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Worldline SA (WWLNF) Q4 2022 Earnings Call Transcript

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Worldline SA (OTCPK:WWLNF) Q4 2022 Earnings Conference Call February 21, 2023 2:00 AM ET

Company Participants

Gilles Grapinet - Chairman & CEO

Marc-Henri Desportes - Deputy CEO

Gregory Lambertie - Group CFO

Conference Call Participants

Alastair Nolan - Morgan Stanley

Tammy Qiu - Berenberg

James Goodman - Barclays

Alexandre Faure - BNP Paribas

Sandeep Deshpande - JPMorgan

Deepshikha Agarwal - Goldman Sachs

Operator

Good day, and convey you for opinionated by. Welcome to nan Worldline Full Year 2022 Results Conference Call. At this time, each participants are successful a listen-only mode. After nan speakers’ presentation, location will beryllium a question-and-answer session. [Operator Instructions] Please beryllium advised that today's convention is being recorded.

I would now for illustration to manus nan convention complete to your speaker today, Worldline CEO, Gilles Grapinet. Please spell ahead.

Gilles Grapinet

Thank you, operator. Ladies and gentlemen, bully morning. This is Gilles speaking. Thank you for attending today's Worldline's telephone connected our afloat twelvemonth '22 results. I will commencement this position arsenic accustomed providing you pinch immoderate cardinal highlights of nan year. Then, Marc-Henri, our Deputy CEO, will make a heavy dive arsenic we usually do now connected nan Merchant Services dynamics. And hereafter, Gregory, our Group CFO, will coming you successful item our results earlier I wrap up pinch myself for nan conclusion earlier nan Q&A session.

So fto maine commencement by taking that we are genuinely satisfied pinch nan beardown twelvemonth '22 that afloat illustrates nan complete execution of our Worldline roadworthy representation towards our mid-term ambition. And this contempt nan volatile and challenging macro discourse we had to face, for illustration galore companies.

I will heavy dive conscionable aft connected these cornerstones of '22. But successful a nutshell, we person achieved aliases exceeded each our guidance parameters and make important progresses regarding our CSR roadworthy map. We person delivered a very coagulated commercialized capacity pinch galore statement wins wrong each our GBLs and accrued again our merchant count while benefiting from a dependable acquiring measurement growth.

And we've been very successful besides connected each our strategical initiatives pinch 3 closing and integration started, 3 caller acquisitions, and 2 disposals executed successful parallel successful '22. All this taken into consideration, we judge that this twelvemonth '22, arsenic nan twelvemonth 1 of our caller three-year scheme is simply a very beardown pillar successful nan execution of our strategical roadworthy representation that evolves arsenic per plan. Hence, we afloat reiterate our 2024 objectives.

Now turning to our afloat twelvemonth '22 results. And contempt immoderate unexpected world and geopolitical headwinds erstwhile we started nan year, we person reached, arsenic I mentioned aliases exceeded each nan financial targets of nan afloat twelvemonth guidance. Regarding nan integrated gross growth, we person delivered an integrated capacity astatine 10.7%, fueled by a dependable maturation each on nan twelvemonth arsenic planned. And successful particular, we posted a 14% maturation for our Merchant Services activities now anchored successful nan double-digit territory.

This beardown maturation delivering operating leverage, coupled pinch nan afloat execution of our synergy plans, allowed america to amended by 110 ground points our OMDA separator to scope 26%, while absorbing 2 awesome headwinds this twelvemonth not planned successful our fund pinch nan extremity of our Russian online corridor and nan effect of other ostentation connected cost. Last, we've been capable to present an OMDA to free rate travel conversion of circa 46%, somewhat supra our first anticipation of circa 45%.

Moving to CSR. I person nan pleasance to study that '22 has not only been a afloat execution of our financial guidance, but arsenic good a beardown transportation successful each our other financial targets, putting Worldline good connected way for our Trust '25 ambition. Certainly, nan champion measurement to measure it is to look astatine immoderate of our 2022 ratings, recognizing this high-level CSR performance.

Worldline continued its momentum pinch fantabulous ratings delivered by starring independent firms, possibly immoderate to mention among others are our 2022 Vigeo’s rating, which is 3 points higher than past twelvemonth and puts Worldline successful nan 4th position successful its manufacture connected apical of 82 competing companies rated aliases nan DJSI rating, wherever Worldline gained again this year, 4 points compared to '21.

And last, Worldline being perfectly focused to beryllium a ace charismatic workplace is very proud to person been recognized arsenic apical employer successful Europe and Asia for '23 by nan Top Employer Institute, recognizing excellence successful group guidance and besides a awesome spot to activity successful 21 countries successful '22, which is simply a nickname delivered, arsenic you know, by nan Great Place to Work Organization.

Now I would for illustration to prosecute this morning's telephone by flagging immoderate of nan cardinal deals we won successful '22 and that we believe, beyond nan turnover they will bring to nan company, illustrates, successful particular, nan competitory benefits of nan operation of Worldline and Ingenico halfway of nan afloat integration program. Regarding Merchant Services, surely 1 of nan largest deals we person ever signed successful Merchant Services is our caller statement pinch Lufthansa, 3rd largest world airline. It is exemplary of nan occurrence of our vertical differentiation strategy, 1 of nan bases of our e-commerce worth proposition successful integer commerce.

Moving besides successful MS to a very different marketplace segments pinch an innovative leader successful home retail. The flagship win, this clip is pinch Monoprix, which is simply a grounds of nan spot of our afloat omnichannel acceptance offerings.

Moving to Financial Services. I want to walk 1 infinitesimal to item nan caller contract, we are very proud to person signed pinch nan ING Group. This 10-year triple-digit statement is to our knowledge, a existent first, successful nan European costs processing manufacture which is traditionally utilized to motion specified issuing paper processing deals connected a azygous state basis.

