Evs Broadcast Equipment SA

XBRU:EVS

Earnings Call Analysis

Earnings Call Transcript 2023-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the EVS First-Half 2023 Results Webcast and Conference Call. At this time all participants’ are in listen-only mode. After the speakers’ presentation there will be the question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Serge Van Herck. Please go ahead.

[Serge Van Herck, Chief Executive Officer]

Thank you, Nadia, for this introduction, and good afternoon, good morning to everybody attending this conference call. Very happy to have you here today to further explain our results of the first-half year of 2023.

Going to slide number two, I immediately leave the floor to Veerle, our CFO.

[Veerle De Wit, Chief Financial Officer]

Thank you, Serge. So as usual, this presentation will contain some forward-looking statements. Forward-looking statements with respect to business, financial conditions, results of operations of our company. et cetera. These statements will be based on our current expectations and our beliefs as a management team, but they obviously also include some risks and some uncertainty.

Those risks and uncertainties, they have not changed compared to previous communications. They're primarily linked to technology changes, market requirements, potential decline in demand, potential loss of market share, pricing pressure, et cetera. They are named here in the slide. The risks occurring mainly to material changes in forward-looking statements, but EVS undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect such events.

[Serge Van Herck, Chief Executive Officer]

Thank you, Veerle, for review with this disclaimer. Let's have a look to the agendas today. So we have a business update, of course. We have a financial update. We'll talk about the outlook. And then we have our conclusions before we go to our questions-and-answers.

So let me start here on slide number five to discuss our corporate highlights for that first-half year of 2023. We're quite happy with the progress we're making, thanks to our PLAYForward strategy and that we developed and started implementing in 2020. When we look to our market and customers, we see effectively record results for revenues. We see a strong order intake. We see indeed also a strong profitability. And we're happy to say that we've secured in the meantime, the big events for 2024 and those numbers are not included in our H1 order intake numbers, by the way.

Looking at the technology side, we keep on further investing also in artificial intelligence for specific broadcast enhancements. We've launched last year also XtraMotion and it's now available on site, on-prem and in the cloud. We've been pushing hard also with our thought leadership about balanced computing, which is effectively demonstrating to our customers, how they can best use on-prem equipment and cloud-based workflows and the right combination of both.

And last but not least, we've been further investing in the right mix between hardware and software, because when we talk about reliability and for many of our customers, reliability is still one of the most important topics for their operation, having the right hardware and the right software is very important.

On the corporate side, we are happy to see that our ESG strategy is delivering clear results and is also getting quite some public recognition. We are continuing with some of our internal corporate transformation projects, and we're happy to see them on track. We see that our channel strategy is paying off and we'll further discuss this in a further slide in this presentation.

As indicated before, we've kept our team size quite still, compared to the end of June 2022. Remember that we've been hiring quite heavily in H1 ‘22 and that -- since that moment, we've been able to keep our team at more or less the same level. And last but not least, we've also been working to further scale our support organization on a global level. So that is for the corporate topics.

Looking at shareholders topics we are planning an Investor Day that will be held in November ‘23 in our headquarters. We continue to drive value through growth of revenue, profitability and order books. And of course, we'll further explain today what that means for H1 of this year. We've been further working on the successful execution of the integration of Axon, we are quite happy with the progress that we're making there with our media infrastructure solutions. And last but not least, we're happy to say that we are delivering a strong EPS supporting also our long-term dividend policy.

Talking about financial highlights on the next slide, I leave the floor to Veerle.

[Veerle De Wit, Chief Financial Officer]

Yes. So a couple of highlights of the pro forma and financial performance of the first-half of 2023. We definitely feel that this is a strong financial performance that is entirely underpinning our ambition for this year, and this is an ambition of profitable and sustainable growth that we want to reach in an uneven year. So in a year where we have no big events or very limited at least.

So what are the main results? In terms of revenue, we realized a number of EUR87.4 million, which is a growth of 29.1%. In terms of EBIT, the growth is more important even. It's a number of EUR25 million and a growth of 58.6%, and our net profit ends at EUR21.2 million, which is a growth of 36.8% our overall order book is increasing with 5% to EUR132.7 million. And as Serge already mentioned, our team members have just marginally increased actually by 13 people.

[Serge Van Herck, Chief Executive Officer]

Good. Thank you, Veerle, for giving us the overview of those financial highlights. Going on to slide number seven, let me repeat also what our ambition is on the longer term. We call that our [Indiscernible], which stands for a big [Indiscernible] go. So it's definitely our ambition to further work on that profitable and sustainable growth path to become the number one solution provider in the live video industry. So that is definitely what we're trying to achieve, and we gave us a few more years to get to that point.

Going to the evolution we're going through. That's on slide number eight. I'll leave the floor to Benoit.

