Earnings Transcript for EDEN.PA - Q4 Fiscal Year 2023

Bertrand Dumazy: Ladies and gentlemen, good morning. Happy Tuesday. Julien, the CFO of the Edenred Group, and myself are very pleased to present you our full year 2023 results and we will do that in the next 90 minutes, 60 minutes of presentation and 30 minutes of Q&A. Page 2, to start with in fact the executive summary. We are halfway through our plan Beyond and we are very pleased with the execution of this plan. Indeed in 2023, we delivered another set of record breaking results. The revenue has grown by almost 24%. Our EBITDA is crossing the €1 billion mark reaching almost €1.1 billion growing at 33% and the EBITDA margin is up by 230 basis points reaching 43.5%. Our net profit group share reached €425 million excluding the fine paid to the ADLC in France. And our level of free cash flow reached a record of €905 million allowing us to deleverage the company with a leverage ratio back to 1 after the acquisition of Reward Gateway. The proposed 2023 dividend is at €1.10 per share, up 10%. Not only we are very pleased by the financial performance of Edenred in 2023, but also with the extra financial performance where we achieved in 2023 key milestones and improved ESG ratings. What did we do in 2023? Very simply, we leveraged our platform. What does it mean? We have been able to acquire more customers and more users. We have been able to propose to our customers and users more digital services. And finally, we have been able also to monetize more and more those services to the growing base of customers we have. Not only we developed the top line, but also we have been able in fact to decrease the cost to serve thanks to our mutualized specific purpose payment factory. We are the only player in our industry owning our own factory of specific purpose payment. When we think about 2024 and forward with our plan Beyond, what do we intend to do? We intend to build a fully integrated Benefits & Engagement platform. You heard about the acquisition of Reward Gateway. But we're also very pleased to announce the acquisition of RB in Brazil that's going to help us to increase the development of what we call Beyond Food thanks to this best-in-class platform in employee transports benefits. As to the Mobility business line, what do we want to achieve? We want to be the fleet manager, privileged partner to foster the transition to electrical vehicle. And you heard this morning about our acquisition of Spirii in that marked that is going to help us accelerate our e-mobility offers by providing to our clients and customer the best European SaaS platform dedicated to EV charging. And finally, we will continue to bring innovative services and enrich our product offering by leveraging notably the full potential of data and AI. So how do we see the 2024 year? Based on our ability to capitalize on our key assets, we are confident to deliver further profitable and sustainable growth, i.e. growth of EBITDA that is like-for-like above 12% and a generation of cash flow that is going to be high and so a conversion rate that is going to be above 70% in 2024. Finally, thanks to our sound balance sheet, but also our cash generative profile, we have the potential to seize further external growth opportunities, but count on us to keep stringent financial and strategic discipline on this acquisition journey. So if we spend a few minutes to go deeper in the 2023 results. So I press the button. So Page 5. As previously said, we have strong growth at all levels and this growth is setting new highs. So our total revenue has grown by 24% reaching more than €2.5 billion in 2023. Our EBITDA has grown by almost 31% reaching almost €1.1 billion. And our generation of cash flow is at an historical high with more than €900 million posting a growth of 27%. In fact where does it come from? First of all on the top line, yes, we have strong commercial momentum. Page 7. If you look at the evolution of our operating revenue, it has grown by 17% organically for the full year 2023 with an almost 15% growth in Q4 2023. Then if we go deeper in the analysis of this operating revenue, in fact this robust double-digit organic growth is true on all business lines. So in Benefits & Engagement, organic growth almost 20%; in Mobility, organic growth of 16%; and on Complementary Solutions, organic growth of 11%. Those 3 business lines represent respectively 63% for Benefits & Engagement of our operating revenue, in Mobility 25% and in Complementary Solutions 12%. This robust double-digit organic growth is true for every business line, but also in every geographies. If we start with Europe representing 62% of our revenue, it's a growth organic of 17%. Latin America representing 29% of our total operating revenue, it's a growth of 15%. And for the Rest of the