Even for very ample banking groups, having galore countries of unit banking activities. The breakthrough present is that Worldline and ING person signed a azygous contract, wherever our group will beryllium nan unsocial processing partner of ING successful aggregate geographies and wherever our cardinal level will process each ING cards, home and world debit and in installments alike.

Last, connected mobility and nan transactional services, it is our expertise to create and run a azygous mobility app based connected our mobility marketplace solution that has been cardinal for West England Combined Authority, WECA for choosing us, successful particular, pinch our proven expertise to harvester successful 1 only solution, nan booking, nan ticketing and nan costs characteristic for their customers.

Moving forward, connected nan strategical inaugural side, arsenic you person seen, pursuing america each on nan year, we person been a very engaged but successful twelvemonth '22. First, we person afloat executed nan closing and integration of Axepta successful Italy, ANZ successful Australia, and EUROBANK successful Greece that you cognize well. These 3 assets correspond for america caller countries and caller distribution channels pinch our partnering banks and each this is starting very well.

In parallel, we person successfully enriched nan Worldline worth proposition pinch 3 caller acquisitions. As committed 1 twelvemonth ago, we person started to diversify our M&A strategies -- strategy towards companies owning exertion aliases costs solutions, which could complement our portfolio and accelerate our invention roadworthy map.

We made 2 acquisitions successful that space. The first 1 pinch SoftPos, expanding our merchant worth proposition, successful peculiar towards micro merchants pinch a salary connected mobile Android-based solution. The 2nd 1 is pinch OPP, Online Payment Platform which is providing america now pinch a very beardown marketplace solution, tailormade successful particular, for B2B businesses and nan information system that is group to turn highly accelerated successful nan coming years.

We person arsenic good announced nan acquisition of nan merchant acquiring activities of Banco Desio, successful Italy, reinforcing present our already successful commencement of Italian operations. The past but surely not least, we person completed nan waste of nan TSS activities, nan erstwhile costs terminal activities inherited from Ingenico, allowing america to very importantly deleverage our equilibrium expanse and to simplify our group structure. Then we person finalized a mini divestment pinch nan waste of nan MeTS LatAm activities. This activity being seen arsenic subscale for our group, acold from costs and without synergies pinch nan remainder of nan MeTS operations.

So to reason my first part, I would for illustration to item that '22 is simply a very coagulated start, we think, of our three-year scheme that we afloat corroborate today, pinch nan ambition to deliver, arsenic you know, 9% to 11% gross CAGR maturation complete nan play '22, '24 to scope circa 5.2 cardinal revenues by then, to amended our OMDA separator by much than 400 ground points to scope circa EUR1.5 cardinal of OMDA and to make an OMDA conversion to free rate travel of circa 50% by '24. And successful parallel, we, of course, will attraction to make M&A an important privilege successful nan coming 2 years.

Marc-Henri will now return nan level to guideline you done nan operational achievements and commercialized dynamics of our powerful Merchant Services division. Marc-Henri, level is yours.

Marc-Henri Desportes

Thank you, Gilles, and bully greeting to you all. I'm very pleased to return nan level and to guideline you done this portion of today's position zooming connected our cardinal operational achievements and very satisfactory Merchant Services business marketplace capacity successful 2022.

Before commenting nan commercialized business dynamics and KPIs, I will commencement pinch nan operational achievements connected some integration and invention and products, each of them being nan foundations of nan coagulated capacity we person today.

Before starting, I would for illustration to punctual you of our strategical approach. We build nan champion broad costs stack by combining progressively nan champion assets of each our acquisitions, connecting them and migrating our volumes to scope scale, ratio and nan champion merchandise features.

At nan extremity of our three-year plan, we will person mostly completed this program, but we tin already spot awesome benefits from its first achievements. 2022 has been so a twelvemonth of afloat transportation connected some integration and invention and products. 2022 was successful peculiar nan 4th and past twelvemonth of SIX Payment Services integration plan, nan highest of investments of nan Ingenico integration, coupled pinch important improvement connected nan merchandise side.

Starting pinch our integration path. All SIX Payment Services synergies are now delivered and afloat completed arsenic of extremity 2022. It represents wide northbound of EUR110 cardinal of synergies executed successful 4 years, and it's a awesome accomplishment afloat successful statement pinch our plans. Ingenico integration is solidly connected track. Our target level is afloat live. And we pursued migrating our merchants connected it during nan year, and we now person nan mostly of our merchants supported connected this platform.

Last, of nan astir caller acquisitions, integration are afloat successful statement pinch nan plan, pinch Handelsbanken merchants migration afloat completed, and presently ongoing connected Axepta and Eurobank. On ANZ, our home front-end portal is now up and running, pinch first transaction unrecorded since September 2022.

Coupled to our integration programme providing nan astir thin and businesslike tech layer, we continued to invest, adding invention and products, enriching further Worldline worth proposition. The cardinal ones to item successful 2022 are nan afloat relationship of our acceptance and acquiring platform, allowing america to leverage existing acceptance merchant towards a afloat end-to-end offering; nan completion of SoftPos integration and OPP closing, allowing america to grow connected caller marketplace segments specified arsenic micro merchants and online marketplaces; nan rollout crossed each our countries of systematic and assisted onboarding devices for merchants, supported by recently dedicated one-web interface.

In 2022, we person delivered for Ingenico and SIX Payment Services integration EUR60 cardinal synergies arsenic expected. And we reinvested circa 7% of our revenues successful CapEx to prolong early growth. Going forward, successful 2023, we expect to present an further EUR40 cardinal of synergies from integration of Ingenico only, arsenic already announced, and to prosecute our finance efforts successful betwixt 5% to 7% of revenues, successful statement pinch our mid-term target.

Now heavy diving connected MS dynamics pinch merchant KPIs. First, this is nan information we provided to you successful our afloat twelvemonth 2021 publication. You tin spot present that our merchant guidelines includes a pro forma ground since December 2020, pro forma ground adding Axepta Italy and Handelsbanken merchants, to person a broad and comparable view. In 2022, we person onboarded circa 85,000 caller merchant, pushing our merchant guidelines astatine nan extremity of 2022 astatine 1.25 cardinal merchants. It represents a very satisfactory maturation of Worldline acquiring merchant guidelines versus 2021.

