Bertrand Dumazy (Edenred) : "Je dis aux investisseurs de rester patients, le cours va rebondir"

Hello David.

So yes, like all business leaders, we are very concerned about the situation in the Middle East. But then we need to get into the specifics of Edenred. For me, first, I have 200 employees in Dubai, so my priority is their safety. So teleworking and placing them where their safety is not in danger. The second priority is obviously taking care of our clients in the Emirates since we have 2 million people using Edenred solutions out of the 60 million. 2 million out of the 60 million who carry Edenred either on a card or on their mobile phone, and thus ensuring them quality and continuity of service to ensure that the most normal life possible can be led. That's my second priority. The third thing is that this conflict creates inflation, first energy inflation with oil prices, and we have solutions to limit that. That is, when you use Edenred solutions, when you use a fuel card or an energy card, it's a way to control how and where money is spent. And so, we have many un-equipped clients calling us saying 'Ah, maybe it's time for us to switch to using a fuel card or an energy card.' And it's the same for purchasing power in general since inflation could return, and we have solutions for that because being the leader, not French but global, in employee benefits, we contribute globally. I read we are the 4th European player.

We follow it very closely, and it also has another impact on the evolution of interest rates since like all companies we finance ourselves on the financial markets. We feel a tension on rates. Sovereign rates, I haven't looked at corporate rates, but on sovereign rates we have taken between 30 and 40 basis points, which is not nothing in 15 days. It turns out that our refinancing for the year was done a few months ago. So we are well-covered.

No business impact to date. Again, opportunities to accelerate the penetration of our products. There is one issue that really worries me: capitalism doesn't like uncertainty. And uncertainty creates uncertainty for our clients as well. And since we are in markets that are largely underpenetrated, we need to convince clients to use Edenred solutions even more. When there is uncertainty, this effort is a bit more difficult.

So on trips, yes, we are very careful. For example, I am supposed to be in Turkey and Dubai in April, and for now the trips are maintained but we will decide at the last minute. My duty is to be close to the teams even when there are drones jumping left and right and to show them that life goes on and we must move forward. So I think the leader has an imperative duty on this, but going to the point of putting oneself completely in danger, there is a limit, and a limit that we will evaluate a few days before departure.

Well, not only did we achieve them, we exceeded them. We exceeded market expectations. So, I think the lesson we can draw is the great resilience of the group. That is, effectively 6% revenue growth, 11% operating profit growth, EBITDA margin at 41%, up 200 basis points, and that is proof of the great resilience of the group. In fact, Edenred has multiple product lines, multiple countries, multiple management teams, and that means we are constantly compensating one market with another when the winds are less favorable. So indeed, the winds were less favorable in Italy, but that's behind us. We are back to double-digit growth in Italy. We are in a phase of reinvention for part of our business in Brazil, but we have many other assets up our sleeve to compensate for the less favorable winds. And in fact, this is what showed the year 2025, the very great resilience of the Edenred group, but also the will to prepare for the future since not only did we achieve our objectives, but we also significantly reduced our debt level, which fell by 30%.

So if we take a static view, then we'd have to look at the dynamic, but in Italy it costs us 120 million euros in operating profit. That is, the redefinition of the rules costs us 120 million euros when we take a snapshot at the end of the year. You and the other market players as well. The 120 million euros is for us, but the bill is also with the other market players. That's a static view. From there, we are back to double-digit growth. Why? Because the Italian market remains very largely underpenetrated with the solutions we offer. And secondly, the government, which wants more meal vouchers in Italy, redefined the rules to ensure the sustainability of the system but also sent a very positive signal since at the end of December, Parliament voted for a 25% increase in the face value.

It's very good. That is, the Italian government said loudly, we want more meal vouchers in Italy. That's why we know we have good growth to go after in Italy on a system that has been redefined, which hadn't been redefined in 30 years. The new rules have been set. It's up to us to make them fruitful.

Exactly.

Exactly. So the bill, we paid 60 million euros in 2025, there are 60 million additional euros to reach the 120 million by the end of 2026. So 2026 is a rebasing year in Italy, but we know that underlyingly and after 2026, we are back to double-digit growth. In Brazil, it's a bit different.

Uh no, not half, let's say rather a large third, a third, to be precise.

Yes.

In the meantime, the suspension of the decree has been suspended, but there are other actions ongoing.

So I'll make it simple. Yeah. We will be in Brazil in a phase of reinvention. First, from a legal point of view, there will be ups and downs depending on the weeks, since there are dozens of operators who are before the courts to contest this decision, which again is not a law but a presidential decree. So there will be highs and lows. One week suspension, another week not. Things will be a bit erratic until the end of the year. Deep down, what Lula wants is to be reelected. And to be reelected, there are measures that are not always very rational, and this one for that matter is not very rational. So we'll see from a legal point of view where it takes us. But whatever happens, we are in a phase of reinvention in Brazil. And the bill, well, we don't know the exact amount of the bill since everything will depend on what happens. That's why the decision I made when it fell on November 11 last year, so 2026, I said, well listen, since I don't know, let's consider it as zero, worst-case scenario. Is that what's going to happen? The answer is no. So will we do better than what I said? The answer is yes. But to what extent? I don't know yet. After all, it's always the same. Glass half empty, we don't know and we take the worst case, glass half full, it's a very big market. There are 20 million people served in Brazil. There should be 40 million. So it's up to us to reinvent ourselves according to the new deal that will be passed in Brazil and to redeploy ourselves and be creative.