World representing 9%, it's a growth of almost 33% in 2023. So you know that Edenred revenue growth is vanity, but profit is sanity. So where do we stand in terms of profitability? If we go to Page 11, you see the evolution of our EBITDA in 2023. So the EBITDA growth has been almost 34% like-for-like in 2023, which means additional €258 million of EBITDA. That's the first thing. The second thing is our EBITDA margin has been growing massively because in fact if you look at this margin, it has moved from 41.2% to 43.5%, which is an increase of 234 basis points in reported; but in like-for-like, the delta is even bigger with a growth of 349 basis points in 2023 versus 2022.So yes, profit is sanity, but cash is king. So the cash generation of Edenred in 2023 is at its highest. And so if we could look at Page 13, you have here the evolution of our free cash flow. What you see is an increase of €184 million between '22 and '23, which is an increase of about 27%. And the other thing is the EBITDA to free cash flow conversion that was 85% in 2022 is 83% in 2023. Why? Thanks to Julien and his teams who are able to develop a strong discipline in negative working capital management everywhere around the Edenred Group. So after having looked in fact at the generation of cash flow, this generation of cash flow at a record high allows Edenred in fact to finish the year with a leverage ratio that is back to 1x at the end of 2023 even if we made the acquisition of Reward Gateway in May 2023 for €1.3 billion. So we started January 1 with a leverage of 0.4x, midyear we were at 1.9x.A few weeks after the acquisition of Reward Gateway and thanks to the strong generation of cash flow, we are back to a leverage ratio of 1x with a net debt level of €1.1 billion. So not only we are very pleased with the delivery of our financial performance in 2023, but it is also true for the extra financial performance. If you look at our ESG indicators and if you look at the chapter heads called ideal people, planet and progress, if you look at the results 2023 versus 2022, we made some significant progress on every dimension. Not only we made some progress in 2023, but we are well on our way for the objectives we set for the company by 2030. And in fact all those efforts we see them in the numbers, but those efforts are also recognized by leading ESG ratings. So for example at S&P Global, we are member now of the Sustainability Yearbook, we are in the FTSE4Good since 2011 and in fact we are AA for the MSCI ranking. So we are among the industry leaders. So yes, we did a lot of progress from an ESG point of view and we have been recognized for this progress by leading ESG ratings. So that's for the 2023 results. Before we are moving to a point at midterm of our strategic plan called Beyond, I would like to share with you a few words on the situation in Italy. First of all, be assured that we take this issue extremely seriously. Ethics and compliance are absolute top priorities for Edenred, but for me also personally. Regarding this public tender in Italy dating back to 2019, one of the lots we won was subject to a legal dispute. The state council concluded that we didn't fully comply with the tender code and so we had to return this disputed lot in 2022. But because it is a public tender and because we are in Italy, a criminal proceeding was opened last week and for the time being, obviously we are at the disposal of the Italian judicial authorities to provide all necessary explanation. But as you can imagine, we cannot comment on an ongoing investigation. Even if we cannot comment, we are confident of the outcome of the proceeding. Based on my understanding so far, there has been probably noncompliance with the public procurement code so it is more a matter of technicalities than fraudulent action. But I do not want to speculate further. We have to let obviously the Italian judiciary investigate. On the other hand, we and I take this episode as an opportunity to reinforce all our internal controls. We are a global group, we are in 45 countries, we are managing more than 250 programs on behalf of 1 million customers. So some of the Edenred programs are regulated. It means that for Edenred, ethics and compliance are not optional. So you can be sure that Edenred and myself, we will continue to be totally uncompromising on this area. So now if we move to the Beyond 2022-'25 our strategic plan, where do we stand? We shared with you in fact during the Capital Market Day of 2022 our vision of being on our way to €5 billion of revenue by 2030. And as you can see on this graph, we did well in 2023 and we did even better than the trajectory that we set to go after the €5 billion revenue by 2030. So who are we, Edenred? Yes, we are a global digital platform enriching connections for good. Global

