Quadient SA

PAR:QDT

Earnings Call Transcript 2021-Q3

[Operator]

Hello, and welcome to the Quadient 2020 Q3 results. My name is Monique, and I'll be your coordinator for today's event. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Geoffrey Godet, CEO of Quadient, to begin today's conference. Thank you.

[Geoffrey Godet, CEO & Director]

Thank you. Good evening to all of you, and thank you very much for joining this call so that we could present to you Quadient's third quarter sales for the period that ended October 31, 2020. I hope most of you should know me by this time, but I am Geoffrey Godet, CEO of Quadient, and I am joined today on this call by Christelle Villadary, our CFO.Throughout this call, I'll be referring to the presentation that can be downloaded from our website, which complements the press release we issued today after market close.So starting with the agenda on Slide 3. I will first give you an overview of Quadient's third quarter 2020 key sales and business achievements. As you'll see, we recorded a strong rebound and faced a strong rebound in Q3 revenue trend in all our solutions and geographies. Then Christelle will provide you with a more detailed overview of our Q3 revenue performance. And next, I will outline some of our most recent business achievements and industry recognition. And I will also share with you our upgraded outlook for full year 2020. And finally, obviously, as usual, we'll be happy to take your questions.Moving to Slide 5. So we are very pleased with a strong rebound in revenue trend that is recorded in the third quarter 2020 and such in all our solutions and every geography. Today -- sorry, total sales stood at EUR 258 million in Q3 2020, down by a contained organic -- 3% organically compared to Q3 2019, confirming the strong rebound from the lows of -- in April. Revenues from major operations were slightly down by 1.8% on an organic basis and a strong improvement compared to the 12% organic growth we recorded in Q2.Both our Business Process Automation and Parcel Locker Solution activities returned to strong double-digit organic growth in the quarter. I think it highlights the relevance of our offering to support our customers in the digitization of their internal process and to benefit from fast-growing parcel deliveries due to the e-commerce [ boom ], as most of you, I'm sure, on this call, have experienced. Our sales performance in North America was also strong with a positive organic growth in the quarter, driven by strong double-digit revenue increase for each of our growth engines -- for each of the growth engines in North America and improved trend for Mail-Related Solution activity. And lastly, our recurring revenue model proved once again very resilient, so our trend for hardware equipment and license sales improved strongly. We have also maintained a strong business and operational execution during the third quarter with a number of new customer gains and some new product launches even in this environment such as Quadient Impress Distribute, our new cloud-based document delivery solution for CXM Impress platform. And in addition, we received multiple industry recognition, underscoring the uniqueness of our product offering.To share with you a few examples of the strong achievements, Quadient placed third in the Horizontal Publisher Category in the annual ranking of French software publishers and developers published by Syntec Numérique and achieved 12th position overall on the Top 250 Panorama. We also achieved the prime status by ISS ESG for our activities related to various environmental, social and corporate governance indicators, I believe, reflecting Quadient's strong commitment today and continuous efforts to corporate social responsibility.Moreover, we have pursued the active management of our cost base to best optimize our profitability in this environment, while also we maintained a strong liquidity position during the third quarter 2020. And lastly, I want to share with you that against the backdrop of the strong rebound, we are upgrading our guidance for the full year 2020. Our sales performance in the fourth quarter of 2020 will be especially driven by continuous growth in our Business Process Automation and our Parcel Solutions activities.So we now expect for full year 2020 organic sales decline of around 9% compared to the full year of 2019 versus the previously around minus 10% organic decline previously stated. On the EBIT side, the current EBIT before acquisition and related expense in the range now of EUR 140 million to EUR 145 million versus the between EUR 135 million to EUR 145 million previously stated. And obviously, the free cash flow will remain above EUR 100 million. This is unchanged guidance.So this was a quick summary of everything that I wanted to share with you. So now let's go into some of the details.Moving to Slide 6. And I think it's fairly obvious, as you can see on these charts, starting with the one on the left side. We posted a much improved sales performance in the third quarter with a 3% organic decline year-over-year at group level, representing a significant improvement compared to the double-digit declines that we recorded in Q1 and Q2 this year. This improved performance reflected a strong rebound in both recurring and nonrecurring revenue.Looking at the chart on the right side, our recurring revenue model proved once again very resilient in the third quarter with a 2.1% organic decline year-on-year, demonstrating the relevance of Quadient's strategy to promote recurring revenue in all our solutions and particularly through SaaS and rental-based sales. And this represented a substantial improvement compared to the 7.7% organic decline we recorded in Q2.As the company has been recovering from the impact of the lockdowns, as you know, in the many countries we operate into, the nonrecurring revenue, which includes the sales of license but also hardware equipment, smart hardware, recorded strongly improved trend with organic decline of 5% in the third quarter, which is rebounding sharply compared to the 26.4% and 29% organic decrease we posted in Q1 and Q2, respectively and when we were