Actually, we are 40% supra our target to onboard 60,000 caller merchants per year. It's a awesome accomplishment since nan acquisition of Ingenico and afloat illustrates that we person -- that what we person built done our strategical attack based connected distribution business pinch banks and nonstop income channel. Since 2020, day of Ingenico integration, we person grown our merchant guidelines by much than 200,000 merchants connected a 9% CAGR, pinch a coagulated move some successful shop and online.

Coming to nan Q4 important merchant wins and upsells. I must opportunity they bespeak nan relevance of our solution and nan occurrence of our orchestration strategy based connected nan coagulated merchandise offering. Let america commencement pinch in-store and omnichannel wins and upsell. Our A la carte acquiring solution has been cardinal successful nan upselling statement signed pinch Maisons Du Monde (ph), providing to nan merchant an adaptive operation betwixt Worldline acquiring and section acquirers, coupled pinch a afloat in-store acceptance solution.

I judge we person now -- that we person now nan champion and astir competitory connection connected nan European marketplace for demanding high-volume retailers. We bask a bully move arsenic good connected some caller wins and upsell based connected a one-stop shop solution, including acceptance and acquiring for accepted shops and unattended solutions, that's been nan main differentiating merchandise for SSP, Dover and Dufry. These customer request a simple, unified commerce solution. And present again, we could hit nan champion world players who were tendering against us. Last, our omnichannel offering that combines e-com, mobile and in-store all-in-one solution has made nan quality for Systme U, Olimpia, OUIGO aliases Eram.

Now regarding our online cross-border wins and upsell. As for nan Lufthansa triumph we person announced successful Q3, our unsocial TravelHub solution made nan quality for Wizz Air and SWISS air, providing to beryllium -- and proving to beryllium a victor connected nan airlines vertical. The improvement of corridor strategy to springiness entree to section costs intends has been cardinal for nan triumph of online crippled level Voidu, 1 of our payments verticals arsenic well; and arsenic we person accrued our stock of wallet pinch Joom marketplace based connected our costs capacity study solution allowing them to prime nan applicable costs methods to amended their conversion rates.

All these examples -- pinch each these examples, you tin spot that our commercialized move is powerfully driven by our merchandise portfolio pinch dedicated verticalization approach. It remains a cardinal occurrence and differentiating facet that we will create further done continuous investments successful invention and R&D.

To reason my part, fto america travel backmost to immoderate business information point. All our actions to grow our merchant guidelines person contributed to a double-digit merchant work measurement maturation during nan 4th fourth and nan afloat twelvemonth of 2022. In 2022, Worldline ain acquiring MSV has accrued by 22% versus 2021 to scope circa EUR320 billion, which represents a beardown capacity successful our addressable European acquiring market. We judge it illustrates our capacity to proceed to summation marketplace stock successful some successful shop and online, pinch respective MSV increasing astatine circa 21% and circa 27% versus 2021.

For information, afloat twelvemonth MSV is organically up 29% versus 2019. Then arsenic you tin spot pinch nan pinkish curve successful nan chart, we continued to spot a coagulated move astatine nan opening of 2023 pinch a dependable inclination successful MSV description fueled by some in-store and online volumes pinch a double-digit maturation inclination without immoderate noticeable recession impact.

Now I will springiness nan level to Gregory to coming you our financial capacity successful much details.

Gregory Lambertie

Thank you, Marc-Henri and bully morning, everyone. Delighted to beryllium presenting this very bully group of numbers for nan afloat twelvemonth '22. In '22, we posted revenues of EUR4.4 billion, pinch integrated maturation of 10.7% comfortably supra guidance, fueled by nan now established MS motor that represents almost 3 quarters of Worldline revenues.

On profitability, our OMDA now stands astatine EUR1.1 billion, i.e., 26% separator aliases a 110 ground points betterment versus '21. This capacity successful an adverse macro discourse comes from our expertise to present our expected synergies connected apical of operating leverage generated acknowledgment to nan dependable maturation floor plan demonstrated during nan year.

Finally, free rate travel stood astatine EUR520 million, again good supra guidance, pinch conversion adjacent to 46% versus nan 45% commitment. In position of earnings, normalized nett income group stock reached EUR545 million, representing 12.5% of revenues, balanced to a normalized diluted EPS of EUR1.53 (ph) per share, up 23%.

Turning to GBL maturation performance. Q4 was our biggest 4th pinch EUR1.2 cardinal revenues aliases 8.3% integrated growth. MS remains good anchored successful double-digit maturation territory pinch an integrated capacity of 10.3% successful Q4 driven by very beardown double-digit maturation successful commercialized acquiring positive a coagulated capacity of our acceptance activities contempt nan Russian sanctions since February 2022.

Financial Services was up 2.9%, arsenic expected, still impacted during nan 4th by past -- nan past period of Equens' statement value renegotiation. Finally, connected MeTS, revenues are up 7% successful Q4, driven by bully move connected e-ticketing. This translates into nan afloat twelvemonth capacity presented earlier of 10.7% integrated growth, pinch MS up 14%, FS up 2.5% and MeTS up 7.3%.

Let maine spell done gross building blocks for nan afloat twelvemonth '22. I'd for illustration to exemplify that nan underlying capacity of our underlying (ph) activities during a twelvemonth successful which we've been impacted by 2 circumstantial situations, chiefly successful our MS activities. First, a monolithic headwind pinch nan extremity of our Russian online corridor astatine nan extremity of February '22; and second, a affirmative effect from ostentation impacting a spot little than half of MS revenues. Overall, you tin spot that nan beardown move successful MS activities person been capable to much than sorb effect from nan existent geo and macro situation, while FS and MeTS person been rather immune.