Julien Tanguy: Thank you, Bertrand. Thank you for sharing with us our 2023 achievements. And good morning, everyone. Very pleased to be with you this morning to share more details about our performance of 2023. We're going to start with the operating revenue. As already mentioned by Bertrand, our operating revenue demonstrated a solid growth in both reported and like-for-like figures in 2023. Edenred's operating revenue stands at €2.3 billion for the full year, it's an increase of 18.8% in reported and 17.4% in like-for-like. You see that scope impacts is plus 4.9% coming mainly from Reward Gateway acquisition and the currency impact is negative minus 3.5% coming mainly from Argentina and Turkey. In Q4 Edenred delivered a solid growth of 15% in reported figures with an operating revenue of €655 million. This growth in operating revenue has been supported by many levers presented earlier by Bertrand including for example face value, increased usage by our existing clients, new sales with a strong focus on SME and new solutions, for instance toll services. To better understand where this growth comes from, we move on to performance per geographies starting with Europe and we move to Page 45. Europe delivered another great year in terms of performance. The income reached €1.434 billion, up 20.7% as reported and up 16.5% like-for-like. In France, Edenred operating revenue grew by 10.3% in 2023. Q4 performance stands at plus 8%. This performance is driven by the attractiveness of Benefits & Engagement solutions translating into strong growth of Food and Beyond Food solution. And the fourth quarter growth is slightly below the full year performance because of high comparison basis related to a 2022 gift season and because of the end of Action Logement subsidy program in July 2023 as Action Logement stopped distributing subsidies. This program had started in 2019. Keep in mind that thanks to all the benefits we have in France, our clients can distribute up to 6,000 additional purchasing power per year and per employee. It includes Ticket Restaurant. I also want to mention we have ongoing constructive discussions with the government on meal voucher regulation. We expect French new regulation to be implemented in 2024. One of the decisions that should be made in this digitization is a digitization of the market by 2026 at the latest and as a digital leader in France, we will take advantage of this full digitization to increase our market share. In Rest of Europe, we posted a solid like-for-like growth of 19% in 2023. This growth is driven by Benefits & Engagement and Mobility. In Benefits & Engagement, we benefited from sustained commercial dynamism in Ticket Restaurant and contribution of maximum face value usage. We also grew thanks to the continued success of Beyond Food solutions. It has been the case in Belgium and Germany. In Mobility, growth is supported by strong traction of Beyond Fuel solution such as the financial services provided by Edenred EBV in Lithuania. I remind you Edenred EBV offers services around VAT recovery. We take care of VAT recovery from local tax administration in different countries for our European customers. Thanks to the performance in France and in Rest of Europe, we posted a growth rate of 16.5% in 2023 versus 2022 in Europe and Europe accounts for 62% of group operating revenue. After Europe, we move to next slide Page 46 and to Latin America. Latin America accounts for 29% of group operating revenue. The operating revenue reached €667 million in 2023 recording a double-digit growth in both reported and like-for-like. Indeed growth reached 10.5% as reported and 15% like-for-like. In Brazil, we recorded double-digit growth in Benefits & Engagement notably with the ongoing success of the Itau partnership and also with the sales dynamism of our internal teams. In Mobility, demand remained strong for Beyond Fuel solutions like toll and maintenance driving further growth in Mobility. We are #1 in maintenance services in Brazil and we keep on deploying our new e-toll solution with Greenpass. And it is important to mention that the growth has been negatively impacted by fuel price in Q4 and all along 2023.In Hispanic Latin America, growth in Benefits & Engagement is robust supported by the commercial successes in the SME segment. And in Mobility, the momentum is strong thanks to the continued positive momentum in Mexico. After the operating revenue, we move to the other revenue on Page 47. Thanks to interest rates increase and business volume double-digit growth, other revenue more than doubled from 2022 to 2023 moving up to €203 million. The 2 main drivers of other revenue growth are