in the deepest moment of the health crisis. This rebound was driven by improved trends across all solutions and geographies. Moving to Slide 7. Looking now at the performance for each solution with a major operation. We recorded double-digit growth in Business Process Automation and Parcel Locker Solutions activities and strong improvement for Mail-Related Solutions and Customer Experience Management. And Christelle will give you more details later on the presentation, but I will provide you with a few comments on that already. On Business Process Automation activity -- sorry, our Business Process Automation activity rebounded strongly with an organic growth of 20% in the third quarter 2020, returning to double-digit growth after a 2.5% decline in Q2, driven in particular by a significant increase in revenue related to volume-based usage as well as the ongoing strong growth in SaaS revenue.If we move to our Parcel Locker Solutions activity, they also returned strong double-digit organic growth on their own in the third quarter at 28.9%. This mainly reflected ongoing double-digit growth and rental-based revenues happened and as well the strong subscription revenue growth.We also benefited from a sharp improvement in hardware sales, fueled by the strong dynamics that we have in the U.S., in particular for the retail sector due to the new contract with Lowe's that we have shared with you.Moving to Customer Experience Management. The activity recorded improved sales trend as well with an organic decline of only 4.1% in the third quarter after an 11% drop in Q2 with, in particular, a strong double-digit growth in North America. We especially benefited from ongoing strong growth in revenue from SaaS subscription and increased maintenance revenue as well from new license deals in the United States and the United Kingdom, including as well in new verticals like government and utilities.And lastly, our Mail-Related Solutions activity also recorded improved sales trend in the third quarter, with an organic decline of only 6.3% compared to the decrease of 13.9% we recorded in both Q1 and Q2, which you know for Q1, we had really only the impact for half the quarter. And that was, in Q3, driven notably by the improved trend in consumption-related revenues on our supplies, as usage has started to return as well as the continued recovery in the new placements from the lows of April I was just referencing.Moving to Slide 8. In the context of this continuing global health crisis, businesses are forced to reassess how they are connecting with their customers and how they're adopting Quadient's cloud-based solution and accelerating, therefore, the digitization of business processes.Over the last several months, we have seen a huge increase in the usage and volume across all our solutions. And as we have indicated in the past, when we became Quadient, a unified organization, we look to leverage our core assets across our 4 solutions.And in particular, when it comes to software, we adapted our market-leading Quadient Inspire platform to the small, mid-sized company segments. And we discovered that these companies have the same needs as large enterprise companies; however, not requiring all the same features.So we reused all the components from Quadient Inspire to develop our Business Process Automation solution. The use of Quadient's Business Process Automation cloud-based solution by small- and medium-sized businesses are for sending customer communication either, as you know, electronically or by posting physical mail. The ones of Quadient facilities reached an all-time high in October. That was a record with hundreds of thousands of documents sent on a daily basis. The number of communications delivered in October exceeded the 11 million threshold just in France alone, representing a spike of 71% compared to the same month in October 2019.For the year-to-date, the usage of Quadient's BPA solution is up 7.8% compared to the same period last year, with tens of millions of documents sent via digital processes, which was accelerated by the recent launch of Quadient Impress Distribute, another cloud-based document delivery solution.For larger enterprise, in addition to the on-premise solutions, Quadient's Customer Experience Management cloud-based solution have also seen a record use in 2020 with hundreds of millions of e-mails sent by businesses using Quadient, and I'm referring to Inspire cloud-based messenger solution. They increased by 87% in 2020 compared to the same period last year.And in addition to Quadient -- sorry, in addition to using Quadient Inspire for the omnichannel customer communication, companies explored how their customers were changing behavior during 2020. The usage of Quadient's customer journey maps in the thousands increased by 19-fold compared to last year alone.Moving to Slide 9. Due to the e-commerce boom, and I'm sure that most of you have experienced even personally during this very unique period that we went through, parcel volumes have experienced high double-digit growth as retailers invest to adapt to the rise of the e-commerce in consumers as they turn to safer, touch-less and more convenient delivery solutions.The volume of package going through Quadient's Parcel Locker Solutions, our network, have experienced holiday-like volumes since COVID-19-related restructuring that started in March and hitting an all-time high of 4.5 million parcels transiting through Quadient's installed base of smart lockers worldwide in October for the first time, including North America, Japan and France.And in July of this year, as a reminder, we launched our Parcel Locker Solution in the U.K., and we have already started to see strong traction from customers and partners for which we already made our first sales. It is naturally expected that e-commerce will drive even higher volumes as the actual 2020 holiday shopping season begins.And Quadient's smart lockers with integrated tracking, I think, provide a great contactless and secure solution for package management, and on top of that, with the 24/7 convenience. And that's thanks to our cloud-based and mobile-based solution, all software-related.With