel, we maintained our investment efforts, particularly in R&D, and preserved our workforce, especially sales teams, in order to be ready for the recovery in 2021.

What is the outcome of the first phase of your Back to Growth plan?

We have profoundly changed and streamlined our organization. From a holding company comprising around fifteen independent units, we have become a unified Company, now focused on three strategic activities. Alongside our traditional mail-related business -which is in structural decline but where we are still gaining market share and generating significant cash flows-, we have expanded into two fast-growing activities which represented 27% of our sales in 2020 compared to 18% only two years before. Our relevant

and recognized software offer enables us to support our customers in the digitization, automation and personalisation of their communications. A portfolio that is now complemented by the acquisitions of YayPay and Beanworks, two FinTechs that enable us to offer solutions for managing invoicing flows. In addition, our parcel locker business benefits from booming e-commerce and provides a compelling last mile delivery solution. These two growth engines also generated strong commercial, R&D, back office and supply chain synergies with our mail-related business, of around €100 million in 2020.

What are your goals for the second phase of Back to Growth?

Our objectives are now exclusively based on an organic growth trajectory, which marks a significant shift in our development strategy. We have now reached a point where the increased weight of our growth engines will enable us to more than offset the decline in our mail- related business while improving our profitability. The health crisis has accelerated the need for SaaS and Cloud software solutions for intelligent communication automation. And we aim to double the number of our parcel lockers installed worldwide within three years. Over the 2021-2023 period, we target average organic revenue growth of at least 3% per year, and at least mid-single digit organic growth in current EBIT. To achieve this, we are going to step up our R&D investments and accelerate the launch of new products. Also, with a highly cash generative business, we should be able to continue deleveraging the Company while maintaining our dividend policy.

Non-financial performance statement

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