Now moving to nan adjacent descent connected OMDA performance. During 2022, Worldline's OMDA reached EUR1.1 cardinal aliases 26% OMDA margin, balanced to a 110 ground constituent betterment versus past year. It's been achieved wholly connected nan Merchant Services broadside through, a, synergies from past acquisitions; and b, very powerful operating leverage of nan caller MS, which allowed absorbed -- absorbing costs inflation.

On nan FS and MeTS side, OMDA margins were slower to accommodate fixed nan mostly fixed-price building successful an inflationary situation and besides suffered from nan now well-known Equens’ Worldline value alteration successful FS.

Let maine now springiness you a spot much colour connected separator improvement and nan powerfulness of nan Worldline communicative going forward. In this bridge, we wanted to show you what our halfway business underlying capacity looks for illustration fundamentally stripping retired nan macro headwinds mentioned earlier, namely really Russian sanctions and inflationary pressures affected our margins.

Here you tin spot that, successful 2022, nan beardown integrated capacity of our activities has generated an underlying separator betterment of 230 ground points to scope 27.1%, chiefly driven by Merchant Services. That capacity was much than capable to sorb 30 ground points from nan extremity of our Russian online corridor, arsenic good arsenic 90 ground points from stronger inflation.

Overall successful 2022, pinch a 110 ground constituent separator betterment while absorbing 120 ground constituent headwinds, our group capacity intelligibly highlights nan virtuous operation of coagulated growth, operating leverage and synergies execution.

Now moving from nan OMDA to different elements successful nan income statement. Non-recurring items reached EUR529 million, and consisted of acquisition value allocation amortization for EUR238 million, mostly linked to nan Ingenico acquisition and nan 2022 additions to nan scope, integration costs of EUR192 million, reflecting nan highest twelvemonth of Ingenico integration, and nan added costs related to nan recently acquired companies, chiefly Axepta, ANZ and Eurobank. Last, these costs see a noncash effect of EUR47 cardinal related to FX accounting connected nan disposal of MeTS LatAm. As a result, operating income for '22 was EUR335 million.

Net financial disbursal is unchangeable versus past twelvemonth astatine EUR41 cardinal and is simply a operation of a unchangeable nett financial disbursal and affirmative effects of nan disposal of Visa shares successful '22 for EUR40 million, offset by a antagonistic FX and hyperinflation effect of EUR36 million. The taxation complaint was EUR79 million, pinch a normative effective taxation complaint of 23.5% successful '22, accordant pinch our nonsubjective to support nan afloat twelvemonth complaint adjacent to '21 level which was 24%, arsenic a reminder.

As a consequence of nan items supra and including an EUR88 cardinal publication from discontinued operations, consolidated nett income group stock stood astatine EUR299 million. Normalized nett income stood astatine EUR545 million, arsenic a result, aliases 12.5% of revenues, pinch a 23% betterment of EPS astatine EUR1.88 compared to EUR1.53 successful '21.

Moving connected to nan rate travel statement. Main parameters of our rate travel generations are CapEx of EUR325 cardinal aliases 7.4% of revenues, afloat successful statement pinch our finance phasing. Since this year, we person importantly invested successful our products and supported ample investments successful caller integrations. Second constituent is alteration successful moving superior which brought a affirmative publication of EUR100 million; and finally, integration costs of EUR192 million, which were afloat successful statement pinch our expectations reflecting nan highest investments successful Ingenico coupled pinch astir caller acquisitions.

Overall afloat twelvemonth free rate travel of EUR520 cardinal represents adjacent to 46% rate conversion, supporting our mid-term trajectory to scope 50% successful '24, wide a very beardown accomplishment reflecting our expertise to present synergies while optimizing implementation costs arsenic good arsenic a strict rate guidance policy.

Let's now look astatine nan nett indebtedness improvement complete nan year. In '22, we delevered by EUR900 cardinal done 3 main drivers: number one, nan EUR520 cardinal free rate travel we conscionable mentioned; number two, EUR300 cardinal from nan TSS disposal proceeds, minus caller M&A considerations; and number three, much than EUR100 cardinal from nan disposal of Visa shares towards nan extremity of nan year.

At nan extremity of nan year, our nett indebtedness stood astatine EUR2.2 cardinal aliases 1.9 times OMDA. Including nan further proceeds from TSS received connected January 1, EUR300 million, leverage stands astatine 1.7 times, good successful statement pinch our expectations, frankincense strengthening our beardown investment-grade in installments rating. This is simply a very differentiating constituent successful nan European scenery astatine a clip erstwhile plus consolidation is underway and valuations person softened.

Now connected nan pro forma. I wanted to item nan alteration of scope related to 2022 acquisitions and disposals and nan effect of nan TSS carve-out to springiness you a broad position of our 2023 starting point. In essence, what we person present is, first, an outer scope effect including nan acquisition of SoftPos, of Eurobank and ANZ; and nan disposals of MeTS Lat Am.

Second, nan effects related to nan TSS carve-out, which tin beryllium divided successful 2 components of akin magnitude: number one, nan transportation of axenic terminal-buying customers now handled by TSS since they do not bargain costs solutions; and number two, nan value effect of nan caller acquisition statement signed pinch TSS relating to terminals.

As a result, our 2022 baseline is EUR4,386 cardinal successful revenues and an OMDA separator of 25.4%. In nan appendix of this presentation, successful bid for you to person a bully consciousness of really '23 will look like, I besides provided nan quarter-by-quarter item for GBL, which you will besides find successful nan property release.

Finally, our 2023 guidance. With nan very satisfactory capacity of 2022, we are very assured successful our expertise to present 8% to 10% integrated gross growth; an OMDA separator betterment supra 100 ground points; and finally, an OMDA conversion complaint into free rate travel betwixt 46% and 48%. This 2023 guidance is afloat successful statement pinch nan trajectory of our 3-year plan, which we intelligibly confirm.

Now fto maine manus complete to Gilles for conclusion.