[Benoit Quirynen, Senior Vice President, Strategy]

Thank you, Serge. Good morning, good afternoon, everyone. So yes, when Serge Ser joined, late 2019, we initiated this PLAYForward strategy where we defined our [Indiscernible], but also different dimensions of transformation. And this slide describes the dimension of transformation. And the way that we execute and the fact that prove that we are very well progressing on these different dimensions.

First, we move from a product company to a solution company. We now extend our -- the scope of the market to address different market peers. We are now ready to sell in different business model, in OpEx, in CapEx, we see the SLA revenues continuously increasing, we have a new shop, which is launched with the first customer so that we simplify the transactions for some kinds of new business models. We now really deliver media solutions, which are full IP optimized for the total cost of ownership of our customer, the days where we were only SDI are far behind us.

In terms of transformation of the technology, we now deliver solutions of course, on EVS hardware, but also on customer of the shelf hardware systems provided by third-parties as software, we also deliver systems on the cloud, and we really now address the balance computing, which allows to distribute the workflows either on-premise in the cloud, either as a pure software or on EVS hardware, and we maintain the mix for what is relevant for our customers.

We have leveraged, let's say, the COVID period to accelerate our transformation to support live anywhere production and operation and we see that our solutions are now more and more deployed beyond sport, in news, in entertainment. And in fact, we deliver complete platforms for modernization of the whole production cycles for our different customers.

If we move to the next slide. In fact, you see there a list of main topics that are relevant for our customers. This list of topics is a result of the big broadcast survey which is done on a regular basis by Devoncroft. And you see here the list of 2022. And in the different colors, here, you see where EVS is playing for which domain, for which topics EVS is bringing solutions to the customer. And when you see the ratio of blue, dark blue or light blue, you see that we actually work a lot and invest significantly in our R&D department to really solve the problems of our customers, which is in line with the customer intimacy discipline that we defined, as well as part of the PLAYForward.

From a business perspective, we have seen along the years that the business is sometimes shifting in terms of media rights. In some years, it was the broadcasters, then we sort the telcos coming and buying media rights and now we see the [GAFA] (ph). In fact, buying media rights. What is for sure is that the media rights value is only increasing. And our business at EVS, it is really correlated to the volume of premium live production. And we are very happy to see that these GAFA customers, they invest and they want to really increase even the value of these premium life events. And we managed to capture a part of this value through the big tech contract in 2022 that we now execute already partially in 2023.

If I move on the slide on the next slide. We are very proud as well to announce that the big events, 2024 will be powered by EVS. In fact, we strengthened our position to provide the solution and not only the solution, but the related services to support the live production. And it's also important to highlight the fact that we also extend the scope of our offering before we were really focused on content and now we also provide media infrastructure equipment, which is the result of the acquisition of Axon that we executed in 2020.

So it has also to be highlighted that we've removed production being more and more used for these big events, the complexity is increased. And in fact, we provide not only the solution but also the services. And globally, the fact that we have more remote production for these events, is really positive in terms of reduction of the carbon footprint for the overall footprint of all these events. So we are ready now to prepare for the 2024 event.

In terms of the different solutions on the next slide, in terms of life section, of course, EVS remains a reference not only for the server, but for the whole workflow of premium production. We also enhanced the workflows with XtraMotion edge. So in 2021, 2022, we launched XtraMotion in the cloud. Now this year at NAB, we launched XtraMotion that we can deploy on-premise, which is totally consistent with our approach of balance computing, where the customer can choose where he deploys actually the logic, the software and the systems. And for that XtraMotion edge, EVS received the NAB Best Offshore Award.

We also continuously complement the use case and workflows that can be supported with the remotes that we launched in 2020 with LSM. In terms of media reception, last or earlier this year, we launched the VIA Create Live Editing, which is a tool to edit during the production. We also deploy now our media section signature. It was first deployed in the U.S., and now it is being deployed in Western Europe. It really creates traction for EVS solution. And that also explains the record LAB order intake that we experienced for this first semester of this year.

In terms of MediaHub, so MediaHub has been deployed in the previous years for big events. We also launched it recently in SaaS, so that it can be used the same technology and the same system can be used for medium-sized events and now on a monthly basis, MediaHub is used in different parts of the world to distribute the content from the media rights owners to media rights holders.

In terms of Media Infrastructure, the Strada evolutive routing solution continues to be really successful. Our customers are happy to have this smooth path in terms of IP adoption. We enhanced the new [Neuron] (ph) ecosystem with a new application. So we support more and more applications that can be virtualized on the same hardware, which is very good for energy saving, very good for carbon footprint.

We also hear the world Cerebrum which is our control system everywhere. It's not only restricted to Europe and APAC. Now everywhere and in U.S., we hear Cerebrum being deployed by our different integrators and also in line with this we continuously improve Cerebrum to add more features to provide continuous support to our third-party channel partners that are deploying Cerebrum in different parts of the world.

And now I will pass the word back to Serge for the next side.