the default assumptions in the world -- sorry, while the default assumption in the world has completely transitioned to digital, physical communication and mail, as you can see, is still very relevant. While we did see a decline of usage of Quadient tracking machine in the late March, we have seen a gradual increase as people were getting back to work. On a comparison base, we have seen the usage up by over 15% over the June to September compared to the first fiscal month of 2020. With greater access to customer sites, sales teams, they were able to recapture the business that was deferred from Q2.Commercial activity for document management system and folder inserters is up 30% compared to the first 4 fiscal months of 2020. Different from earlier quarters, large orders progressed now through the buying process and closed, yielding the highest conversion rates of the year. And we'll touch upon it later.We're obviously also happy to have been able to leverage our supply chain, our common and single supply chain organization that we have leveraged for years for Mail-Related Solutions to be able to support the implementation and the rollout of the huge increase of lockers that we need to install for our new customer, Lowe's.In particular, we have been able to optimize, and we'll touch upon that, our supply chain operation in North America to take care both of our Parcel Locker and Mail-Related Solutions business.So moving to Slide 10. As I'm sure you know by now, at its core, Quadient back-to-growth strategy has been to develop strategic synergies. We have uniquely assembled our software solution and our Parcel Locker Solutions to fully leverage the core assets of our traditional business. What makes Quadient unique today is our ability to bring together our core assets, including our innovative technology, 500,000 customer base across the world, passionate employees and recognition for being market leaders, and obviously, also our infrastructure across those geographies in those 29 countries.So becoming Quadient, one company, this one vision, one mission is really what enabled us to focus on leveraging these assets to efficiently accelerate our growth solutions and to truly enable these synergies.During our H1 2020 call, for the ones of you that were with us, we're excited to share with you some of those synergies from customer-facing and commercial activities to R&D and supply chain.This quarter, we continue to make progress by expanding our current distribution center in the United States that was introduced to you when we discussed about the smart hardware usage. Based on the increased customer demand for Parcel Locker Solutions, as you can see by our progress this year, and the requirement to deliver from -- in the retail industry, with Lowe's among those other contracts, we were able to upgrade our distribution center in the Midwest, across in Memphis in the U.S., to optimize our supply chain so that both our Mail-Related Solutions and Parcel Locker Solutions jointly benefit from one shared logistical infrastructure across our smart hardware solutions.And we're obviously also leveraging the same supply chain in Asia to be able to procure quality smart hardware through a different set of suppliers for both mail-related equipment and parcel locker. Also, in October of this year, we announced and launched Business Process Automation platform called Impress Distribute. This is the direct result of bringing all our software team into a fully integrated software engineering practice, truly global team across R&D centers now and under a single management for all software across all of our solutions, including both software and smart hardware solution.Developed on the same teams in our Czech R&D center, this new cloud-based document delivery solution reuse the IP and the development code from the award-winning and market-leading solution Quadient Inspire, which is our flagship product for Quadient Customer Experience Management solution. This includes leveraging the tools, know-how, processes and people to accelerate this release. We're very proud of what the team has achieved this year.Just a couple of weeks ago, we announced, also in conjunction with Canon U.S.A., a reseller agreement for all our Parcel Locker Solutions. We're obviously very excited about expanding our current partnership for mail-related equipment with Canon to reach more customers for our Parcel Locker Solutions. And we see more and more commercial synergies potential from our MRS customer base and our MRS sales channels to cross-sell our Parcel Locker Solution in addition as well to our software solutions.We also started in this third quarter to enable our commercial Mail-Related Solutions sales team in the U.S. and the U.K. to sell Business Process Automation accounts receivable software solutions that you know we have recently acquired YayPay. This will help Quadient to cross-sell our Business Process Automation solutions business. In the third quarter, we also made, I believe, another critical steps in becoming one organization by rolling out, for the first time, a single human capital management system from leading cloud-based Workday. And this is just another example of rolling out a single standardized way of doing business at Quadient, and as such, as I mentioned, across the world and across our solutions.This is the way to enable synergies and be able to be more efficient as we do business. And this is on the heels of the progressive rollout we had started materially already for our CRM solutions sales force that we have started to implement in a standardized way into many countries now, month and quarter after quarter. So much has been achieved now after more than 18 months of announcing our new strategy and new organization and centralizing our back offices, HR, IT, finance and legal organization, even if much more remains to be done.As you can see, hopefully, we've made strong progress in becoming one truly integrated and synergistic organization.So this concludes my review of the key highlights I wanted to share with you. And I'm now handing over to Christelle for the review of our Q3 sales performance.

