OVH Groupe : OVHcloud - Résultats du S1 FY2022 - Transcript de la conférence (Anglais)

OVHcloud H1 2022

Results

Thursday, 14th April 2022

Transcript produced by Global Lingo

London - 020 7870 7100

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OVHcloud H1 2022 Results

Operator: Hello, and welcome to the OVHcloud H1 Full Year 2022 Results Call. My name is Josh, and I will be your coordinator for today's event. Please note that this conference 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 questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator.

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

Marisa Baldo: Yes. Good morning, everyone, and welcome to OVHcloud first half results conference call. I'm Marisa Baldo. I'm the Head of Financial Communication at OVHcloud. And to comment our results today, we have Michel Paulin, our CEO, and Yann Leca, our CFO. We will start with the usual business and strategic highlights with Michel. Yann will then take over to comment financial results and outlook. And we will conclude with Michel before opening the floor to Q&A.

Just a quick reminder on the disclaimer on slide two that I invite you to read. And with that thank you again for joining. And I now turn over the call to Michel.

Michel Paulin: Hi. Good morning, everyone. I'm very pleased to be with you this morning. And I'm very, very honoured to have the opportunity to present our H1 results.

The first slide is about that - to demonstrate that OVHcloud continues to deliver its growth acceleration path. On the left, you have the key attributes of the OVHcloud positioning, and on the right we have the KPIs of the semester. First, we have reached a revenue of €382 million, which is up 14.3% reported and 13.3% like-for-like. We have an adjusted EBITDA of €153 million with a 40.1% margin. Our net revenue retention rate is at 112% and our growth CapEx at 41% and the recurring CapEx at 18%.

The next slide shows that we have a continued momentum during this first half, and we have - continuing to have commercial wins with new customers that we have across the globe, which is a way for us to continue to accelerate our growth. The second in the middle is that we believe to have better go-to-market coverage. Everywhere in the world we are strengthening our partnership programmes and I just want to illustrate that with a few numbers.

We have now up to 850 partnerships and double-digit growth with our system integrators, and of course, we have put some big names, where we have a global partnership with them covering most of the continents of the world. But of course, we have also a lot of regional, technical, and sectorial partners today to continue to increase our market coverage.

But also we are betting for the future growth thanks to our partnerships with start-ups. And we have acquired, in the first semester, up to 300 new start-ups in our project, which allow us to be comfortable to continue to accelerate and we're also improving our scale up programmes to attract more and more, fast growing companies in our programmes.

The last, of course, is about innovation. We want to develop innovative solutions, and that's why we have accelerated our PaaS offering. And you see that on the right, all the new services we have introduced very recently. I will illustrate in the next slide how we want to continue to have the way and the capacity to capture a growth opportunity of the PaaS market.

The next slide shows that today we are continuing on our four pillars to accelerate and confirm our growth acceleration trajectory. First, as you know, this is a business mix shift, which is a mechanical acceleration growth due to our different growth rhythm that we have across the different product lines. We maintain a strong growth in public cloud up to 24.4% reported. And we - as you know, private cloud is a very strong asset for OVHcloud. And now we have reached 15.8% growth in H1.

The second is a pillar to accelerate our growth, thanks to the fact that now we are moving to the PaaS, which is up to €50 billion to €60 billion market opportunity. We have introduced 71 services now available to our customers and so we confirm the target of 80 IaaS and PaaS services by the end of our fiscal year 2022.

The third one is international expansion. We are very successful in our digital channel in the US and Asia with respectively 97% like-for-like growth in the US in the digital channel; 57% like-for-like for APAC. And we intend to continue to invest in these continents. We will bring a new data centre, the third one in Singapore. We are going to open in 2022 a new data centre in India in Mumbai. We are planning for 2023 new data centres in America, in Germany, and of course, also in France because we will extend our footprint of data centres in France.

The last, as you know, which is not something that is huge in our plan acceleration growth that's important is the fact that data sovereignty, data protection is really a rising concern in all geographies. There is a lot of, and I will illustrate that, new regulations and also enquiries which are made today in this domain. And we believe that this is potentially, again, a very important element, where OVHcloud is uniquely well-positioned to differentiate themselves and we have a very dynamic commercial pipeline with this data sovereignty concern.

Let's illustrate the move to PaaS with the next two slides. The first slide is to show that today we are rolling out, I mean, according to our plan, the availability of new services across the different PaaS domains once we have decided to invest. Security-as-a-Service, storage and backup, AI and machine learning, containers, Kubernetes and orchestration, Database-as-a-Service, and application platform.

I will not, of course, mention all the innovation we have introduced, but we believe that today we have the engine which allows us to continue to propose to the market new innovative solutions, which are completely consistent with our business model and also our values of openness, reversibility, and transparency.

And if we go to the next slide, we see today the full screenshot of all the services we have. We show that now we are catching up and we have a complete offering that we can propose in the public cloud but also in the private cloud as PaaS solutions for customers. Either they are tech pure play customers or corporates or mid-enterprise market. So this is something that we believe is a strong pillar for the next year growth acceleration process.

The next slide is about international expansion. You see that on the right that today we have a strong acceleration, especially in the rest of the world, with 37.4% growth reported, and also we are making strong investment to continue to accelerate in all geographies. As I mentioned already, we have planned to open new data centres in North America, where we have today strong growth, and we will continue to do digital and also direct sales, especially in the US and Canada, where we have strong pipeline and strong momentum.