Bertrand Dumazy: Thank you, Julien. So how do we intend to shape our future? First of all, we recognize that we are in an environment that is undergoing sustainable mutations and we love those mutations. First of all for the working world; people are facing talent war, there is an increased focus on wellbeing and a demand for personalized benefits. So our ambition is to deliver a fully integrated Benefits & Engagement platform. In Mobility, we are entering a new era. Fleet manager demand for greener and smarter mobility especially in Europe. So we are providing and we will provide more an end-to-end platform for seamless and efficient mobility management. Finally, the data and AI revolution is an opportunity for Edenred. Because we are serving 60 million users around the world and we have a lot of data, we will leverage the full potential of this data and the acceleration due to the artificial intelligence. So what does it mean? Our ambition in Benefits & Engagement is to deliver a fully integrated platform and in fact we are reinforcing our Beyond Food strategy thanks to the acquisition of RB in Brazil. First of all, it's about the transport market and it's an attractive market in Brazil. It's a mandatory benefit for the employees. 30% of the total workforce is using public transportation to commute daily and you have more than 130 million annual public transportation users. So RB was founded in 1999. They employ 300 people. They have 15,000 customers, but mainly SME customers. They generated revenue in 2023 of BRL 100 million and they have been able to grow between 2020 and 2023 on average by 25%. So the acquisition and the integration of RB in our portfolio of benefits solution is going to drive growth and scale in Brazil and is going to help us to acquire a leading position on this transport market. And in fact to better understand on another chapter what does it mean the integration of both Benefits & Engagement? What I propose you now is to watch a video who will give you an idea of the ambition we have in terms of integration. [Presentation] Watching this video, I want everybody around the world to use our Benefits & Engagement solution. But what we are doing in Benefits & Engagement, we also have a high ambition for Mobility. We want to be the end-to-end platform for seamless and efficient mobility management. And in fact things are changing, especially in Europe. Our fleet managers are experiencing increased complexity due to the immobility development. Let's put ourselves in the shoes of a fleet manager today. He has to manage the fleet complexity, coexistence between combustion engine, hybrid and electric. He has to deal with diverse energy sources; fuel, ethanol and electricity. He has to deal with multiple charging locations; workplace and depot, at home, on road. And he needs to put in place in fact some infrastructure especially on the workplace and in the depot. So basically they have 1 objective, which is the business continuity and what they are saying to us, make it work anytime, anywhere and for everyone. That's why we made the acquisition of Spirii because when you look at where we were in the value chain and where we need to be, we needed this piece to accelerate our presence on all the elements of the value chain. On road, we are a leading player, i.e. you have access to public charging point in 34 countries with the Edenred UTA e-card. It's more than 570,000 points of charge. And in fact the number of vehicles that is using the Edenred EV charging solution on road has been multiplied by 5. But we need to deliver more. To deliver more, we need to be able to have a presence at work and on depot, but also managing the recharge at home and Spirii is doing that. Spirii has been founded in Denmark in 2019. They are operating now in 18 European countries. They employ 100 people and in fact they are the strong partners of network especially for the installation and maintenance of the charging point. And they are already trusted by large companies such as TUI or LeasePlan or EDF or PowerGo. And in fact they are doing that. We are doing on road. They are doing at work, depot and home. And the ultimate vision is to be able to propose integrated EV services that we will develop together, i.e., the energy and load management, the billing and payment solutions, the reporting and the insight especially when you have hybrid solutions with fuel on one side and EV charging on the other side because for many, many, many years, all the fleet will be made of a mix of traditional vehicles and EV vehicles. So that's the vision we have to have a 360-degree charging solution and to be able to propose to our customer base integrated EV services. And when you look at the offer today of Spirii, it's very impressive. First of all in terms of infrastructure, they have a large network of third-party hardware resellers. They are working with ABB, with Zaptec, with Wallbox for example. So they have been able to partner with best-in-class hardware providers. In terms of charge point management. Charge point management is the energy and load management, the customer care, the reporting and insights. In fact it's the operating system. We call that the Charge Point Management System, the CPMS. It's the equivalent of the operating system on all your digital devices. And finally, they are proposing on-road services so the station screen, the charge optimization and the climate impact. And in fact we saw the number of mobile app users increasing by 150% between '22 and '23.Our third ambition is to leverage the full potential of data and artificial intelligence. We have today 200 data practitioners at Edenred. But more importantly, we invested year after year to build a global data platform. It's now rolled out in 80% of the countries representing -- sorry, in the countries representing 80% of our Edenred operating revenue. We have more than 50 use cases that have been deployed internally that in fact allow us to increase the individual productivity, but also the Edenred productivity. So for example with GitHub Copilot for tech, as explained before, we see a productivity improvement of our tech developers of 15%. But we also have many chatbots for customer self-service that are in fact doing 2 things. First of all, increasing the level of satisfaction. They love in fact being taken in charge by the chatbot, but we are also able to reduce our cost base. So yes, we will embrace fully the digital and artificial intelligence revolution thanks to the strong foundations we built year-over-year. So what do we see for the years to come? In fact as shared with you during the Capital Market Day, our ambition is to generate sustainable and profitable growth. Where will it come from? 60% will come from the growth in our underpenetrated core markets; 30% will come from the acceleration of the Beyond Food, Fuel and Payment; and 10% will come from our expansion in new business opportunities. What does it mean? It means that high level of growth with our growth destiny in our hands because think about it, 90% is in our hands; the ability to penetrate more and to accelerate Beyond Food and Fuel and Payment. So we will accelerate our generation of sustainable and profitable growth. As I said, more market penetration, more of Beyond solution and the ability to leverage the attributes of our platform; connectivity, distributing those digital services of some of our platforms, but also being distributed. And by doing that, we will generate some scale effect that will allow us to accelerate our investment in tech. But we will also seize new opportunities. We discussed about e-mobility, we discussed about the cloud, the data and the AI. And as explained by Julien, we have some M&A firepower of more than €2 billion once again to go after well-targeted bolt-on acquisition to in fact enrich our portfolio of solutions. Once again more customers on underpenetrating market, more additional services and then more monetization of those assets. It's the magic equation of sustainable and profitable growth. That's why for 2024, what do we see? We see an EBITDA organic growth of more than 12% and a cash conversion that is going to be above 70%.Thank you for your attention. And Julien and myself are now all yours to answer all the questions you may have.