[Christelle Villadary, Chief Financial Officer]

Thank you, Geoffrey. So moving to Slide 12. You can see on this slide a snapshot of the Q3 performance. So we recorded sales for EUR 258 million in this quarter, representing a decline of 7.4% year-over-year on a reported basis, but which is an organic change of minus 3% versus last year, which represents, as you know, a sharp improvement compared to the minus 14.6% and minus 10.9% declines reported, respectively, in the second and third quarter of the year.So as already explained by Geoffrey, this performance primarily reflects the strong rebound we had in both the recurring revenue and also the sales of hardware and licenses during the last months.Major operation, which contributed about 90% to the total sales in Q3, performed even better and are down by only 1.8% on an organic basis compared to last year. We also would like to highlight and to note that North America and the international regions returned to an organic growth during this quarter.For additional operations, they were down 11.8% on an organic basis compared to last year, but which is a material improvement as well versus Q2, which stood at minus 32.5%.Moving to Slide 13. I will now comment on the revenue bridge for Q3. So again, as you can see, major operations benefited from double-digit growth in BPA and Parcel Locker Solutions activities, up 20% and 28.9%, respectively. Compared to the revenue trend we experienced in Q2, both Customer Experience Management and Mail-Related Solutions posted an improved performance in Q3 as well, with organic declines of 4.1% and 6.3%, respectively.And as we just saw, sorry, additional operations, we are down 11.8%. Regarding the other items, the currency effect was slightly negative at minus EUR 3 million in Q3, reflecting the divestment of ProShip and the promising acquisition of YayPay. Lastly, we had a negative currency impact of EUR 9 million during the quarter.Moving to Slide 14 for Customer Experience Management. So in Q3, sales stood at EUR 31 million, and we are down 4.1% organically, which is an improvement versus the minus 11% we had in Q2 2020. Recurring revenues, which represented 74% of the sales, continued to show a very good resilience, down by only minus 1.3%, driven by an ongoing strong growth in revenue from SaaS subscription and also an increase in maintenance revenue. This performance was offset by a decline of professional services revenue, as you know, mainly operated on-site and thus -- which were still affected by social distancing measure during the quarter. We also would like to highlight that some European countries benefited last year from PSO activities attached to very large deal, which did not occur in Q3 2020.License sales were down 11.3%, which is an improved trend versus Q2, which were at minus 31.1% and were driven by several deals in the U.S. and the U.K., including in -- some of new verticals, especially government and utilities. Both regions, so U.S. and U.K., reported more than double-digit organic growth in Q3 in license sales. During this quarter, CXM also added 15 new logo to its portfolio.Sales in North America continued to be very dynamic and recorded strong double-digit growth for the fourth quarter in a row. Mainly -- many European countries posted a decreased revenue despite the strong double-digit growth in the U.K. and international sales were lower due to a rather high comparable basis in Q3 2019.As you know, our lead generation process, which has been affected by lower process opportunities coming from our MRS channel and the impact of social distancing measure on our traditional marketing activities, will continue to impact our short-term sales. So as we expressed during our H1 results, we still expect CXM to be declining as a result in Q4 and H2, driven by delayed PSO activities, lower licenses, but which would be offset by continued increase in SaaS and maintenance activities.Moving to Slide 15 on BPA. So in Q3, Business Process Automation sales stood at EUR 18 million, up 20% organically compared to last year, returning to double-digit growth level versus Q2, which was at minus 2.5% and Q1 at plus 4.9%. Recurring revenue recorded strong double-digit growth, up 34.6%, representing 87% of the total sales in Q3.We benefited from a significant increase in volume-based revenue, including a positive catch-up effect in the property management sector in France. We saw also continued strong growth in SaaS revenue, thanks to the increase of our customer base in the prior quarter. And in addition, the group continued its campaign to accelerate new customer acquisition under the subscription model across all regions.And lastly, sales benefited from the good growth from YayPay that posted a triple-digit revenue growth year-on-year, but still on a low basis. Moving to Slide 16, Parcel Locker Solutions. In the third quarter of 2020, Parcel Locker Solutions sales stood at EUR 21 million, up 28.9% organically versus last year, which is also a strong improvement versus Q2 which was at minus 1.9%.Recurring revenues represented 47% of Parcel Locker Solutions in Q3 and posted a sustained performance at plus 19%, with a continued double-digit growth in the rental base revenue, notably thanks to our Japanese installed base but as well strong growth in subscription revenue. In addition, recurring revenues benefited from a sustained increase in sales related to maintenance and usage-related fees.Hardware sales, sorry, were up 39.2%, again, a sharp improvement versus Q2 at minus 27.5% and were fueled by the strong dynamics in the U.S. retail sector and the rollout of the new lockers as part of the contract with Lowe's. PLS sales also benefited from Quadient's first customer gain in the property management sector in the U.K., as explained by Geoffrey.At the end of the quarter, we also started the first deployment of our new compact lockers, so the Parcel Locker Lite, as part of the contract with Yamato in Japan.Moving to Slide 17, Mail-Related Solutions. So in Q3 sales stood at EUR 159 million, down minus 6.3% organically compared to last year. So experiencing an improved business condition versus Q2 and Q1, which both recorded a decline of minus 13.9%. Recurring revenue were down minus 5.4%, representing 73% of the total sales in Q3 and benefited from an improved trend in consumption-related revenue, the supplies, and the usage has started to return month after month.We'd also remind you that most of the other recurring revenue streams, being leasing, rental, maintenance, are featured by multiyear contracts in our portfolio. Average sales were down 8.7%. Again, much improved performance versus Q2 at minus 25.5% driven by the continued recovery in new placements from the lows of April with all the 3 segments, small, medium and large accounts, improving during the quarter.The production mail segment, which include the high-end mailing system and folder inserters, has been lagging a little bit behind during the quarter. Business trend improved sequentially across all regions, especially in North America and in the France/Benelux region. Furthermore, our backlog remains very high in Q3 2020 compared to Q3 '19. Moving to Slide 18, major operations. So in Q3, a major operation recorded revenue of EUR 229 million, representing almost 90% of the total sales. They were slightly down by 1.8% organically compared to last year. They benefited from a robust performance of recurring revenues, which were down by only 0.8% as well as a strongly improved trend for hardware and license, down minus 4.3%.Looking at the different geographies, North America and international recorded an organic growth and the trend in Europe improved as well. So specifically in North America, the region posted a strong performance with positive organic growth of 2.3%, a sharp improvement versus the 7.7% decline in Q2 driven by strong double-digit revenue increase for each of the growth engines, namely CXM, PLS and BPA, and benefited from an improved business trend in Mail-Related Solutions with also [indiscernible] positively impacting the quarter.Main European countries posted much lower organic sales decline in Q3 compared to Q2 and benefited from double-digit growth in BPA revenue as well as a strong recovery in France/Benelux, which recorded a very small organic decline over the quarter. The international segment posted a solid organic sales increase of plus 4.1%, returning to positive growth after the decline of 4.2% in Q2 driven by the strong increase in rental revenue from Parcel Locker Solutions in Japan. Lastly, moving to Slide '19 for additional operations. So additional operations were down 11.8%, reflecting an improved trend from the export business. Notably, we benefited from large OEM contract with third-party distributor for mail equipment. The revenues from the graphic activity continued to decline. Lastly, we benefited from an increase in revenue from automated packing systems, or our CVPs. Indeed, we sold 4 units in Q3 2020 versus 5 in Q3 2019, of which 2 units of higher-end CVP Everest product driven by e-commerce market dynamism.So I'm now handing over to Geoffrey for the business update.