[Serge Van Herck, Chief Executive Officer]

Thank you, Benoit. So going forward here, let's have a word about those partnerships in our PLAYForward strategy, an important topic was also about further extending our sales capabilities by further expanding our indirect sales through partnerships with channel partners. And that is what we've been doing over the last years, and we're quite happy to see the progress. And we keep, of course, direct sales approach with specific customers, but to achieve or to be able to increase further our reach to certain type of customers, and we are further extending our partnerships with channel partners around the world.

And we see quite some good progress on that side, especially also with our media infrastructure solutions that are very nicely fit for being sold through such channels. So products like Neuron or Cerebrum, more and more also being sold through those channels. There is more training being set up for those channels. There is more certification set up for those channels. So we're quite happy to see the number of partners increasing and even more importantly, also seeing the number of projects and the commercial successes increases through those partnerships.

Talking about NAB, which took place in April in Vegas. So we were quite happy with this addition, we clearly see that our customers more and more understand and follow our strategy that goes into offering full solutions, and we are really entering an environment, we are providing an ecosystem not just products, but a whole set of products and solutions switch from together an ecosystem, and that was very nicely demonstrated at NAB earlier this year.

We had, of course, a large tenants of NALA clients, we saw some customers coming from other regions of the world, but definitely, most of the customers were from North American and Latin American region. We definitely also saw an up linked to my previous slide, an increased interest from those channel partners, also U.S.-based channel partners, who more and more see opportunities to work with us thanks to our extended product and solution portfolio. And last but not least, was mentioned also by Benoit before, the intelligence space, XtraMotion, also got quite some nice coverage during NAB. We received the best offshore award, which definitely confirms that our balanced computing approach is definitely the right 1 to bring to the market.

Slide number 15, I'm talking about components and inflation, that remains, of course, something that we follow from very short, this continues to be a challenge, but we feel that the challenges at this stage are under control. But especially when we talk about components and availability and pricing of components, we still very much working hard to gather a negative effect of that. So that's still something that keeps us busy with quite some colleagues to make sure that the supply chains don't get disrupted.

Fortunately, we had no disruption up to now. We have extended our delivery terms to 20 weeks last year. We kept that also this year, and that helped us indeed to deliver on time to our customers. Inflation is something that we follow-up very closely around the world, and we try indeed also to reflect increases in products or in salaries into our products, and we've seen a positive effect of that price increase in our revenue and our profitability.

On slide number 16, talking about ESG, we're quite happy with the progress that we're making on ESG. And of course, also the external recognition that we have been receiving over the past months. One of the important recognition was from Sustainalytics, where we are now ranking where we have a risk rating of 13.5 from which represents a low risk. We're quite happy with that further improvement of our risk profile. And this means that in the global universe that we are in the top 10, even at the top 7% of Sustainalytics. And so that shows effectively that we're going in the right direction when we talk about our ESG objectives and efforts.

Slide 17. I'm happy to point out again that we have received that certificate for being a top employer in Belgium. So that really shows that we are doing a very good job when it comes to making sure that we provide a very good environment for our team members to work in. That also is linked to our ESG objectives, and that is also a very strong signal, of course, to the market and to potential candidates that we are interviewing to join the company. So we're quite happy with that certification, and that shows the strength that we have as a brand and, of course, also the quality of our HR team.

But going forward here and going forward in the agenda, that brings us to the financial update. And here, I'll leave the floor again to Veerle.

[Veerle De Wit, Chief Financial Officer]

Yes. So a little bit more in detail our performance of the first-half. And Slide 19 demonstrates actually our top line performance. It's definitely a strong top line performance that is demonstrating our growth path. The order intake is strong at EUR84 million during first-half. It is slightly below actually in the 2022 level, but it keeps up with the strong revenue performance that we have seen for the first semester. And for us, that was a major objective to achieve is to make sure that we keep up with that high growth.

Next to that is the revenue performance. So as mentioned, it's a revenue of EUR 87.4 million, which is growing EUR 19.7 million, but 29% growth, but again, this is without any big event or event rental in 2023. So once you neutralize actually for big events, the growth is actually 41%. So it's a very impressive growth compared to last year, which actually was also already a very strong semester. That growth is actually primarily driven by a very strong back order position.

So we started the year with a strong back order. And what's important for us is actually that, that growth is strong at all -- in all regions. There's not 1 region actually underperforming. We still see some slowdown in China. It's not really picking up. Bu we can definitely in the other countries in the APAC region are covering up for that. So we have all our regions demonstrating an important growth and this is obviously a very balanced performance from our point of view.

On top of that, we also have a strong in-year conversion of deals that we signed in 2023. So that obviously also contributes to the success of this year. If we look at our total order book, you see that it grew up to $132.9 million, which is a growth of 46.2%, this is obviously also including the big tech contracts that we signed in August in 2022. So it explains a huge part of that increase. What is definitely also comforting is also that the long-term order book is also increasing. So that long-term order book is actually increasing with $5.8 million compared to the beginning of this year, and so it is growing up to a level of EUR61.7 million.