Gilles Grapinet

Many thanks, Gregory. And indeed, 3 points to reason earlier opening nan Q&A. First, my individual reading: My individual reference of each these achievements that I want to stock pinch you really is very simple. Our strategy conscionable useful and useful each twelvemonth better. In 2022, Worldline has really started to harvest visibly nan beardown and structural competitory and financial benefits of our integration pinch Ingenico retail.

Indeed, successful '21, owed to nan galore pandemic-related restrictions successful immoderate halfway countries of our group and besides owed to nan truth that we were conscionable starting to integrate, immoderate of these business benefits were astir apt little easy to read, but successful '22, what you tin spot done this merchandise is simply a overmuch stronger Merchant Services business enjoying nan marketplace benefits of its very unsocial portfolio and really starting to get nan competitory separator of our much integrated acceptance and acquiring platforms. And this is only nan start, arsenic we are only halfway done our four-year integration plan, pinch still galore benefits to come.

My 2nd constituent is to stock very transparently pinch you our 4 cardinal priorities for '23. First, we will prolong our maturation momentum and our strategy to summation marketplace shares, leveraging our improved competitory positioning I conscionable mentioned arsenic we advancement further connected our Ingenico integration roadworthy map. Second privilege will beryllium to amended our operating leverage, benefiting from nan operation of dependable growth, integration use and further standard effect.

Third, we will attraction connected strictly executing our finance connected our merchandise and invention roadworthy representation to prosecute perpetually enriching and differentiating Worldline. Fourth priority, nary astonishment here, will beryllium to prosecute actively marketplace consolidation opportunities, successful peculiar pinch a privilege fixed to grow further our distribution channels.

To conclude, I want to stock pinch you that arsenic a guidance squad we really consciousness that '22 has been a twelvemonth of basal progresses, which is nan cardinal stepping chromatic for nan pursuit of our three-year plan. And we afloat admit that location are galore macroeconomic uncertainties astir that commencement to create successful '23, but nonetheless, arsenic Greg said, arsenic a team, we consciousness really assured to present some our 2023 guidance and our mid-term objectives making Worldline a premium world bank.

Thank you very overmuch for your attention. And I americium now fresh pinch Marc-Henri and Greg to return your questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And your first mobility comes from nan statement of Alastair Nolan from Morgan Stanley. Please spell ahead. Your statement is open.

Alastair Nolan

Right. Thank you. Thanks for taking my questions. Maybe you could just, successful position of nan 2023 guidance, springiness america a small spot of a consciousness for what assumptions are underpinning nan anticipation of nan apical extremity versus nan bottommost end. And successful particular, you could remark connected benignant of effect from possibly strategy fees, which were a tailwind successful '22, and besides perchance China reopening. So possibly that's my first question. Thank you.

Gilles Grapinet

Hello, Alastair. Gilles speaking here. Well, clearly, I mean, it is simply a spot excessively soon to authorities wherever we could extremity betwixt nan 8% to 10% that we flag. Definitely you will apt pinpoint, I think, 1 of nan components connected which we person astatine this infinitesimal successful clip debased visibility, nan China reopening and nan comeback successful number of Chinese tourer aliases business travelers to European territories.

We understand from first chat pinch airlines and hospitality companies that it seems that decidedly location is besides a type of Chinese revenge recreation readying itself from China, Chinese citizens having been, arsenic we each know, a large tube for nan anticipation to recreation of circa -- for circa 3 years now, truthful this could decidedly effect arsenic our expertise of MS successful this vertical to people much aliases less, depending erstwhile it really happens. Directionally it will happen.

The mobility is to cognize if it starts very soon and beardown successful H1 aliases if it is progressively ramping up successful nan year. While strategy fees, to a definite extent, are not that overmuch decisive successful that context, I must say, we are utilized to person that arsenic portion of nan evolution. And we don't anticipate, to our knowledge, that it should beryllium thing important successful '23 versus '22 [Technical Difficulty] successful nan erstwhile twelvemonth that is per se a publication to nan acceleration of nan apical line.

Alastair Nolan

Great. Thank you. Maybe conscionable 1 follow-up. We person seen a number of payments businesses starting to use from nan expertise to reinvest immoderate of nan merchant flows and making it nett liking income. Is that thing that Worldline expects to use from successful 2023? And if so, possibly you tin quantify.

Gregory Lambertie

Hi, Alastair. It's Gregory speaking. So for us, it's not worldly astatine nan size of Worldline. It remains an opportunity. Our privilege remains to connection bully colony conditions to our merchants, i.e., early settlement.

Alastair Nolan

Understood. Thank you.

Operator

Thank you. We will now spell to adjacent question. And nan adjacent mobility comes from nan statement of Tammy Qiu from Berenberg. Please spell ahead. Your statement is open.

Tammy Qiu

Hi. Thank you for taking my questions. So Gilles, I'm going to inquire astir nan M&A opportunity. So historically, we've talked a batch -- and you person been doing a batch of benignant of mini details. What astir nan expectations of a larger woody size astatine immoderate constituent aliases should we beryllium expecting immoderate of nan banking owned assets to beryllium successful nan pipeline astatine immoderate constituent arsenic well?

Gilles Grapinet

Hello, Tammy. Thank you for nan question. Well, regarding M&A, fto maine restate that our privilege decidedly stays to build up further our distribution channel. That's number one. Number 2 is, arsenic I mentioned sooner, to prosecute improving our portfolio by exertion targeted acquisitions. So connected nan first front, decidedly we still are very keen to prosecute expanding nan number of alliances pinch banks successful peculiar that are still owning successful Europe circa 50% of nan distribution of merchant services activities.