[Geoffrey Godet, CEO & Director]

Thank you, Christelle. Moving to Slide '21. So even in these challenging times in the last few months, the Quadient teams continued to be in the news, as you could see, as we continued to receive recognition for our efforts. But this is the result, obviously, of the teams coming together as one Quadient organization and relentlessly focusing on execution.So just a few compelling things that I wanted to share with you today. Our flagship Annual Inspire Days Conference has completely, and for the first time, transitioned to digital and bringing close to, I think, 1,500 attendees together virtually to discuss the trends that we see on customer experience and our new partner program. We also welcome Knoxville Utilities Board to our family, as they standardize using Quadient Inspire for enhancing how their customers receive their bills and invoice.Quadient was also again recognized for being one of the top software companies in France, ranking third in the Horizontal French Publishers' category Syntec Numérique, which is their annual ranking of the French software publishers and developers.And we achieved, I think, as I think introduced to -- I shared an introduction, the 12th position overall in the Top 250 Panorama with more than $215 million in software revenues across its solutions today. We also achieved a Prime status by is ISS ESG for its activities related to various environmental, social and corporate governance indicators. As you know, this is at the core of Quadient strategy today. And this is a status that is given to companies with an ESG performance above the sector-specific Prime threshold. So Quadient's 2020 results reflect its commitment and continuous efforts to corporate social responsibility.As many counties in the U.S. supported mail-in ballots, Lehigh Valley in Pennsylvania relied on our innovative, high-speed envelope openers for managing all incoming ballots for timely election reporting.And finally, our CVP Everest automated packing system has been selected as the sorting and fulfillment technology of the year by the 2020 Parcel and Postal Technology International Awards. So this Quadient CVP Everest, as you know, is a high-speed packaging system that uses 3D scanning technology to construct tailor-made, right-sized individual boxes around soft and hard goods for variable size up to 1,100 package per hour. This is a recommendable hardware. The CVP Everest generates the smaller box needed and saving on labor, but also shipping and material costs, and it also increases the sustainability, which is key to us by eliminating excessive packaging. So moving to Slide 22. As we already stated, thanks to the synergies that we have now across our solution, Quadient is uniquely positioned to continue to benefit from different trends, the acceleration of the shift towards digital solutions. And with the e-commerce booming, and I think -- I believe we can do that by continuing to outperform our competition, both on software and smart hardware.Taking into account the improved performance recorded in the third quarter, we have logically upwardly revised the full year 2020 expected sales and current EBIT. Our Q4 sales performance will be especially driven by the continuous growth in Business Process Automation and the Parcel Locker Solutions activities. So logically, we now expect the full year 2020 -- so for the organic sales decline to be around 9% compared to the full year 2019 versus what we told you at the end of H1, where we expected it to be around 9% organic decline at the time.The current EBIT, before acquisition-related expense, we now have a guidance in the range of EUR 140 million to EUR 145 million versus the range we had between EUR 135 million to EUR 145 million at the end of H1. And that is, obviously, at constant foreign exchange rates in H2 compared to H1.And in terms of free cash flow, this is unchanged and remain -- and the guidance remain above EUR 100 million of free cash flow.So I appreciate the time that you have given us, and this concludes the presentation, and I am now happy to take your question with Christelle.

[Operator]

[Operator Instructions] Our first question comes from the line of Patrick Jousseaume from Societe Generale.

[Patrick Jousseaume, Head of Mid and Small caps Europe Research]

I have 3 questions. First one is about the second lockdown. Could you compare how you operate during the second lockdown versus the first one, please?Second question is about your forecast, about 9% organic decline for 2020. If I'm not wrong, should you be able to go to minus 3% in Q4, so same rate as in Q3? Organic decline for the full year should be around 8%, so could you elaborate a bit on this? To what extent is this 9% cautious or not? And my third question is about the debt lending at the end of the year. I mean when I look at your consensus, there is quite -- the ones that you have provided, there is quite a wide range of debt expectation for the full year, starting from the EUR 668 million of last year. So you gave quite a clear indication about the free cash flow at EUR 100 million. What are the other, let's say, moving parts, including dividend and maybe something else? And could you give us some indication about where net debt could be at the end of the year.