The secured revenue then, based on this order book for 2023 is at EUR 158.7 million. And this is definitely confirming our growth ambition for the year 2023. So an objective that we set for ourselves in the beginning of this year. If we look a little bit in more detail at the revenue performance. So again, I think I already mentioned it, it was a very sound spread by region.

And you see this on the right-hand side of the graph, that is actually every region contributing to that result. On the left-hand side of the graph, you see the evolution by revenue by pillar. And yes, we have no big event rental revenue so far in first-half 2023. It will be extremely limited anyhow the full-year as well because there are no major big events this year. But you see actually both in the LAB business as the LSP business are still growing quite impressively. So both market servers are contributing to the strong revenue performance of first-half 2023.

If we then look at Slide 21, we move to the profitability, and that profitability obviously is boosted by that strong revenue performance but it's actually also benefiting from a very solid margin performance. If we look at our gross margin, we actually realized the gross margin performance of 70.1%. It's a 2.4 point increase compared to last year. This is a very strong performance, and it's a clear demonstration that our margin optimization plan that we have by solution that this is paying off. I think our pricing strategy designed actually to make sure that every solution contributes positively to our profitability. And that strategy is actually entirely being realized. We see the demonstration in this gross margin performance. So we're very happy to see this.

If we look at our operating expenses, our operating expenses move up to EUR36.3 million. So it's a 20.6% increase. It's primarily explained by additional costs linked to team members. So even though we kept a number of resources flat, compared to end of June 2022 or more or less flat, if we look at the average of H1 '23 versus the average of H1 '22, we had an increase of 36 FT, and this is obviously reflecting in the operating expenses.

Next to fee member costs. We also have costs related to transformation projects. you might have heard references to those projects earlier on in the presentation. So it's purchase like a shop like further implementation of our ERP and optimization of our ERP systems, et cetera. So obviously, we still invest in that. And then there's definitely also an increase in energy prices and an increase in travel spend that are being noted, but we're happy to say that actually our operating expenses are evolving exactly in line with what we designed for beginning of the year. So I think it demonstrates a strong control over our expenses in the first-half of the year.

If you look at our EBIT performance, definitely strong EBIT performance in first-half, obviously, driven by the strong revenue performance, the strong margin performance and then the overall relative control over our operating expenses. And so an EBIT was realized of EUR25 million, which was growing 58.6%.

If we then look at our balance sheet and the financial health of our company, definitely, it continues to be strong. As Sergio already mentioned, we have a fully diluted earnings per share of EUR1.52 in first-half 2013. So it's a growth of 32%. Again, the combination of strong revenue performance, strong gross margin performance and the balance control over OpEx.

Our net cash position, it is decreasing, compared to first-half '22, but it is increasing, compared to December '22. That is a higher cash -- we need higher cash actually for working capital with a strong revenue increase, there's obviously also an increase in trade receivables. And obviously, you don't have to forget that compared to December, we also paid the final dividend worth EUR14.8 million in May 2023.

Just zooming in on the receivables then, you see the graph on the right-hand side entirely, the trade receivables actually evolved in line with the overall sales. So the white graph is the evolution of sales. The gray bars are actually the evolution of our receivables. And you see that it's actually moving in the same direction. We're also happy to confirm that our DSO returned to normalized levels, and especially happy to see that after we had a one-off impact at the end of 2022 linked to a delayed invoicing of the ERP go live.

We're happy to confirm as well that 54% of our receivables are not even due. So I think this is definitely a demonstration that our receivables are healthy. As usual, we also passed two seconds on intangible assets. We're happy to confirm that the investments that we're doing are exactly in line with our budget spend and that they still respect the time line that we set forward initially in 2022. So for recollection, we started in 2022, the internal development of two important projects. And those two projects are actually being capitalized under the norm of EIS 38.

The spend in first-half 2023 has been EUR2.9 million. It is just slightly below what we budgeted for first-half, but it's very much in line with what we foresee for the full-year. The developments are actually being followed on a regular basis internally as to make sure that the progress and the outcome of the projects are in line with the business plans and the initial outcome set forward. And we still confirm that there are announcements for seeing [Indiscernible]. So it mid-September with regard to both projects and so exactly is again in line with the time line set forward.

[Serge Van Herck, Chief Executive Officer]

Thank you, Veerle, for that overview. So let's go further here with the next chapter, which is looking at the outlook. So all that information that you've seen, all those very strong results for H1 are leading us to change or to upgrade some of our guidance.

And again, I'll leave the floor to Veerle to walk us through slide 25 and 26.

