OVH Groupe : OVHcloud - Chiffre d'affaires du T1 FY2023 - Transcript de la conférence (Anglais)

OVHcloud Q1 FY2023

Results

Friday, 13th January 2023

Transcript produced by Global Lingo

London - 020 7870 7100

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OVHcloud Q1 FY2023 Results

Friday, 13th January 2023

OVHcloud Q1 FY2023 Results

Operator: Hello, and welcome to OVHcloud Q1 Fiscal Year 2023 Revenue Conference Call. Please note this call is being recorded. And for the duration of the call, your lines will be on listen-only. However, you will have the opportunity to ask question at the end of the call. This can be done by pressing star one on your telephone keypad. If you require assistance at any point, please press star zero and you will be connected to an operator.

I now hand over to you, OVHcloud, to begin today's conference. Thank you.

Benjamin Mennesson: Thank you. So hello, everyone. This is Benjamin speaking. I'm Head of Financial Communications at OVHcloud. Thank you for being with us today on this call for Q1 revenue publication.

I'm with Michel Paulin, our CEO, who will start on the strategy and the business update. And then we will have Edouard Ferran, our Deputy CFO, for the financial performance. And then Michel again for the outlook and closing remarks.

Now - I now hand over to Michel.

Michel Paulin: Hello, everyone. Good morning. This is Michel Paulin. I'm the CEO of OVHcloud. Thank you for being with us today. And before, of course, we start, let me wish you all the best for this new year. I'm very pleased to share with you our Q1 fiscal year 2023 revenue.

Another strong quarter, thanks to the high engagement and commitment of our employees will keep delivering and executing our growth strategy. This first quarter has been a strong start to the year, and we are confirming our targets for 2023. Our Q1 revenue reached €216 million, up by 15.4% as reported, and 11.7% like-for-like.

The net revenue retention rate reached 110%, which is for us a good indicator of the loyalty of our customers and the stickiness of our model. As I said, we are confirming our targets for 2023.

First, a like-for-like revenue growth between 14-16%, with a progressive growth acceleration throughout the year as price increases will flow through. Second, an adjusted EBITDA margin in line with 2022 around 39%. Third, a recurring CapEx between 16% and 20% of our revenues. And last, a growth CapEx between 20% and 32% of our revenues.

After this quick introduction, let me give you some highlights of the quarter. In Q1, as previous quarters, we have been focusing on delivering growth acceleration. During the quarter in a fast- growing cloud market, the demand for trusted and sovereign solutions remain very dynamic. We highlight this trend with a very strong performance of one of our sovereign solution, the SecNumCloud offering. SecNumCloud is the most secure product of a large array of offering and its revenues was multiplied by four in the last six months.

Also, our leadership in sustainable cloud is more and more appealing for our partners and customers. And we are very proud to have recently published in December, a high eligibility on Green Taxonomy close to 90%. Our customer dynamic remains very strong with new clients win and additional workloads for existing clients.

Our Enterprise segment with large corporates is the fastest growing one, with, as you can see on the third box on the right, large new deals signed with AMBition; the innovation lab of Mercedes-Benz; and with the French national expert on nuclear energy, the IRSN, for example.

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OVHcloud Q1 FY2023 Results

Friday, 13th January 2023

Last but not least, we keep developing additional PaaS solution to fit customer needs. We have released a new Cold Archive storage offering, a new AI solution and also another container solutions based on Tanzu Kubernetes. All the feedback and commercial performance give us confidence for the success of our PaaS solutions and move to PaaS strategy.

As I said before, OVHcloud operates in a fast-growing market with an expanded five-year CAGR of more than 20%. The cloud market is driven by cloud adoption for all customer segments as it is mission-critical to their operations. Everyone is moving to the cloud. Data usage is booming. And we keep seeing new usage, new habits, new use cases such as multi and hybrid cloud, which are driving global cloud adoption while the cloud offers the financial flexibility to convert CapEx IT cost to OpEx IT cost.

One of the significant milestone in Q1 was the recognition of OVHcloud as one of the top tier cloud player by the market analyst of IDC. We were named as a major player in the latest Marketscape of November '22, which is a significant progress compared to the last thirty-two years ago where we were challengers. We are very proud to be the only European player featured in the study and see our trusted and sustainable cloud positioning recognised as a core competitive advantage by analysts.

All the work we do and have been doing is recognised and valued with this improved ranking. This is showing business momentum whilst all our customers, partners, prospect, carefully read and relying on these studies. And being recognised as a major player reinforces customer confidence and improves our credibility.

As underlined by market analysts, data sovereignty is one of our key competitive advantage, and clearly a strong market momentum. And today, OVHcloud is the partner of choice in European data sovereignty, which we see an increasing and in terms of interest and demand by customers. We see it month-after-month with the success of our sovereign offerings.

On this chart on the left-hand side of the slide, you highlight the impressive growth of one of the sovereign solutions, the most sophisticated one, the most secure one sold with the markup, our SecNumCloud solution, which revenue has been multiplied by four in the last six months. This solution is one among others, such as HDS, Trusted Zone and, of course, all OVHcloud offerings, which are sovereign by the[?] solution.

SecNumCloud is for customers who have the highest expectation on data security and data sovereignty. Today, the certification is only for one of our product, and we plan to extend it to all our public and bare metal solutions. And we are absolutely convinced this extension will be driving business momentum.

On the next slide, I want to give you a quick update on other key competitive advantage, sustainability. Since the beginning, we have placed sustainability at the heart of our model. We are the leading pioneer in sustainability cloud. And as you can see on the left-hand side of the slide, we are proud to have recently published a very high eligibility on Green Taxonomy regulation and revenue, CapEx and OpEx. This eligibility is a confirmation of our positioning.