[Geoffrey Godet, CEO & Director]

Patrick, thank you for your 3 questions. They're good questions. I hope on the first one, I will respond the right way because you asked how we operate with the second lockdown. So on the first topic, we were fairly quick in the first lockdown to already move to working remotely fully for the organization. And the speed, obviously, of the lockdown allowed us to, I think, realize that we were fairly well capable to operate in this fashion with almost no disruption. The things that we had seen were really minor.So since then, we have obviously continue to anticipate, to work on our systems, our tools and our capability to ensure 2 things: one also -- always the safety of our employees at first; and two, to ensure the business continuity for customers. So as we were -- because we're exposed to so many different countries, we did anticipate those second waves were coming and that potential lockdowns or curfew could be happening, and they were happening in different stage. So we've been able to anticipate here.So I feel today, we are in a very good position to continue fully to operate in terms of business continuity. We don't see any risk in terms of supply chain as of today on any other aspect. In terms of ability of resources, most people are working from home when it's possible. The others are able to come at the office when it's needed. So we are -- I think we have 100% business continuity.If we look at the lockdowns, we need to make sure things could always be delivered into ports and all that. But as of today, again, even on the rest of the aspect from business continuity, we're good. So we don't anticipate the current lockdowns to impact us, from an operations perspective, the same way that they were in the first part. So hopefully, I addressed your first part of the question. Getting back to the guidance for this year. We obviously took into account 3 things. One is the better performance in the third quarter, naturally. And then we started to look at by solutions, what were the different dynamics and how we could anticipate this Q4 that will have some uncertainty. So in terms of dynamic, by solution, we obviously expect to continue to grow in our Parcel Locker Solutions that will be sustained by the implementation and rollout of the more numbers of lockers that we plan to install in Q4, in part driven by the contract of Lowe's. And we should expect a stronger growth on Parcel Locker.On the Business Process Automation, as Christelle mentioned, we had some benefits of catch-up effect from the -- usually the seasonal activities that we see during Q1 or Q2 that unfortunately didn't happened this year, but we believe we saw in Q3. So we expect the Business Process Automation to continue to grow, probably not at the same pace as what we've seen in Q3.And then obviously, for the Customer Experience Management, we expected, like we said, at the beginning -- at the end of H1 to decline this year as well in Q4, like in Q3, because we noticed a change in the marketing activities at the beginning of the year. Some of the traditional event didn't happen and lower pipeline generation, knowing that we have 6 to 12 months of cycles, we did anticipate that in H2, we will continue to be impacted by that. That being said, we continue to sign new customers in the different segments, in the different areas. You've seen that it was driven by a strong double-digit growth in North America. We've seen in this quarter also a good growth in U.K. So what is difficult for CXM is obviously the big deals, especially in the fourth quarter that is the largest fourth quarter for CXM. So big deals could always be delayed, especially in period over uncertainty for a large organization. So that's why we have taken those things into account.And then for the Mail-Related Solutions, that's where, as of today, where we are in November, we see the same dynamic that we had in Q3 and in October continuing in November. So today, we don't see impact -- a negative impact in the daily usage and the continuity from customers in the booking, the placement and installation. But we do know that the fourth quarter is the largest quarter of the year. We know that January is our biggest month of the year for the Mail-Related Solutions business in particular. And considering that those lockdowns, curfew in the U.S., in particular, because it's 50% of our business, we've seen that California just announced a curfew. So we are obviously -- we need, I think, to remain prudent, considering the weight of the fourth quarter and the uncertainty that we have for Q4.So that's part obviously of that. There's still -- it's still difficult to predict on such a big month at the end of the quarter for us, what it could be. So that's what all came up in our guidance for the full year, including Q4. So that was for the second question.

[Patrick Jousseaume, Head of Mid and Small caps Europe Research]

Sorry, did you say that you expect a stronger growth for Parcel Locker Solutions in Q4 versus Q3?

[Geoffrey Godet, CEO & Director]

Yes.

[Patrick Jousseaume, Head of Mid and Small caps Europe Research]

Not sure.

[Geoffrey Godet, CEO & Director]

Excuse me.

[Patrick Jousseaume, Head of Mid and Small caps Europe Research]

My question is, did you say that you expect organic growth to be stronger in Q4 than in Q3 for Parcel Locker Solutions? I am not sure.

[Geoffrey Godet, CEO & Director]

Yes, I did say that. Yes, I do expect the growth in Parcel Locker to be stronger in Q4. I'll let Christelle address the third question, Patrick.

[Christelle Villadary, Chief Financial Officer]

On the -- your question on that, so there's nothing different than what you say. So I mean, the debt will be impacted by free cash flow that we said to be above EUR 100 million. It will be impacted by the dividend we paid in the September by EUR 12 million. There is already, at the end of October, a small decrease of the IFRS 16 debt. And at this stage, there is nothing additional to be taken into account for kind of projection of the net debt.