So location whitethorn beryllium comparatively sizable opportunities successful word of nan powerfulness of nan distribution transmission successful definite geographies. And this is staying focused, number 1 priority. You mentioned larger deals. Per se, we are much willing into nan size of nan distribution transmission than nan financial magnitude of nan transaction per se. We really person a very coagulated portfolio of products. And what we judge is nan champion measurement to leverage it is to grow nan size of nan distribution for Worldline, overmuch much than onboarding immoderate sizable, caller costs level that would make monolithic integration effort and costs for a fewer years’ time. So that's presently our authorities of mind.

Of course, opportunistically location whitethorn beryllium awesome opportunities coming successful our direction. In that case, we will enactment opportunistic regarding imaginable -- nan imaginable of worth creation, but for what we proactively explore, intelligibly these are slope partnership, pinch a attraction successful Europe arsenic previously. Of course, we are besides overmuch much progressive than successful nan past regarding technology-related acquisitions. We don't expect these to beryllium large-scale acquisition but rather important, anyway, to prosecute improving and expanding our invention and innovative portfolio. I dream I answered [Technical Difficulty].

Tammy Qiu

Okay. And besides we did talk astir ostentation rather a batch successful past year. And besides precocious location person been fears about, of course, user spending trends coming down arsenic well. How do you spot that impacting your business arsenic a consequence of operation effects pinch that?

Gregory Lambertie

Yes, Tammy, successful position of inflation, arsenic we've discussed previously, nan effect connected our apical statement is simply a mild positive. And arsenic we've seen successful nan bridges that were presented successful presentation, while connected nan bottommost statement it squeezes america somewhat -- and therefore, we've had this attraction connected costs and ratio complete 2022 while supporting our growth.

Tammy Qiu

Thank you.

Operator

Thank you. And nan adjacent mobility comes from nan statement of James Goodman from Barclays. Please spell ahead. Your statement is open.

James Goodman

Good morning. Thank you very much. Firstly, conscionable connected nan Financial Services division. So encouraging to spot nan ING woody and to get nan discourse there. I deliberation -- backmost astatine past quarter, Marc-Henri, I deliberation you talked astir a number of triple-digit deals successful nan pipeline connected nan Financial Services side. So are you happy pinch nan benignant of cadence of signing there? Are location others which are still adjacent to completion and really should we deliberation astir nan trajectory of Financial Services maturation fixed that dynamic? The first question.

And secondly, conscionable connected separator and, I guess, nan mid-term, nan three-year target. And we've evidently sewage nan effect this twelvemonth of nan TSS disposal somewhat weighing again connected nan pro forma separator for '23, but -- for '22, but moreover connected nan underlying basis, we're going to beryllium astir halfway done nan 400 ground points that you're readying for nan 3 years by nan extremity of this year, truthful tin you thief america a small spot pinch your comfortableness astir driving that retired a year, a bigger step-up successful nan profitability of nan business? Thank you.

Gilles Grapinet

So Marc-Henri, you'll return nan first one, I believe.

Marc-Henri Desportes

Yeah, James. So so we are satisfied, we're very satisfied pinch nan wide type of deals of FS. As you rightly spotted, ING was 1 of nan large deals we had successful this pipe. And I deliberation it's Gilles explained it: It's a very important woody successful its style because it is simply a multi-country paper acquiring pan-European woody which is simply a first of a benignant of its dimension, of its multi-country base. And I deliberation we spot it arsenic a first measurement successful thing we'll commencement to materialize because now, nan solution, we are capable to offer. I emotion this benignant of deal.

And I must opportunity nan remainder of nan tube is evolving positively arsenic we speak. The only small, I will say, disappointment, it's a spot slow. We would person expected -- we would person loved banks to make decisions somewhat faster. That being said, nan important portion is that it is there. And nan tube is continuing to progress. It's not going down moreover pinch nan ING signature, truthful it gives america bully assurance past to beryllium backmost successful this mid-digital -- mid-digit maturation for our Financial Services division.

Gilles Grapinet

Thank you, Marc-Henri. And connected your 2nd question, James, regarding nan step-up of OMDA margin, progression during nan execution of our '22, '24 plan, I want to commencement by saying that we are perfectly very assured to execute this scheme and to present astatine nan extremity nan circa EUR1.5 cardinal OMDA I mentioned sooner successful my presentation. And why so? Because first, arsenic you could spot done nan Gregory's span that was presented, I mean, we person a very beardown underlying OMDA capacity successful '22.

And for '23, we favour remaining cautious connected nan OMDA advancement and nan guidance supra 100 ground points because we cognize that we will person highest ostentation expected again during this twelvemonth that we will request to absorb, still immoderate impermanent antagonistic impacts of nan Russian -- nan closure of our Russian online corridor during nan first 4th successful MS and not yet nan afloat tally complaint effect of our Merchant Services repricing strategy and nan use astatine immoderate important standard of nan Financial Services semipermanent statement value indexation that we are presently negotiating pinch galore customers.

On nan contrary, successful '24, we expect OMDA advancement to beryllium materially stronger than successful '23, arsenic we will use from nan remaining Ingenico synergies, from nan afloat tally complaint effect of each our repricing and indexation speech initiatives and nan normative maturation successful each our business lines pinch accelerated operational leverage. So we consciousness that we are absolutely, successful word of trajectory, wherever we should be. And we are wholly committed coming to this.

James Goodman

Understood. Thank you.

Operator

Thank you. We will now spell to nan adjacent question. And your adjacent mobility comes from nan statement of Alexandre Faure from BNP Paribas. Please spell ahead. Your statement is open.

Alexandre Faure

Good morning. Thank you very overmuch for letting maine on. I had 1 speedy follow-up and past I person a question. And nan follow-up is connected an earlier mobility astir nan nett liking income. I think, Gregory, you said that nan privilege was connected early colony to merchants, but still I think, astatine nan extremity of 2021, you had astir EUR1.7 cardinal of costs from intermediation activities, truthful should we expect that magnitude to travel down because you'll commencement settling it early pinch merchants?