[Veerle De Wit, Chief Financial Officer]

Yes. Thank you, Serge. So as mentioned, we have secured revenue at the end of June 2023 for the full-year of EUR158.7 million. Definitely, this is already demonstrating that we will grow in 2023 for your reference, last year, we had a revenue performance of EUR148 million. So it's already EUR10 million above despite the fact that we don't have big events?

Yes, based on that secured revenue, the revenue guidance for the full-year is being upgraded. We hadn't guidance set forward of EUR150 million to EUR160 million. We now move that guidance up to -- from EUR160 million to EUR170 million. So it's an uptick of EUR10 million that we see -- that we announced.

Upgrade actually assumes that we just have a normal final production cycle of the year, obviously not being impacted by any shortages in component any major changes linked to pricing of components. The majority anyhow of the deals with the 20-week delivery terms that we have are expected to contribute to 2024 already. So we expect limited deals being signed in the second semester, that will still contribute to the performance in 2023. Obviously, there are still deals that will follow through and hence, the range of EUR160 million to EUR170 million.

In terms of gross margin, you saw gross margin performance of 17.1% in first-half. We expect that margin to be marginally negatively impacted in second-half basically as a consequence of the projected revenue versus the existing costs. and also taking into account the mix of our solutions, we expect that gross margin to marginally decrease in the second-half.

And then obviously, if we upgrade our revenue guidance and also taking into account the strong profit performance that we've seen for first-half. We also upgraded our EBIT guidance so the EBIT guidance with a revenue range of EUR150 million to EUR160 million, was put to EUR27.5 million to EUR32.5 million. It was a spread of EUR5 million of EBIT with the new range of revenues, so EUR160 million to EUR170 million, we have a spread of EUR6 million. So the spread is now EUR32.5 million up to EUR38.5 million. And I believe that those numbers definitely demonstrate the sustainable and profitable growth ambition that we have for the company for 2023.

Coming back to our dividend proposal. We issued a dividend proposal in 2022 for the next three years. So 2022, 2023, 2024, that dividend proposal is foreseeing a dividend of EUR1.1 per share in 2023. We will normally distribute an interim dividend of EUR0.55 per share in November of this year.

And then the remaining EUR0.55 per share will be scheduled for payment in May 2024. Obviously, subject to market conditions and subject to the approval of the General Ordinary General Meeting of Shareholders. But our current performance definitely confirms that we will honor that dividend proposal at this point in time.

Serge, over to you for conclusion.

[Serge Van Herck, Chief Executive Officer]

Thank you, Veerle. So let's indeed go to those conclusions. So I'm on slide 28. Six key learnings, which are consistent with what we've seen over the last year. And the first one is the industry keeps on consolidating, and we definitely intend to keep playing a role on that also in the future. We see that the tech providers on the place we've seen last year that we signed a major deal, which was triggered by one of those big tech player that was called our big contract '22. And definitely, that is also helping us to generate more revenues with big tech companies, but also for the companies, who are working for them.

Our infrastructure, our media infrastructure is definitely and the cornerstone for big changes for certain of our customers. And we definitely see some important objects on the horizon that will help us further fuel our growth in the future as well.

Talking about business models. As Benoit said before, we see that business models are shifting and we just make sure that we provide choices to our customers within the strategy of customer intimacy. We make sure that we are not forcing our customers in one or into another direction, but we just give them the options to choose from. And so that they indeed can go for the option that the best fit the needs.

Number 5 is late. We see cloud between brackets just as one of the enablers, our balanced computing approach where we are making sure that we are providing clever solutions with partially on-prem and partially cloud, be it private or public cloud solutions is one of our cornerstones of our balanced computing approach, and that is more and more appreciated by our customers. And last but not least here, we all think that EVS is definitely on a good track to further realize that the profitable growth ambition that we have for the next three years.

Going to slide 29, talking about the next focus on key activities for '23. We keep on saying that we focus on delivering those large multiyear modernization projects that we've been winning and that we keep on winning. We will help further our customers, who are still using previous versions of the exterior replay service, typically XT3 to transition before the end of support, which has been announced by the end of the year. We'll further leverage the new solutions to continue to increase on our order book.

We continue to expand our solutions offer, be it organically and through acquisitions or strategic partnerships. We were happy to confirm that we've been able to sign up the important concert for those major sports events in '24. And last but not least, we'll keep on focusing on our cost control based on a growth system and what we call internally and frugality.

So moving to slide number 30, conclusions. Our objective to reach a sustainable and profitable growth for '23 definitely becomes reality here. Our EVS PLAYForward strategy is definitely generating the expected sustainable and profitable growth. We see for the rest of the year, limited further investments in our cost structure, and we'll focus on '23 to make sure that we keep those costs under control. But we see a slight increase compared to H1.

Our revenue guidance for this year, as Veerle explained, has been now increased to EUR160 million to EUR170 million versus the EUR150 million to EUR160 million that we announced earlier this year. So we're happy to see that even in an even year, we're able to realize growth, compared to the year before. We're further increasing our EBIT guidance, as Veerle pointed out.