Operator: [Operator Instructions] And our first question comes from Simon LeChipre from Stifel.

Simon LeChipre: So I will stick to 2. First of all on the outlook for 2024. Could you comment on the operating leverage for this coming year and are you confident to see total EBITDA margin going up in 2024 despite the slower growth from the other revenue? And secondly, on the regulation in France, are there any other initiatives that could be part of this new regulation beside the digitalization? Are there still some discussion regarding the implementation of a cap or the separation of issuance and acquisition of volumes?

Bertrand Dumazy: Okay. Simon, thank you for your questions. So as to the operating leverage, yes, we are confident that naturally due to the scale of Edenred and the growth of Edenred, there is some operating leverage. But the other thing you need to know is our job is to generate more EBITDA and more cash so to do that, we need to invest. So we always make a tradeoff between the positive evolution of the EBITDA margin and the level of investment we need to make to fuel the growth. To make a long story short, there is a natural operating leverage at Edenred due to the scale effect. Then we reinvest part of it because tech investment is 60% OpEx, 40% CapEx. So based on our ability to grow, it defines our ability to invest. But my forecast for 2024 is that the EBITDA margin will be at least at the same level as the one we had in 2023. And depending on the operations, our ability to grow and to get the scale synergies; we will reinvest partly, let's say, the surplus of EBITDA margin we could have in 2023.Your second question as to the regulation in France. In fact we have a constructive discussion with the government. Why? Because in fact the objective that is stated by the minister each time we meet is we want to protect and develop and grow in fact the Ticket Restaurant in France. Why? Because the level of penetration is still low, it's only 25% and it's the benefit that is the most loved by the employees in France. So the only objective of the minister is how can we make it grow? And the answer number one is we need digitalization because it opens horizons for everybody and especially for the SMEs. So I am convinced that it's a conviction, it's not the position. Well, we need to see. But I am convinced that the minister will set a deadline in terms of digitalization and according to my understanding to the latest by 2026, which is very good for Edenred, which is the leading digital platform everywhere around the world. That's the first thing. The second thing as to the price cap, no, those conversations are not on the table anymore because all the discussion has happened and everybody understand that in fact us, the issuers, we provide a lot of traffic to the restaurant owners and to the other merchants and they better understand what we are doing. They better understand that for example in France, we have 1,200 employees dedicated to grow the business every day. So constructive discussion. One of the outcome is digitalization to the latest by 2026 and constructive discussion on how can we continue to grow the business in France, which is an underpenetrated market.

Operator: And we now move on to a question from Julien Richer from Kepler.

Julien Richer: So 2 ones for me also. The first one on the SaaS model transition. Could you please help us to better view how it will impact the economics of your business as you did in the past when you moved from paper to card? Is there also a way to have a view on the impact on growth and margin from the transition from card to a SaaS model? And second question on the EBITDA margin and more specifically operating EBITDA margin that was flat this year and when I look to the LatAm situation, it has been down in 2023 so the operating EBITDA margin and it has been down pretty significantly since 2018. So is there any reason for that? Maybe competition, maybe more investment needed, so any reason. Happy to have your view on that, please.

Bertrand Dumazy: Okay. Julien, thank you for your question. I propose that we start with the number two with Julien.

Julien Tanguy: Yes. So regarding the operating EBITDA margin. As you said, this operating EBITDA margin is in 2023 at the same level as 2022 when we look at the published number, in like-for-like the operating EBITDA margin is growing. So I think that we are demonstrating that our platform allows us to leverage and to better manage the cost to serve. In terms of impact, keep in mind that this year the fuel price has been at a lower level compared to 2022. It means that without the fuel price impact, the operating EBITDA margin in published numbers has increased compared to 2022. Now when we look at the operating EBITDA margin in different geographies, as Bertrand explained, we decide to invest in some regions or in some countries depending on the potential of the country and depending also on the number of services we are launching in those countries. So when you look at what happened in Latin America or in Brazil, we have decided to invest more on those markets. And if you look at the market in Brazil, we have 2 major business lines in this country so we have Benefits & Engagement and Mobility. We are the leader in Mobility by far in the market. We are #1 for the maintenance. And yes, we invested over the last few years to build this platform that we are now able to deploy in other countries such as Mexico. So our ambition is to grow the EBITDA margin, as explained by Bertrand, and then we decide to invest in order to generate additional EBITDA growth in, I would say, numbers as we did over the last few years.

