(News Bulletin 247) – The title of the world leader in electronic labels recorded a new historic record on Thursday after the signing of a major agreement with Walmart, which could also take 10% of its capital. SES-imagotag is also hailed for its very good start to the year.

For the first time in its history, the price of SES-imagotag exceeded the 170 euros mark on Thursday from the first exchanges, and even well beyond with a peak of 172.80 euros. The world leader in electronic labeling of physical items enjoys a solid start to 2023, with the icing on the cake the announcement of the signing of a historic contract with Walmart . This partnership is accompanied by the possibility for the American giant to allow the distributor to take 10% of the capital of the specialist in electronic labels, via stock warrants.

These multiple announcements relaunch SES-imagotag, which lacked fuel since the beginning of the year given its incredible stock market performance over the past few years. On the stock market, the title is currently rebounding 41% to 158 euros, around 12:00 p.m. to take the lead in the SBF 120 index on Thursday.

The links between SES-imagotag and Walmart are therefore entering a new dimension. The French electronic label specialist has announced that it has reached a new agreement with Walmart for the deployment of the latest generation Vusion platform in several hundred Walmart stores in the United States. The Vusion platform helps “retailers transform their physical stores into true digital assets, highly automated, data-driven, and connected in real time to brands and consumers”, recalls the French group.

The contract with Walmart will run for several years, with a first phase involving 500 stores taking place over the next 12 to 18 months. A total of 60 million electronic labels will be covered by this contract, with the key, “an opportunity for a wider extension within the store network of the sign”, indicates SES-imagotag.

“Assuming a price of 5 dollars for each label, this new agreement could represent 300 million euros in revenue”, calculates Stifel.

This contract is therefore historic for the company founded in 1992. The American giant had been seduced by the French technology from April 2021, with a test phase in hundreds of Walmart Canada stores, before extending the deployment of the labels. French in all of its American stores last year. Noting the success of an experimental phase carried out in a pilot store in Arkansas, Walmart then chose to deploy the Vusion OS and Vusion IoT platforms across the United States, where the global retail giant operates nearly 4000 stores.

“This contract is the largest ever signed by SES in its history and, subject to milestone approvals expected over the coming months, could amount to several billion dollars over the next 5-7 years”, specifies for his part his CEO Thierry Gadou.

Red carpet

Confirmed by this sign of Walmart’s confidence in its technology, it seemed natural to SES-imagotag to offer the American the opportunity to enter its capital. “Thus, given the value creation that this contract will allow, it seemed legitimate to SES-imagotag to accept that Walmart could be partially associated with this value creation, in the form of stock warrants” , added the leader.

In detail, this potential reserved capital increase would take the form of share subscription warrants which would ultimately represent a maximum of 10% of SES-imagotag’s capital. The first option would only be triggered when Walmart spent $700 million on SES-imagotag and the 10% would only be reached if total spending reached $3 billion.

The exercise price set for the options is 112.19 euros, ie the volume-weighted average of the prices for the 90 days preceding the date of the announcement of the contract. The SES-imagotag share closed at a price of 112 euros on Wednesday evening.

“This provision is inseparable from the contract itself”, adds Thierry Gadou who “strongly” invites the holders of the company to approve the issue of stock warrants reserved for Walmart at an extraordinary general meeting of shareholders, scheduled for June 2.

“The partnership with Walmart has entered a new dimension with the signing of an agreement providing for an option for Walmart to acquire up to 10% of the capital at the current price level of SES-Imagotag in the event that total expenditure exceeds $3 billion, so Walmart has every interest in spending at SES-imagotag,” Stifel says.

A first quarter above expectations

This historic contract with the giant Walmart supports the growth prospects of the group, which aims to achieve a turnover of around 800 million euros by 2023 (compared to 621 million last year) and gives strong visibility beyond.

And SES-imagotag is well on its way to achieving this goal. In the first quarter, the specialist in smart labels for physical stores saw its turnover increase by 32.5% over one year to 159.2 million euros. Although solid, this growth is penalized by the deconsolidation of its joint venture in China, which occurred at the end of 2022, specifies SES-imagotag. On a like-for-like basis, the group’s revenue growth in the first quarter of 2023 is 39%.

In detail, turnover on the Old Continent amounted to 130.2 million euros, up 42.4%. Between January and March, the group was able to capitalize on the dynamism of its activity in Germany. In the rest of the world, sales grew modestly by 1% year-on-year. On a like-for-like basis excluding the negative effect of the deconsolidation of its joint venture in China, revenue outside Europe increased by 27.1%, mainly driven by the Americas (+31%). At the end of March, cumulative sales over a rolling year amounted to 660 million euros, an increase of 43.8% since the start of the year compared to the same period of 2022.

SES Imagotag is still betting on the continued penetration of value-added services such as Captana, its shelf monitoring solution. For example, it allows retailers to report supply gaps on the shelves or to capture the movements of customers in the store in real time.

Between January and March, these posted growth of 32% to 24.5 million euros and 15.4% of the turnover achieved over the quarter. The group reports that it is making significant efforts to technically and functionally integrate the solutions acquired very recently (In the Memory in January 2023 and Belive.ai a month later). The goal is for SES-imagotag to quickly bring enriched solutions to market in order to further accelerate its growth trajectory for value-added services.

The order book is also expanding. Order intake for the first quarter amounted to 221 million euros, an increase of 30% compared to the previous year, “and in line with the quarterly growth in turnover”.

“With 221 million euros in new orders in the first of 2023, the order book seems to us to be strong enough not to call into question the revenue target of 800 million euros for 2023 and strengthens our revenue forecast. of business of 820 million euros”, advances Stifel.

SES-imagotag is also confident in the trajectory that its profitability will take in 2023. Several positive factors support this outlook. The group mentions a favorable evolution in the cost of components as well as the recovery of the euro against the dollar, themselves coupled with the pursuit of strong growth in value-added solutions and services. Given this favorable alignment of the planets, the group expects a continued substantial improvement in its profitability.

“As far as the group’s profitability is concerned, at constant eurodollar exchange rates at current levels, the average parity for the first half of 2023 would be similar to that of the first half of 2022 and should therefore not weigh on the gross margin”, advances Stifel. . “Thus, the recent evolution of the eurodollar parity has increased the probability that the group exceeds 100 million euros of EBITDA [résultat brut d’exploitation] in 2023”, adds the research department, which maintains its buy recommendation while raising its target price to 175 euros after the latest announcements from SES-imagotag.