And so now we announced a guidance between EUR32.5 million and EUR38.5 million for this fiscal year. and we indeed confirmed our dividend policy for EUR1.1 over the year '23, which still needs, of course, to be confirmed by our shareholders.

So to conclude this presentation before going to the questions-and-answers part. I'd like to thank all of my colleagues for this quite impressive result that we're putting here on the table. And then also to thank all our customers around the world, it's clear that they show strong confidence in what we do. So we're very happy with their support.

Very happy also with the support of our channel partners, and we definitely feel that we are making a very good traction with those general partners. And last but not least, I'd like to also thank all of our EVS operators for using day-in-, day-out our technologies to create those great emotions and just a few -- to name a few, those which are happening now in Australia and New Zealand, of course.

So that ends the presentation for today, and I'll be happy to answer with Benoît and Veerle any questions you might have at this point.

[Operator]

Thank you, dear participants. [Operator Instructions] And now we're going to take our first question from Guy Sips from KBC Securities. Your line is open. Please ask your question.

[Guy Sips, KBC Securities]

Yes, thank you. And first of all, congratulations with very good results. I have four questions on my side, if I may. First is, can you elaborate a little bit on the June contract that was mentioned in the press release and you didn't elaborate on this during this call. This is a contract that's not included in the guidance?

The second question is on the, yes, the 2024 big event rentals that you now also announce that are now in your hands? Is it fair to assume that you will get a bigger portion of the pie, compared to four years ago and now also Axon is included?

And the second -- the third question is related to the 23-week delivery time. Is it -- can you give us some clue what the difference in prices when a client or are there a speed order? So if you want an EBS machine delivered in -- yes, in the next 12 to 15 weeks, what is the price difference compared to the normal 20-week delivery time?

And the last question is to manage expectations on the IAS 38 projects. So these two projects barely mentioned that, yes, this will be announced in December, what these contracts are. So during the Capital Markets Day of November, we will not get any clue on this project. Is that fair to assume? Thank you.

[Serge Van Herck, Chief Executive Officer]

Okay. Thank you for those questions. So I'm not sure I fully understood your first question about the June contracts. So I'm looking here to my colleagues if they had…

[Veerle De Wit, Chief Financial Officer]

So it's a contract that we referred to in our press release that we signed end of June for big events 2024 and beyond. So that's the contract we're referring to. And in fact, that it's not included. It is included in the guidance. So we don't give a guidance for 2024. At this point in time, it's not included into the numbers of order intake of first semester. Why is that? It is a frame agreement that we signed in that frame and will be recognized in order intake as soon as the entire bill of material or the needs of each of the events will be entirely known. So it will be realized in -- we will see an order intake in second-half the events of 2024 realized in value on order intake.

[Serge Van Herck, Chief Executive Officer]

Okay. That was the first question. The second question was about big event rental contract term for next year and the fact that we're extending our scope with media infrastructure. So the answer is indeed that we are increasing the coverage of our solutions to help producing those live events -- will that automatically lead in higher revenues than is before. I would not assume that. It also depends on the geographical setup and the remote productions that are being applied. But all in all, we'll see for sure similar revenue numbers as you have seen before. But this just means that our presence will even be bigger in those big events than what they have been up to now. So that's the situation for the big event trend ‘24.

Going to your third question, which was about 20-weeks of every time. Now what is the difference in price for speed orders. Well, there was indeed a possibility for speed orders, but that's depending on availability of equipment and stock, and that is very limited. So there is not something like not there is no guarantee that speed orders can be delivered. It really depends on if at that moment in time, there is certain stock.

With the current situation, I can indeed indicate that stocks are very, very limited. But if in certain cases, there would be stock and a customer is requesting a speed order, then there is indeed a commercial mechanism in place that would allow him to access that stock with a decreased discount, that is the way it is working today. I'm not going to explain here also to our colleagues and our markets discount be given, but that is the way it works. And so we reduced discount when we are talking about speed orders.

But again, it is very limited. And as Veerle pointed out or most of the orders that we'll get this moment onwards for the rest of the year will be delivered in ‘24. And then the last question about the IAS 38 projects, announcement will be done at IBC, which is in a few weeks in September. So we'll be able to talk about them during the Investor Day in November.

[Guy Sips, KBC Securities]

Okay. Yes, I did understand December. So September is perfect. Okay. Thank you.

[Operator]

Thank you. Now we’re going to take our next question. Please gives us a moment. The next question comes from the line of Alexander Craeymeersch from Kepler Cheuvreux. Your line is open. Please ask your question.

[Alexander Craeymeersch, Kepler Cheuvreux]

Yes. Hello, congratulations on a very nice set of results. Just wondering, so at the year-end, you actually mentioned that you had a new ERP system, which resulted in a delay of invoicing and resulted also in a large buildup of receivables. I just wondered why it didn't completely recover by mid-year now, just if you refer to the midpoint of last year, receivables were up 36% and sales were right now up to 29%. So just wondering why we haven't seen a complete windback of the receivables front? And if something is still laying there?