Bertrand Dumazy: Okay. Maybe to rebound on what Julien said and we manage a portfolio of solution and a portfolio of geographies so it's our job to balance the equation. So when you look at the EBITDA margin improvement by more than 230 basis points in 2023, it is done because we are able to manage where we invest. So we have plans of investments, we have CapEx dedicated to the new platform, to the legacy per business line and per country. So it's our job to manage the intensity of our investment based on the ability as well to use the surplus that is coming from the scale effect on the EBITDA margin. That's why you will see depending on the region some evolution in the EBITDA margin, but our job is to manage that globally with some very strict plan locally. As to your first question, in fact in terms of economic model, why do we go for, let's say, SaaS fees or subscription fees? Because SaaS is a generic word. We go there because first of all it allows us to go after some clients that are much more interested by this pricing formula. So for example Edenred Hits in Brazil, the micro companies without subscription fee are much more difficult to go and grab. So what I see is in fact the pricing structuration is a way to fuel the revenue growth. Then when it is well managed because there is a lot of recurrence behind that, it has also an impact on the EBITDA and EBITDA margin because you are working on recurring fees. So to make a long story short, it's also our job to manage those kind of transition. And the good news is once again we are in 45 countries and we have more than 250 different programs. So it's not as if we had to make a radical change with a transition that can be painful. In this case there is no radical change. It's just our strategy to go more and more Beyond and Beyond bring value-added services and more subscription fees and it's on top of what we are doing today. And it can be managed by doing some tests and learn and experience because we have many programs in many countries. To make a long story short, it's a long transition. It's going to be done per product, per geography depending on our ability to go and grab new customers.

Operator: And up next we have Ed Young from Morgan Stanley.

Ed Young: My first question was sort of surrounding Italy I guess. Can you talk about the controls and oversight you have in the business? Are you considering any type of internal review of any kind to give reassurance there have not been aggressive practices going on with other Italian contracts or in other countries to meet the company's demanding targets? And the second one was a follow-up on France. I note your point about the expectation it will be this year and including some positive news around digitization. I just wanted to come back. You said, Bertrand, that the main focus of the government was on growing the market. That's clear. But it does look like the report and the government's original concern was also about market concentration. And just bearing in mind that things like shift to digital are probably going to help scale players like Edenred who can invest in the technology appropriately. So is it fair to say the way you're summarizing there that the government's view on the market has evolved and it's no longer so focused on the 99% share that the Top 4 players have got and more just about market growth? Is that the right way to understand your comment?

Bertrand Dumazy: So if we start with France. As you rightly said, you have 4 players and 2 of them are worldwide players and they represent around 90%, 95% of the market. Knowing that in France you have 12 or 13 players, in fact Julien tells me now 15. So you have a lot of competition and you have this competition for a long time. And when you think about it, in many many industries it's rare to have 4 major players on the market. So it depends on how you look at it and it's a judgment. My judgment is 4 players plus 11, let's say, newcomers fully digital, it's the proof that the market is very active and very buoyant. And when you look at the level of innovation and so the level of investment that are made by major players in France, it's another illustration of the buoyancy of the competition. You have a third element, which is the level of price. When you look at the take-up rate in France, it is in the low average of what we see everywhere around the world. So our view is it's a highly and fully competitive market in France, but it takes time to educate and for people to understand the dynamic of this competition. As to moving to full digital, you have many countries around the world that are full digital and you have a lot of competition. So if you think about Brazil, it's a full digital country and you have 5 major players and many local competitors. So digitalization equals concentration. If you look at it around the world, this equation is not true. And that's why once again we go back to explaining because we have to recognize that our markets are not well known and so that's why it takes time, it takes discussion to explain. And when you do that, slowly but surely reason comes back. So that's how I see it in France. As to your first question, I'm not really sure that I understood it clearly. Would you be okay to rephrase it?

Ed Young: Yes, of course. I'm just wondering I mean you speak to I know every country manager on a monthly basis, but I'm talking about the sort of controls in the business and oversight. How confident are you that you've got a really full oversight of what the individual countries are doing? You said about reinforcing levels of internal controls, I'm not sure what that means. Perhaps you could help explain. And I was wondering are you doing any kind of internal review to give reassurance because you said this maybe a technicality and, as you say, you respect the process. But is it a technicality or do you think there's a chance that given the company has demanding targets that there's actually some other areas where there's been aggressive practices either in Italy or in the other countries?