And my 2nd constituent aliases mobility I had for you has to do pinch nan merchant count, wherever it feels like, though location was beardown maturation complete nan people of 2022, successful H2 nett merchant additions slowed a small bit. I was wondering if that's conscionable marketplace inclination aliases if you're besides moving connected bolstering your distribution channels successful immoderate of your cardinal countries. Thank you very much.

Gregory Lambertie

Thank you, Alex. On liking income, I'll repetition what I've mentioned, which is nan truth that it's not really important astatine nan standard of Worldline. And we really put nan privilege connected differentiating ourselves pinch nan expertise to settee early to merchants versus competitors who mightiness effort to make interest income connected this. And no, nan EUR2.5 cardinal that was successful our merchant intermediation accounts astatine nan extremity of 2021 should spell up because of nan acquired scopes but besides because we shouldn't alteration materially nan floor plan of nan group successful position of colony patterns. So we should really increase, astir apt to nan tune of EUR4.5 billion, successful nan accounts you'll spot astatine nan extremity of 2022 successful a fewer days.

Gilles Grapinet

Marc-Henri, will you return the...

Marc-Henri Desportes

Yeah. So connected nan merchant count, successful fact, what you saw successful 2022 is simply a benignant of different pattern. It's what we had besides successful 2021, wherever astir it is two-third of merchant summation successful H1, one-third successful H2, truthful we do not spot a important quality this year. Important is we are still up of nan scheme and that we spot that this move is solidly showing nan relevance for level and solution and -- but what you rightly spotted is we proceed to activity and create that.

We proceed to bring caller fast-onboarding solution. We will leverage nan Soft POS inaugural to person a easier to -- moreover easier-to-deploy solution not utilizing nan standard-for-payment instrumentality for nan micro merchants. So we person various initiatives that are going to beryllium rolled retired towards nan market, which will beryllium supporting our merchant development, but successful itself arsenic a shape successful 2022 has thing importantly different from nan 1 we saw successful 2021, truthful it's -- it's alternatively a yearly continued bully momentum of merchant development.

And I deliberation it's important I insist connected that. The marketplace stock summation of Worldline successful this infinitesimal is simply a existent impervious constituent of our merchandise investments. It's some existent for mini merchants but besides for large merchants. I insisted a spot successful my position connected nan -- connected our merchant gains, but I deliberation we are schematic that pan-European merchants needing a elemental solution, successful a competitory tender, are reached pinch Worldline; high-volume retailers that want to person nan champion and astir businesslike economical solution mixing nan Worldline acquiring and third-party solution if it's somewhat much applicable successful section market, which we've won because we are bringing nan champion combination. I deliberation this competitivity of Worldline is thing that is increasing each year. And that's besides thing that prolong our three-year trajectory and beyond and we judge firmly successful it.

Gilles Grapinet

Thank you, Marc-Henri. I would conscionable possibly to -- adhd to your question, Alex, 2 remarks. One is it's a awesome opportunity to retrieve our maturation exemplary for nan wide market, which is, number one, having much merchants connected file. That useful perfectly well. Number two, each of these merchants successful mean successful Europe transacting much each twelvemonth owed to nan structural cashless displacement momentum; number three, an expertise to upsell immoderate services to immoderate of these merchants being nan 3rd motor of gross growth. More merchants; much transaction for each merchant; upselling immoderate products; and last, which is much a circumstantial taxable successful nan discourse of hyperinflation, a spot of repricing connected this merchant base.

Keep that successful mind. It is nan beardown exemplary that will provender up early maturation acceleration erstwhile we normalize successful word of macro environment. Second connection is this merchant count number conscionable show that nan distribution strategy of Worldline combining slope distribution and nonstop go-to-market useful very well. And it's hence our attraction successful them of M&A, connected expanding nan size and number of these, successful peculiar bank-related distribution channels for nan wide market. I dream it's clear. Well, let’s move to nan adjacent mobility maybe.

Operator

Thank you. We will now spell to nan adjacent question. And your adjacent mobility comes from nan statement of Sandeep Deshpande from JPMorgan. Please spell ahead. Your statement is open.

Sandeep Deshpande

Yeah. Hi. Thanks letting maine on. Two questions, if I may. I mean you person guided to 8% to 10% separator maturation this year. If we saw done past year, I mean, you had very beardown Merchant Services maturation successful nan first 3 quarters of nan year, which has somewhat slowed by nan 4th quarter. How do you spot that trajectory done this year? And successful position of nan different non-Merchant Services businesses, do you expect to spot maturation accelerate, for instance, successful Financial Services arsenic nan headwind associated pinch nan renegotiation of nan statement passes?

Gilles Grapinet

Hello, Sandeep. Thank you for your question. In word of -- I understand, of maturation floor plan complete nan year, I understand you want it.

Marc-Henri Desportes

Yeah, I tin return it. It's a mobility of a spot nan breakdown of nan maturation floor plan passim nan year. I think, you -- successful position of Merchant Services, if Q4 was somewhat slower, you whitethorn remember, we mentioned it respective times connected nan call, nan Russia comparison impacts, nan truth that we had to extremity nan Russian corridor successful extremity of Q1 past year. That's thing that will beryllium supportive arsenic -- successful nan comparison guidelines effect successful 2023.

And wide we person nan momentum of our business for products aliases for solutions, which makes america assured it tin stay a coagulated double-digit improvement successful 2023 connected nan MS side. That's what we are seeing. Regarding nan 2 different business line, we spot them having a somewhat softer commencement astatine nan opening of nan twelvemonth but past accelerating to scope their wide 3-year scheme momentum. And that will support nan maturation versus what it was successful Q4. And you should past spot that we person what it takes and to get to what we ambition for nan guidance.

Gregory Lambertie

One further constituent is nan favorable -- I mean, unfavorable comparable for 2021, successful Q4, wherever we had nan very beardown Q4 successful '21 successful MS. So nan fundamentals of nan business are not altered successful our view.

Sandeep Deshpande

And 1 speedy mobility for you, Gilles, connected M&A successful nan sector. Given nan caller liking complaint situation and fixed liking rates support rising, is this consolidation going to proceed to deduce nan benignant of worth it has complete nan past five, six years, fixed nan caller financial reality?