So the rebound year is 27. 2026 is a year where we pay 50% of the remaining bill in Italy, and in Brazil we are in the worst-case scenario. So unfortunately 2026 will show a negative evolution of our operating profit, and we said between -8 and -12. 2027 we return to growth at +8 to +12. So am I optimistic? The answer is yes. It's up to us to get through this year 2026 and adapt to the new rules. But yes, I am very optimistic at heart for Edenred. Especially since as I said earlier, Edenred is completely debt-free. That is, our debt level corresponds to less than one year of operating profit. That means Edenred has the means to continue investing.

It's an important signal for us at Edenred, saying we have the means to invest and we have the means to widen the gap with our competitors.

Yes. Yes, of course. Well, in Brazil, we don't agree with the intensity with which it was done. That is, it goes too far in terms of the time given to us to adapt. But on the substance, is it a good idea to rebalance what the employer pays versus what the merchants pay? I think on the substance, it is the best way to perpetuate these markets. It turns out that there were two markets in the world where structurally the employer didn't even pay the amount of the allowance he gave to the employee. That is, I am an employer, I want to give 100 to David Jaco, and I paid 98. So the merchant paid the two that were missing plus the Edenred commission. So rebalancing that is probably the best way to perpetuate the system for the next 20 years.

Well, I think the employer must pay at least what he owes the employee. Moreover, the reform in France, which will probably be passed in Parliament during the year 2026, and we must thank the government for that because it is a wise decision, will prohibit an employer from paying less than what he must give to the employee. That will allow, for example, just a small example to be sure we understand. An example on a fictitious amount. So let's say that per year, an employer in France gives about 2000 euros of meal vouchers to his employee. He might be tempted through commercial negotiations to say 'I will not pay the 2000 euros to Edenred which administers the entire system, but I will give him 1980 euros.' The 20 euros missing, someone has to pay them. So by prohibiting that, it's the best way to ensure that the system is balanced between what employers pay and what the company said 'We paid them partly and the merchant paid it in exchange for the volume we bring him.' And so the French reform will prohibit that, which is a very good thing to avoid ending up in a situation like Italy or Brazil. So to answer your question, these are two very specific markets with an imbalance that has set in over the years. This imbalance will stop in these two countries, and this imbalance will not have time to become permanent in France with the law.

I think these risks are very limited as long as the system is rebalanced in time.

Yeah. So actually, it's not really a question of signal, it's just an economic reality. The economic reality is that we are very cash-generative because the house is well managed, and so it's normal to return part of that cash to shareholders, but it's also normal to keep part of it to pay down debt and keep part of it to invest heavily. The amount of our tech investments is around 500 million euros per year. That is, it's an investment greater than what we return to shareholders. So there too, the will to manage the house well, each to their part, but the priority is to invest and develop Edenred.

So because we're talking about 500. Well, I'm not going to give you the amount because I have competitors chasing me all over the world, but it's investments, especially in fintech, but also in more traditional competitors. But in fact, it starts from a very simple idea. We will be the great winners of artificial intelligence just as we were the great winners of the digitalization of our industry when we started that 10 years ago. So we have the firm will to invest more, to invest better than anyone else to take advantage of the benefits of artificial intelligence. And we already see the first benefits. That is, if you use the Edenred customer service, you will have chatbots that achieve 50% more satisfaction than what we used to have. If you use the Edenred platforms, you will increasingly have a digital agent dedicated to you that will help you in how you spend your money. I'll take a very simple example. Bertrand Dumazy is an employee of the company Jaco. He receives 100 euros via his works council. Bertrand Dumazy likes cycling. He will immediately have an agent who will say to him 'Dear Bertrand, you received 100 euros. We know that on average when you receive 100, since the boss pays, you will spend 150. You like cycling, and you have a special offer at Ecoil for gloves and winter tights for your bike, and it's time to buy.' And that's a revolution for best using our very qualified audience.

No, rather around 8 am. But yes, yes, it's good.

Yes, it's 7.5% yield, passing as a growth stock and at the same time a value stock.

Well, we're working on it. We have to recognize that we haven't succeeded yet, but it will come. The market is always right, but not every day. I would say first, education, that is, explaining the model, and I think the 2025 results have done a lot to rediscover the virtues of Edenred, that is, resilience due to all our product lines in all countries. So, great resilience. For that, 2025 was a very strong test. I would say that's the first thing. The second thing is to give investment and growth prospects. That is, do we believe in the future of profitable and sustainable growth of Edenred, and are we able to explain it? That's what we are doing, and it will eventually pay off.

I think the first trigger will be the regulatory disruptions behind us. That is, this law needs to be passed in France. It has passed the test of three governments. Everyone agrees. Obviously at the margin, some have to make compromises, including us. But this law must be passed in France since it's a test market and it's a good law. So already that will help. Secondly, after one or two quarters in Brazil where we will see more clearly on the new rules and how we adapt to these new rules, I think once we have done that, then the great virtues of Edenred of profitable and sustainable growth will be rediscovered. And we see it, I see dozens of investors all over the world who tell me 'We are ready to invest, we are just waiting for the moment when it will start to turn.'

So I tell them to be patient, because Edenred has plans for profitable and sustainable growth, and so the stock price will eventually rebound. So first, I tell them as long as it's not sold, it's not lost. Secondly, in the meantime, as you said, the yield is very good, that is, with a yield of 7.5%. Thirdly, the prospects are good. We have this resetting in 2026, but then 2027-2028 is the rebound, and we have about 40 consecutive quarters where we've said what we do and we do what we say. So we have a track record that speaks for us. So, listen, I ask them for patience and love for Edenred, which deserves it.