[Patrick Jousseaume, Head of Mid and Small caps Europe Research]

Except [ EP ]?

[Christelle Villadary, Chief Financial Officer]

Yes. They were -- was part of the H1 number.

[Patrick Jousseaume, Head of Mid and Small caps Europe Research]

Okay. Okay. Yes, but full year...

[Christelle Villadary, Chief Financial Officer]

If you like [indiscernible].

[Operator]

Our next question comes from the line of Jean-Francois Granjon from ODDO BHF.

[Jean-Francois Granjon]

Jean-Francois Granjon from ODDO BHF. Just one question regarding the expectation for 2021, please. Could you give us some more color on what you think with the trend we expected for each 4 major business next year in terms of growth for the market, in terms of performance for Quadient for each market? Do you expect more -- probably more organic growth or strong organic growth in 2021 compared to 2020? Or do you expect more recovery? And due to the positive Q3, are you more optimistic for next year?

[Geoffrey Godet, CEO & Director]

Jean-Francois, a good question. Difficult one, I'll try to do my best. What we did see this year, and we saw it in many different dimensions, is that there's definitely a strong appetite by a small organization, mid-sized and large one, to use digital capabilities to communicate with their own customers or their own employees, by the way, we all have seen that. So we do feel that -- this at some point, the question is, obviously, the economical situation. There's the lockdown and all that. So when you asked the question about 2021, it's difficult for me. A trend of market or need, I would say, from need of an end user, we know that the demand is there. After that, we need to look at it by country and by segment and region.But we feel that the choice that we made in Back to Growth to position our software practice around the need for this deviation of those business process for those organizations, small or large one and ensure that the experience that the customers of all those businesses will be better digitally is at the heart of our strategy. And this is why we feel reinforced that we picked software solutions that are responding to those trends. And the only thing that we could say, and this is why we gave you the usage, is that we see more usage on those solutions. So naturally, we'll have to take the time to understand the economical impact in each of the countries we're operating to. So it's too early to say what it could be on the software side.On the Parcel Locker side, that was also -- that a big change we've seen is that usually, the e-commerce and the numbers of deliveries of parcels is really booming in November and December, and then it goes back down. And then we see a natural, some growth of volume during the year. What we've seen is that since March, when the first lockdown happened, there's definitely been a shift in consumer behaviors where those package, wherever they were acquired before, now they're being delivered in a way more volume and to where people live. And that's what we've seen is that the level of volumes have -- basically, the peak has remained as -- we've been as high as since starting in March and we used to be in November, December.So obviously, we're just at the beginning of the holiday season. So we'll see how much more we will make it also in November and December. But that's a shift that is likely to continue in 2021 and probably to accelerate in terms of the need. And the more package are being delivered, then the more stress it provides to the people that want to receive it, et cetera. And therefore, it should naturally increase the need for more automation, in particular in urban cities and where we place our locker. So same thing. It's the second big aspect of our Back to Growth strategy. So we feel pretty strongly that the market trends will be there.So that's the -- what I would say, after that, not knowing how we will get into 2021 in the winter and the first part of the year, knowing -- not knowing if those lockdowns or the health situation will evolve and how a vaccine will be deployed is difficult to project. What I could say now with confidence is that, when you see the rebound that we had in Q3, that obviously, in particular on the software side and on the Parcel Locker, that makes us confident that whatever difficult period there could be or not in next year, we may have some impact temporarily. But then as the economy and the need for it to grow again, we should feel very confident that we could benefit from that. So that's overall what I would say. So it's too early for us to be able to give obviously numbers for 2021. That's why we're going to take the time from now and March for a full year to give you a strategic update.On the mail side, it's the same thing. Just to give a few word there. We've seen the usage and the numbers of mail being used through our smart hardware on the mailing and folding inserter side to drop significantly during the lockdowns. We've seen the rebound since. You've seen the resilience now also demonstrated in Q3 on the mailing side of the business. It's too early to know how much that will carry into the coming months, especially the impact that it could have further. And this is why I think we need probably a few more months to fully assess those longer-term trends because that's where I think we -- your question is coming is, how much we could benefit from the change in those longer-term trends and how that would impact our performance in 2021?So that's all we are working actively on. And I think March will likely hopefully be a good time frame to give a good basis for what is our belief and what are the trends that we believe we should be able to benefit from next year.

[Operator]

Our next question comes from the line of Igor Kuzniar from Teleios Capital.

[Igor Tadeusz Kuzniar, Managing Member]

Look, Bloomberg reported today that Quadient has received a bid for the Customer Experience Management business and valuing it at more than EUR 350 million, which looks extremely attractive to shareholders and it represents over 80% of Quadient's market cap as of last week, while accounting for a little more than 10% of 2019 revenues. And we were surprised and concerned about what it seems to be the company's response that the unit is not for sale.I mean, it is the Board's duty to evaluate any such approach. And given the large value relative to your market cap, there seems to be absolutely no justification for dismissing it on the basis that it runs counter to your strategy. So are you saying you have dismissed this bid out of hand and are not engaging with the bidder?