In addition to be already best-in-class, we want to lead the way in the industry, and that is why we are committed to ambitious mid-term targets detailed on the right-hand side of the slide, including global net zero on Scope 1 and 2 by 2025 and on the full Scope 1, 2 and 3 by 2030.

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This positioning of offering a sustainable cloud is fostering customer demand, especially for large organisation.

Sustainable cloud is a key competitive advantage for our customers and partners. Our sustainability is on the top priority and critical to their performance. For example, IJO, a customer specialised on green IT expertise, underline our capacity to recycle and reuse all components of our servers as a competitive strength of our integrated industrial model.

Hugging Face, an American company in machine learning, highlights the significant improvement they made in terms of carbon footprint when they migrated to OVHcloud.

As you know, we have a successful go-to-market strategy. Enterprise channel now, that represents 54% of our revenue and it is the fastest-growing segment for OVHcloud. We have built dedicated programmes around these enterprise and digital go-to-market. These programmes are driving growth acceleration, and they are more and more successful.

For instance, the Partner Programme is now more than 1,150 partners, of which 300 are called Advanced, the layers highest level of partnership, meaning they have dedicated training, certifications and also commitments. The Startup Programme is also, I mean, very impressive. In Q1, we had more than 210 new startups joining the programme for more than 40 different countries. These startups are coming from a wide range of industries such as logistics, manufacturing, healthcare and agriculture.

We give them dedicated mentoring, and we help them to - them building cloud-native offerings on our OVHcloud ecosystem, PaaS and IaaS solutions. All these successes are driving the strong customer dynamic, and the startup programme will fuel future growth.

We are pleased to share that we still enjoy strong customer dynamics. As you know, we announced a price increase in August last fiscal year. And we started to increase our prices in December 2022, which is in Q2 for us. So we don't have any price effect contribution in Q1, and we expect this progressive price increase to be fully implemented in the coming months. We will fully benefit of it in the second half of the year.

On a full year basis, we expect the price increases to contribute between 2 to 3 points of revenue growth. We are also pleased to report that so far, we do not see any negative impact following the announcement in Q4 2022. And the increase started in December 2022.

Moving to the top-right corner, we are proud to reach 110% like-for-like net revenue retention rate. This highlights the stickiness of our customers. Having such a good level is a confirmation of our customer loyalty, and again, without any effect, price tier.

Our pricing power is strong and intact. Our customers see the value of our solution, and this is the reason why they stay with us in an inflation context. Moreover, we have the best price performance ratio to hyperscalers and this is what we see on the bottom right.

As a reminder, the price increase we have announced will allow us to maintain our fiscal year 2022 adjusted EBITDA margin around 39%, in line with last year.

And this is a good transition to the financial section. Our Deputy CFO, Edouard Ferran, currently acting as interim CFO, will present the financial section.

Edouard has been a key performing member of the finance team for over - more over than three years. And we've been working closely with our new CFO, Stéphanie Besnier, who will

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join OVHcloud beginning of March. Stéphanie is currently Deputy CEO of the Agence des Participations de l'Etat, the entity managing the strategic shareholding of the French state with a portfolio of over €120 billion of assets. And in this capacity, she served on the Board of large global corporates, including Safran, ENGIE, Orange and Air France-KLM with more than 20 years of experience in management position, in finance and investment.

Stéphanie will bring significant expertise to help drive the Group development and a growth acceleration strategy. We are really, really happy to have her on board in the team.

On this first introduction, I'm sure you have all the opportunity to meet her soon. And I propose we now let's move to the financial side.

Edouard Ferran: Thank you, Michel. Good morning, everyone. I'm delighted to be with you today to comment our strong start to the year. We are very proud of our robust performance in Q1 with an acceleration compared to previous quarters. Note that we did not have any price increase effect during this quarter as the first increases are implemented in Q2. So the 11.7% underlying revenue increase in Q1, which is, again, an acceleration against Q4, is all driven by volume.

We have an especially good performance in France, reaching 13.2% like-for-like in acceleration after Q4 FY'22, which was already the strongest of 2022. We reached a rounded[?] growth in all segments with a double-digit growth in both public and private cloud. We keep seeing a good momentum in Europe with a continued double-digitlike-for-like growth and a strong growth in public cloud especially.

In the rest of the world, we have a robust performance with a continued successes, especially in the digital channel. Of course, after 18 months of very strong growth, we have a high comparison basis throughout the year in the US. And since last quarter, Russia is starting to weigh more significantly on the region performance. Without Russian activities, we would be growing double digits in our all - in all our regions in Q1.

I would like also to confirm our roadmap of 15 new data centres opening in the next two years. This is confirming our successful expansion strategy with a progressive ramp-up of our data centres once they will be opened.

So on the next slide, as Michel said at the beginning, we reached a revenue of €216 million in the first quarter with a like-for-like growth of plus 11.7% and a reported growth of 15.4%. We have a sustained revenue growth in all segments with 12.8% like-for-like growth in private cloud, 18% in public cloud and 4.6% in Webcloud.

On the next page, we can see that the mix continued to evolve towards more public cloud, which is the most dynamic market. And private cloud with the continued strong growth in this segment, thanks to the success of our go-to-market strategy, as Michel detailed previously.

Public cloud now represents 17% of our revenue, up 1 point versus last year. And public cloud represents 62% of our revenue, up 1 point also. It's interesting to note, as underlined by our high net revenue retention rate of 110% that we have a high loyalty of customers, thanks to our cross-sell strategy and our recurring revenue in private cloud and Webcloud.

Now I will let Michel update you on our outlook for the rest of the year in the mid-term.

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