Then you mentioned also the lead times remain 20-weeks. Would you care to elaborate when you see some improvement on this front? And then a final question. You -- for the second-half, you expect a marginally decrease in the gross margin. Would you care to maybe specify what you mean exactly with marginally? Is that less than 1 percentage point? Or is that 2 percentage points, et cetera. So thank you for that.

[Serge Van Herck, Chief Executive Officer]

Okay. Alexander, thank you for those questions. So the first question is about ERP delayed invoicing and recovery of the those invoices, and I will leave the floor to Veerle.

[Veerle De Wit, Chief Financial Officer]

Yes. So I think -- so the ERP implementation happened in October of last year, October 2022. But we went live knowing that we would not be able to issue invoices for some time that sometime in the end turned out to be around six weeks. So in the busiest quarter of the year, we were not able to issue invoices in the first six weeks of the quarter, which means that a lot of the invoices were pushed actually to the last week of the year. and therefore, we're not even flexible by the end of the year. So that is what happened last year.

We did recover a huge amount of that -- of those receivables. We see it in our receivables remaining very current. So as I mentioned, 51% is actually not due. So for us, we believe that is a healthy situation. Do we see some customers that are requested -- requesting it in the payment terms. Yes, we do see some customers for very specific reasons, we see customers, for instance, struggling cash-wise because of the writers' strike in Los Angeles Hollywood. So it might be but that is indeed happening. So we're obviously helping those customers in providing that additional delay and yes, one of our major customers were also helping with them for them to make sure that we extended payment terms, but it's all done in collaboration with them. But I think overall, we believe our receivables are definitely under control with yes, a couple of extensions granted, but those are for very good reasons and generally for very good customers.

[Serge Van Herck, Chief Executive Officer]

Yes. Thank you, Veerle. Then I'll take the second question, which is about the delivery terms of 20-weeks and will be reduced and when will we reduce. Well, for the moment, we don't expect to reduce that those 20-weeks. And you have to know that certain components have delivery times, which are more than double than the 20-weeks. So that is reality that even and we don't feel that we'll be able over the next months, probably over the next year to reduce that 20-weeks every time. It also helps us to further streamline the production and make sure that we can deliver all our customers within that delivery time of 20-weeks.

And so to answer your question, we don't expect for sure, not this year, but probably also not even next year to reduce those 20-weeks. So that as for the new standard, and we see that our customers adapted 12 to those 20 weeks delivery times.

Then going to your third and last question about the gross margin evolution for H2. I'll ask Veerle to comment again.

[Veerle De Wit, Chief Financial Officer]

Yes. Yes. So for the full-year, we expect our gross margin to be slightly lower, that's 70%. We talk about 2 points, 2, 2.5 points. Why is that? It's, one, linked to the revenue that is projected for second-half, so in distinctive will be lower than the revenue that is booked in the first-half. And therefore, you only have a less dilutive effect of your revenue. And second, it is linked to the mix of our solutions. So yes, we believe that the 70% on a full-year basis will probably 2 to 2.5 points lower.

[Alexander Craeymeersch, Kepler Cheuvreux]

Just to be clear, it was 2 percentage points was your point of reference.

[Veerle De Wit, Chief Financial Officer]

2 to 2.5 yes.

[Serge Van Herck, Chief Executive Officer]

Thank you, Alexander.

[Operator]

Thank you. [Operator Instructions] And the question comes from line of David Vagman from ING Belgium. Your line is open, please ask your question.

[David Vagman, ING Belgium]

Yes, hello. Good afternoon, everyone. So first question is on the LAB growth. So we saw very good LAB growth. And you're also saying that in the order book that the, let's say, the proportion of LAB is even higher, though it's progressing even further. Can you zoom on this growth? I mean, the type of projects and solutions, which is responsible for this growth. So within LAB, is it also related to servers or tilting a little bit servers or is it other type of product? So that's my first question.

Then second question, you made quite an interesting comment on the -- in the press release on the XT via replacement cycle. So you say, for instance that one XT can replace two XT3 and not everyone will be upgrading. So I'm -- is it correct that you want to inject a kind of dose of cogent here on the replacement cycle. And could you update us on the progress of this replacement cycle? I think you previously said you were not even halfway through the replacement cycle of the install base. So yes, where are we, what could we do still?

And then last question on the OpEx growth. I understand that there will be some limited investments in H’22, yes, can you quantify this a little bit? So there are still -- I understand that energy -- or I would think that energy should go down, should be more helpful, transformation plan, maybe the spending on could go down. So where are we, let's say, for the full-year 2023 in terms of OpEx growth guidance. Thank you.