[Geoffrey Godet, CEO & Director]

So we do receive -- Igor, thank you for your question. Look forward to our next discussion. We receive -- we do receive from time to time, and it's not the first time, and I'm sure it won't be the last time, unsolicited mark of interest for parts of our businesses. And I can assure you, always, we always study and carefully take those offers, whether they are unqualified or qualified. It's always interesting to learn from them, take them into consideration. Because that's obviously all the responsibility with this management or Board. And we are fairly professional, I think, on that point.That being said, it's not our policy or our policy, I should say, is not to comment on them, naturally. This is not a public place to do that. What I could say that, as you know, CXM is the backbone of our global software franchise, and it's the core, obviously, of our strategy. And there's not an ongoing process for sale of this activity. But that being said, as I mentioned earlier, we look at everything, always carefully. And as a result, it's important, we remain committed to maximize shareholder value and also executing the transformation of the Back to Growth strategy.

[Igor Tadeusz Kuzniar, Managing Member]

Okay. So it's not accurate to assume that you have rejected the approach. It sounds like, as if yours -- your duty essentially, you're giving this offer your full professional consideration. Is that accurate?

[Geoffrey Godet, CEO & Director]

As I mentioned, we usually don't comment. It's not our policy to comment on those processes. And I think, as I mentioned to you, we always look at every offers carefully in detail the Board and management as appropriate.

[Igor Tadeusz Kuzniar, Managing Member]

I think that's great. I'm just asking because your comment seems to suggest that you dismissed it out of hand. So I just wanted to confirm that it is not the case.

[Geoffrey Godet, CEO & Director]

Again, I think I have shared that we will do all the normal process for us to review any of those offers.

[Operator]

Our next question comes from the line of Nicolas Tabor from MainFirst.

[Nicolas Tabor, Analyst]

So my question is quite related. I wanted to have an update on where you stand currently on your M&A strategy, and how is the pipeline looking? And what are you looking at in terms of acquisitions and divestments? And what can you share with us?

[Geoffrey Godet, CEO & Director]

Nicolas, thank you for your question. As usual, so a good question. So as you know, as part of our business, we obviously are trying to accelerate the transformation of the company, and we're caring for each of our solutions. But we have a strong organic position today. We have made, to date, a few divestments and 2 acquisition, fully in line with what we have described in our strategy. And we remain focused on implementing the strategy.We have made recently the acquisition of YayPay for which -- which is completely in line, I believe, is what we have shared with you in the past, the benefit that we see for the small- and mid-sized business, and I think it will be a nice complement. YayPay is a cloud platform for accounts receivable to the business process we're trying to automate with our Impress platform we have just released. So we're obviously focused now. In Q3, there has been -- the bulk of our effort is making sure we do a good job on the integration like we did for Parcel Pending making sure when you buy a small company that you don't disrupt it. And I think it requires the same discipline as usual on that. So I think it showed you that even in a difficult period of time, like we've seen this year, we remain open to see what opportunities that exist in the market that potentially could be suited for our businesses. And we continue to do that. I obviously have nothing else to add more specific here on that.Thank you for your question, Nicolas.

[Operator]

All right. There are no further questions in the queue, so I'll hand you back over to your hosts.

[Christelle Villadary, Chief Financial Officer]

Okay. So we have 2 questions from [ David Laurent ] on the webcast. So please, what part of the revenue is from YayPay and what is its contribution to the growth of the activity? And second, what do you expect that net result for 2020, taking into account the upward revision of the current EBIT?So regarding your first question, as you know, YayPay is still a very modest company. So we are extremely happy to see the growth that it has benefited during the quarter. So it's a great triple-digit growth, but it's still on a very low basis. And regarding your question on the net results, well, you know that we are not guiding the market. Just to remind you what I think I shared with you during the H1, on the different lines below the EBIT, we have the restructuring where we were anticipating an increased level of restructuring based on the adjustment of the cost structure that we are currently doing.We also -- we benefit from a decreased level of interest, net cost of debt, sorry, because last year, we had some refinancing costs that will not appear this year. There are still other lines on the -- on tax, sorry, for example, where we expect higher tax than what we experienced in H1. But you have here a few items to help you for the net results, but I will not guide specifically on it.

[Caroline Baude, Financial Communication Specialist]

Thank you, Christelle. We already answered the other question. Thank you, Geoffrey. So you have the line.

[Geoffrey Godet, CEO & Director]

Okay. So there's no additional question? Okay. Wonderful. Thank you all for attending today and for your questions. All good questions. Our next...

[Laurent Sfaxi, Financial Communication Director]

1st December.

[Geoffrey Godet, CEO & Director]

That's it. Thank you, Laurent. I look forward -- potentially if some of you can join us, we will do an education session on our Business Process Automation software practice, December 1. So I look forward to being able to be with some of you at that time. Thank you very much, everybody.

[Christelle Villadary, Chief Financial Officer]

Thank you.

[Geoffrey Godet, CEO & Director]

Thank you, bye-bye.

[Operator]

Thank you for joining today's call. You may now disconnect. Hosts, please stay on the line and await further instructions.