Bertrand Dumazy: In fact I spent part of the weekend to sit down and reflect on all the processes we have in place. And basically first of all, we have 3 lines of defense; we have the managers, then we have the internal control and then we have the internal audit. As to the managers, in fact everybody within the company has to sign a code of ethics and we have 99.8 of our people that sign the ethics charter. Then we have mandatory training courses so we have mandatory for anticorruption, mandatory for personal data protection, mandatory for antimoney laundering, mandatory for antitrust and competition law. And we have a ratio of 95% in terms of completion rate and that's something we follow very clearly. Then we have some certification. So for example in Italy, we are ISO 37001, it's the antibribery management system requirement and we are certified. So we have our lines of defense, we have training, we have certification, we have tone from the top, i.e., people know how I stand about it. I take it very seriously because brand is the main asset of Edenred and then we have some other systems in place. When you have the internal audit that is going through a large spectrum of companies on many processes, the report of the internal audit is sent to all the group executive committee. We all read it. Then there is an action plan that is written and we make some priorities that we call A0 and A1 and for each priority, you have what needs to be done, by whom and by when. And you know what? Every country manager, every regional manager, every business line manager, every [indiscernible] member has an incentive in terms of resolution of the A0 and A1. So when I look at everything that is in place, it seems that it's very sound. On the case of Italy because it seems that it's non-completion versus a very complex code of public offer, we are still digging to try to understand and we are questioning ourselves. And we did it with the Audit Committee, we did it with the Board we had yesterday and we will continue to do it to say okay, is there something that we need to change? Knowing that when we look at the system and we look at the certification of the systems, it seems that it has been super well done, but we take every event as an opportunity to question ourselves and to see if there is something that need to be changed. For example do we need to put in place a process where for every public bidding, it has to be reviewed independently by somebody else? So we are questioning ourselves. But just to give you an idea, in France we are answering to public tender in quantity of 450 tenders every year. So we need to find, let's say, the right balance. But to make a long story short, I will make no compromise on the integrity and the ethics of Edenred and every situation is an opportunity to question our practices and to see if there are things that we need to improve. But based on the system we have in place today, based on the feedback we have; we are certified by many, let's say, independent firms. Everything is reviewed by the audit committee, the Board. It seems that we have a very sound internal control system. But if there's something we can learn and we can improve, we will do it.

Operator: And our next question now comes from Pravin Gondhale of Barclays.

Pravin Gondhale: So firstly, a clarification on the EBITDA margin growth that you expect next year. You said at least flat year-on-year. Is it the operating EBITDA margin growth or the group EBITDA margin growth including the EBITDA? And then related to that, previously you talked about higher investments into special IT projects, which held back the operating EBITDA margin growth. How should we think about the cadence of those investments in next few quarters and couple of years? And can we expect some sort of unlocking of margin growth from paring back of those investments?

Bertrand Dumazy: Okay. So let me start with your second question and then the first one for Julien. So once again our mission in life for Edenred is to generate sustainable and profitable growth. I think we made the demonstration in 2023, but we make the demonstration year after year that we are able to grow every part of the business. But to be able to do that, as I said, we need to invest. But to invest, we set some limits as well. So we said that in terms of CapEx, it's between 7% and 8% of our total revenue, which is in the normative band of what the platforms are investing. Even if some other platforms are investing much more in fact not in our industry, but in some other industries they are investing more in terms of ratio CapEx on total revenue. So to make a long story short, at Edenred we are very disciplined and we are forward looking. So it means it's 1 year after another investing in the foundation to prepare the future growth of Edenred. We did it every year. We did it during the COVID as well. We were probably the only one to continue to invest. We grew our tech investment by more than 10% in a year that was a difficult year. So do not expect from Edenred suddenly a huge rise of investments because we plan year after year and we sustain the effort. The second thing is yes, we are making some very targeted bolt-on acquisition. But when you think about the integration, the cost of the integration is part of this 7% to 8% and then we need to make the rollout, which is also an investment. So Reward Gateway rollout is going to be an investment in 2024.But our job is to balance that to make sure that we have extra profit on one side and we reinvest it into all those programs we have in term of tech development or market deployment or acquisition integration to in fact to be able to post an EBITDA margin that is demonstrating the scale effect of the platform. So to your second question, do not expect a huge spike in terms of investment. At Edenred, we are disciplined, we are forward lookers and it's 1 step after another. But we believe in the consistency of our investments and we set some limits to make sure that we're going to give the best out of every penny we invest. As to the EBITDA margin, Julien?

Julien Tanguy: So regarding the EBITDA margin, as Bertrand said, our ambition for 2024 is to keep the EBITDA margin at the level where it is in 2022 at least. But when we think about it, EBITDA margin and operating EBITDA margin is a consequence. It is a consequence of our capacity to grow the top line and in the top line, you have those 2 lines. The first one is the operating revenue. So we are here to develop our business and, as we said, we are operating in a vastly underpenetrated market. So we still have many things to conquer and find new clients, do cross-sell and all those things. So we're going to keep on growing the operating revenue. Then regarding the other revenue, as I mentioned during the presentation, we did very well of course thanks to interest rate increase, but also because the business volume has increased in 2023.And our ambition in 2024 is to keep on growing the other revenue so it will have an impact on the EBITDA margin. And then regarding the cost, you have 2 categories of costs. Indeed you have the running cost, things we need to spend because we need to run our business and you have the investments we are deciding. As Bertrand already mentioned, when we do investment in technology, part of it is in OpEx around 60%. So we are managing that very carefully. And I would say EBITDA margin is a consequence of our capacity to grow the top line and to control our costs and this is what we are doing. We have processes to decide where and when we invest and with which intensity. So as I said, ambition for 2024 come to an EBITDA margin that would be at least at 43.5% as it is in 2023.