[Serge Van Herck, Chief Executive Officer]

David, thank you for those questions. So let's answer the first question about let's focus on the [Indiscernible] business, and I'll leave the floor to Benoit to comment somewhat on that.

[Benoit Quirynen, Senior Vice President, Strategy]

David. So yes, indeed, we are experiencing a very significant LAB growth. And in the LAB, in fact, we mainly sell media section solution and media infrastructure solution. Is it only due to servers, no, we have shifted from selling products to selling solutions. And in the exception solution, it's not only and server. It's also more and more software servers as well that we deploy and sometimes on the cuts, meaning on hardware, like Dell, HP and other providers.

And so -- yes, and it's also media infrastructure, where, in fact, we have the modernization project, where we have the new broadcast centers that are moving to IP and there, in fact, our customer appreciates really our Strada solution, which enables them to have a smooth evolution and that is based as well on the Neuron platform, which is really growing very well in terms of the scope of the application that can be hosted on that. So these are the main factors that make that we are growing in this segment in this market period.

[David Vagman, ING Belgium]

The impact that it could take.

[Serge Van Herck, Chief Executive Officer]

No, David, please continue.

[David Vagman, ING Belgium]

Yes. I was going to say any conclusion we should go from this on the margin so that it's not only the sulfur, but it's more broad-based.

[Benoit Quirynen, Senior Vice President, Strategy]

I don't see any significant impact because sometimes it's also Neuron of our media infrastructure. So it can affect in terms of product mix. And sometimes it's a pure software where the margin is also different. So it really depends on the solution, which is selected by the customer. And also it depends on the way that the customer wants to deploy the EVS solution. So it doesn't necessarily depend on us.

[Serge Van Herck, Chief Executive Officer]

Okay, Thanks. Okay, then the second question was about the XT3 and replacement cycle. So we -- what's the progress of the future about that. And so it's clear that thanks to the reliability of our agreement, we still have quite some customers using older generation of equipment and some will stay like that. There is the beauty, the strength of our technology that it's really reliable. And as long as the customer doesn't need new capabilities so high or better formats or needs to move to IP or has other technical reasons, he can just stay on the previous version.

The XT3 support will end by the end of this year. So that's, of course, a the reason for customers to take a decision if they want to take a risk equipment that will not be supported anymore or if they move forward. And so we expect that [Indiscernible] will just take the risk and continue working with their previous equipment. But definitely, this year, we saw good evolution, quite some customers took the decision to move to generation. We're getting closer to halfway for sure. And -- but again, we know that we will never replace the whole installed base. But we try to make sure that we continuously increase the capabilities of our XT VIA solution so that there are ever more new reasons for customers to upgrade to that new XT VIA platform. The topic was about OpEx growth. And there, again, I'll leave the floor to Veerle.

[Veerle De Wit, Chief Financial Officer]

Yes. I think traditionally, over the past years, we book around 56% of our total OpEx in second-half. We don't believe that, that will be the case this year, given the focus that we have on our cost control. We believe that we have a much more steady pace between the months and first-half, compared to second-half. When we say marginally increase, yes, you have to take into account that we had an inflation as of first of July. So for our Belgian team members, there's been inflation, which has been around 6% so that will definitely count. Overall, I think that the balance this year will be 47-53 or 48-52, something like that. So it's a much more balanced approach.

Energy price, I heard you referring to energy prices. Unfortunately, we will not have a reduction in 2023 and as we fixed actually our costs for 2023 for the full-year. We will see reductions coming at from 2024, but that will not benefit our 2023 results.

[Serge Van Herck, Chief Executive Officer]

Thank you, Veerle.

[David Vagman, ING Belgium]

Thank you very much, everyone. Just as a clarification. So you're saying the balance in OpEx will be more between the two half of the Euro will be more like 48%, 52%.

[Veerle De Wit, Chief Financial Officer]

Something like that, yes…

[David Vagman, ING Belgium]

Okay, okay. Thank you very much, everyone.

[Operator]

Thank you. Dear, speakers, there are no further questions. I would now like to hand the conference over to your speaker, Serge Van Herck, for any closing remarks.

[Serge Van Herck, Chief Executive Officer]

Yes. Thank you, Nadia. So as you see, we're quite happy with the progress we are making here. It's definitely in line with our expectations and with our strategy. So quite happy to see that PLAYForward strategy is delivering on the expected results and that we are on our way to achieve our ambition to -- over the years to come to become that number one. quite happy with the support and the feedback we get from our customers, from our channel partners and our EVS operators. And okay, we are working further and making sure that we can continue delivering on our promises to further deliver profitable growth and sustainable growth over the years to come. And again, we are quite happy that we can show such results in an even year, which we feel is quite a big achievement for EVs.

So thank you again for attending. Thank you for some of you also being a shareholder. I hope that indeed we show or we live up to your expectations, and I look forward to seeing you during our Investor Day in November in our HQ. So thank you again for attending.

[Operator]

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.