In Asia, we are growing very fast, 37% reported, and we intend to continue to invest by developing two new data centres by the end of 2022, which is data centre in India, which is a strong market with new regulations about data, and for us it will be a strong asset to be able to penetrate more aggressively in this market. And also in Singapore with a third data centre, which will allow to expand and grow even faster in this area.

Moreover, I just want to emphasise the fact that we have very successful digital channel today outside of Europe with very strong momentum, three-digit growth in the US, and 64% growth in Asia, which shows that today we have a strong engine of growth acceleration in these areas. And we do believe that the investment in terms of product innovation and data centre expansion will allow us to accelerate and to continue to grow actively, and, I would say, constantly in this market.

The next slide is about the last pillar, which is an important pillar, even so the plan is not completely dependent on this pillar. This is about the fact that now there is more and more concern about data sovereignty, trusted cloud. It's a rising concern for customers, governments, public entities. And there, we see that we have adopted a dedicated approach for some critical industries like public sector, healthcare, financial services, aerospace. We also now have dedicated products and services based on certifications like SecNumCloud. We have created what we call the trusted zone services for all European GDPR compliance services. And we are a leading player to create, especially in Europe, everything which is consistent with the European values and also European certification. We are the number one European player. We are a Gaia-X founding member and board member. And you know that today, Gaia-X has just announced that they are going to release the new labels, which will give clear directions about how to be consistent on both interoperability and data sovereignty.

And last but not least, of course, is about the evolving legal frameworks globally, which are showing that our positioning is accurate. The DMA, which will prevent some gatekeeper to impose unfair practices, and clearly this is something we believe is something in favour of OVHcloud. The Quebec Bill called Loi 64, but also we see that there are some new laws in India, in South Korea, in Japan, in Singapore, which are going in the same type of trends. And we have a strong momentum with commercial wins on a growing base, and this is a key figure about our installed base and the public sector. We have 50 financial services, 35 regional cities in France, 30 are state-owned entities as customer. We have more than 25 healthcare big organisations in Europe. And in France, we have more than ten ministries, which are already customers in OVHcloud. So this is something I do believe is showing that our four growth pillars are really, I mean, according to our plan, a way to accelerate our growth.

Moreover, we believe that we are able to continue to support our growth plan, thanks to our human resources strategy. And you know that recruitment is a key element of success to maintain this growth. And we are very, very confident today to show that we're able to develop our workforce to support our growth strategy. Today, we have 2,632 employees, more than 60% tech profiles and we have continued to attract at a high speed with up to 60 to 100 new employees per month. Moreover, we have recurrent and survey, and we know that today we have a strongly engaged employee level with the loyalty rate of 79%. And engagement score of our last employee survey, we do employee surveys every quarter, of 7.4. The absenteeism is less than 4%. And the voluntary departure is pretty low for a tech company, lower than 13.5%. And this is important because we received recognised prizes, which also demonstrateOVHcloud H1 2022 Results Thursday, 14th April 2022

that OVHcloud is a nice place to work. And we know that it is important to continue to emphasise the fact that today OVHcloud is a place to be, and that will help us to continue to grow and accelerate our growth in the future.

The last mention I would like to do before Yann presentation, is about the fact that we continue to invest massively in a sustainable cloud. We have some key performance indicators today which show that today thanks to our integrated vertically model, we have the capability to continue to improve our sustainable cloud.

We have low PUE, low - very, very low WUE, which is the usage of water. We have today very, I would say, high standards of renewable energy, already at 78%. And thanks to the capacity that we have today with our two factories and our vertically integrated model, we are able to refurbish, to reuse components, which is a way also to reduce cost, to increase the capacity by reusing some servers and also to have a low carbon footprint.

That's why we continue to have ambitious mid-term targets with 100% renewable energy by 2025. Carbon neutral operations, including production by 2025, which is really very different than most of our peers. Carbon net zero on the enterprise footprint of - by 2030, and zero waste to landfill. Moreover, we are also able to have strong partnerships like EDF Renouvelables on renewable power purchase agreements ,which are signed this semester with new solar plants in France with 15 years agreement starting in 2025, which will give us 50megawatt capacity. And we will continue to innovate. With new innovations that we will introduce very soon to continue to have this leading capacity in the sustainable cloud. Yann?

Yann Leca: Thank you, Michel, and good morning, everyone. Yann Leca here, CFO. Very happy to be with you this morning to go through our financials, and I invite you to go to page 13.

This page shows that obviously we have a solid growth on the back of confirmed improvement in revenue retention rates. First of all, you have our usual ground showing how we compute like-for-like revenue. We restate last year with two components: perimeter - we had a few acquisitions in the meantime; and also the forex impact as we restate active numbers with today's US dollar rate mainly. As you know, the dollar is now stronger. That brings us to 340 as a base to grow from.

And then we restate this year's revenue just for the vouchers, given in the context of Strasbourg, which impacted our revenue by €3 million. As you can see, this is going to be gradually the end of this voucher programme. But this first half year we were impacted by €3 million. So 386 is the restated number.

As a result, the like-for-like comparable revenue growth is €45 million or 13.3% to be compared to a reported growth of 14.3% definitely driven by the growth in US dollar. Our net revenue retention rate in fiscal '22 H1 was 112%. It's in line with the first quarter, and we're actually very happy with this result. It was 103% last year for the entire year, and this shows that our business is getting stickier.

On the next page, I want to show you a breakdown of our revenue and revenue growth by product segments. Our private cloud continues to grow in line with market trends at 15% growoth, reaching €234 million and at 61%, it's one point more than previously. The public cloud is growing at 21%. Actually, this includes public cloud, VPS, and SaaS revenue. The