Operator: And our next question now comes from Johanna Jourdain of ODDO BHF.

Johanna Jourdain: Two questions from my side. The first one on the change in regulation in Brazil in meal vouchers. Could you give, please, the positive impact it had on the working cap in '23 and what should we expect as an impact for the free cash flow in '24 due to the annualization of this change? And my second question, could we please have an indication on the financial cost that you expect for '24 and also on the tax rate, should we expect any changes on tax rates in any countries in particular in Brazil over the coming months?

Bertrand Dumazy: So Julien?

Julien Tanguy: So let's start with the regulation in Brazil. So you know that some of the positive impact coming from the change in regulation of Brazil is the fact that payment terms have been bad for some clients so it has an impact on our free cash flow for sure. Now what we need to keep in mind is the fact that because we are in Brazil, nothing is really automatic. What does it mean? It means that even if the law has changed, we still have to negotiate with our clients to reduce the payment terms we have. So this regulation has a positive impact on our free cash flow in 2023 because the regulation has been implemented in May last year. So we already had 7 months to discuss with our clients. Now what do we expect for 2024? Indeed we don't expect a big impact as most of the impact is already in 2023. Keep in mind that when we look at the free cash flow, we look at the picture at the end of the year. So the results we have in our balance sheet is a result of the operations of the last quarter. So the vast majority of the impact of the new regulation in Brazil is already in our free cash flow in 2023. Once we've said that, our ambition for next year is to keep on growing our float and we expect to keep on improving the level of float of the company next year even if we will not have this kind of event as what is key for the growth of float is the capacity to generate more business volume. So this is it for the regulation in Brazil. Then regarding financing costs, I gave you few information about that during the presentation. So yes, we have the impact of interest rates on the debt we have swapped so this year it's around €60 million and we believe that interest rates will not go up for Eurozone in 2024. So the amount of interest we paid in 2023 will be the same in 2024. And then you will have the full year impact coming from Reward Gateway acquisition. So this year in 2023 the impact was around €30 million. Next year it will be €44 million as we issued 2 bonds in June, €1.2 billion with an interest rate of 3.6% so if you do the computation, it's €44 million. And then regarding the tax rate, the tax rate this year is high due to the ADLC fine. We should go back to kind of a normalized tax rate for Edenred and it should be around 31% in 2024 as it is a tax rate we used to have. And regarding the change for the tax reform that should be implemented in Brazil. The tax reform has been voted. It will take time before being totally implemented. And we don't have the level of tax that the Brazilian government will decide. So I would say that the scheme of the tax reform has been voted, but we don't have the numbers yet. So when we'll have more visibility on that, we'll see which impact it can have on our P&L, but it's too early to say.

Operator: Thank you. Unfortunately, that is all we have time for today. But please note the IR team is at your disposal for any additional questions or inquiries. I would now like to hand the call back to Bertrand Dumazy for any additional or closing remarks.

Bertrand Dumazy: Okay. Very quickly because we are running out of time. First of all, thank you for having listened to us and for all the good questions you have. So the IR team is now at your disposal if you have some other questions. To conclude, yes, we are very much satisfied by the execution of our plan which is called Beyond and we are much halfway through this 3-year plan. Yes, we delivered a superior performance in 2023 with another set of record-breaking results. Those results are a direct translation of our strategic achievement i.e. more penetration on our market, further expansion of Beyond and Beyond; but also the ability to broaden our source of revenue via acquisition, engagement and monetization. In the meantime and as usual with Edenred, we continue to prepare for the future. We invest in fact in our state-of-the-art and highly flexible platform and we are developing partnership to distribute additional services or to be distributed. And finally, we are also using our firepower to make well-targeted bolt-on acquisition with the most stringent financial discipline. We discussed about Record Gateway and GOintegro to move towards an ambition of fully integrated Benefit & Engagement platform. A good other example is the acquisition of RB to strengthen our transport benefit offer in Brazil. And finally, Spirii in Mobility to enhance our capacity to help fleet managers in their shifts towards EV. All those elements makes us very confident for the future sustainable and profitable growth of Edenred. Thank you for your attention and have a super happy Tuesday.