Gilles Grapinet

I genuinely judge it will beryllium nan case, Sandeep. What is striking maine successful nan existent chat we person crossed Europe is that fundamentally now moreover nan largest banks and really nan largest banks that person been very keen for years to see nan closed telephone (ph) business are really looking, arsenic I mentioned sometimes connected immoderate of these calls, astatine their strategical options. And for us, what is really awesome successful that discourse is that -- and I dream you will spot that down nan roadworthy of nan coming quarters aliases years.

It's that much and much banks are discussing pinch america not that overmuch for nan rate they tin extract from this transaction, of course, business whitethorn alteration from 1 state to different one, but overmuch much for nan value of nan exertion and products that Worldline tin bring to them truthful arsenic they tin unafraid their expertise to create merchant relationships done nan waste of nan costs services.

So what I mean by that is that I judge we tin bring overmuch much into this transaction than conscionable nan equilibrium expanse of Worldline. Balance expanse will still play a role, but we tin bring besides our technology. And very often successful these transactions that we are presently moving aliases that we dream to prosecute gross successful nan coming years, these are really bilateral owed diligences that we are having.

We owed diligence nan portfolio of nan banks, their distribution engines, nan measurement they thrust their sales. And they owed diligence our exertion and our products. That is really thing new. And it tells you that what Worldline has built done nan operation of SIX and Ingenico, and arsenic Marc-Henri rightly pinpointed, is really much and much seen arsenic a very unsocial worth proposition successful Europe, is besides a very powerful compelling facet for banks to talk pinch us.

So it's why nan measurement we were assessing worth successful nan past, immoderate nan liking rates, is besides going to construe into different woody structure, I believe, pinch banks, wherever fundamentally we are aft nan business worth we tin make together versus conscionable a heap of cash.

Sandeep Deshpande

Understood. Thank you truthful much.

Gilles Grapinet

This is highly encouraging for our strategy execution.

Sandeep Deshpande

Thank you.

Operator

Thank you.

Gilles Grapinet

Let's move for nan -- possibly nan past mobility fixed that clip is really moving and we are astatine nan extremity of this hour, please, operator.

Operator

Thank you. I will now return your past question, and nan mobility comes from nan statement of Deepshikha Agarwal from Goldman Sachs. Please spell ahead. Your statement is open.

Deepshikha Agarwal

Hi. Thanks for taking my question. The mobility is simply a spot of a follow-up versus for illustration immoderate was discussed. So first of all, I deliberation you talked astir nan pipeline for nan outsourcing deals pinch banks, for illustration particularly successful nan financial -- for nan Financial Services division, truthful tin we get immoderate colour successful position of what benignant of upside successful position of maturation are you seeing from nan ING woody possibly successful 2023 and beyond? So that's 1 thing.

And conscionable this is much housekeeping conscionable to for illustration understand it better: So for illustration nan medium-term margin, like, guidance is astir 400 bps, truthful should we still presume that pro forma separator of FY '21 arsenic nan starting point, 24.8%? Or should we for illustration -- and conscionable trying to understand fixed location was again a alteration successful nan pro forma erstwhile it comes to for 2023, erstwhile we look astatine it. So that's that.

And nan 2nd -- nan 3rd 1 is fundamentally connected M&A expectations. So conscionable wanted to understand. How are you looking astatine acquisitions much successful position of larger and mid-size deals? And besides for illustration -- now, like, are banks much consenting to prosecute for illustration erstwhile it comes to these partnerships, particularly for illustration station COVID?

Gilles Grapinet

Yes, sure. So I will return nan 3rd one. And astir apt Marc-Henri will reply connected nan ING woody that we mentioned. And Greg, I think, will screen nan past one. Well, conscionable making it short: Indeed we spot a existent momentum successful word of slope discussions, primarily, I will say, medium-size transactions alternatively than very ample ones astatine this constituent successful time. I deliberation successful comparative position to what Worldline has made successful nan past, truthful that would beryllium my consecutive answer, a batch of activity, alternatively medium-size transactions. Regarding nan ING transaction, Marc-Henri?

Marc-Henri Desportes

Yeah. On nan ING transaction, it's important to punctual it's a semipermanent contract. It's successful nan scope of 10 years; pinch a magnitude of renewal and, arsenic I mentioned, of scope description and multi-country description , truthful it's adjacent to opportunity that for nan twelvemonth 2023 nan effect is not very significant. It will beryllium alternatively dispersed and travel successful its afloat magnitude successful 2025, truthful it's a longer-term impact, but that being said, it's a very beardown momentum for our FS business. And again, based connected nan remainder of our activity and based connected what I conscionable shared pinch you, we spot it backmost successful nan mid-single-digit maturation passim this year. Greg?

Gregory Lambertie

So pinch regards to nan -- yeah. Go ahead.

Deepshikha Agarwal

So basically, connected nan margins, that is nan past one.

Gregory Lambertie

Yes. On nan margins, we person not recomputed a 2021 pro forma. What we are looking astatine successful position of medium-term guidance is nan circa 400 ground points committed astatine nan CMD successful 2021. And nan first twelvemonth is simply a 110 bps improvement. We intend to present much than 100 bps this twelvemonth and truthful nan remainder for 2024. With regards to nan pro forma, what we are -- what I've explained earlier is nan truth that nan 2022 pro forma stands astatine 25.4% for 2022, which is nan caller baseline for nan '23 progression.

Deepshikha Agarwal

Got it. Thank you.

Gilles Grapinet

Thank you very much, everyone, for having been pinch america connected this call. We are really looking guardant nan nearest opportunity to interact pinch you successful roadworthy shows aliases done bilateral calls. In between, I wish you a very bully day.

Operator

Thank you. This concludes today's convention call. Thank you for participating. You whitethorn now disconnect.

Editor: Naga



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