CEO Talks met An Steegen van Barco

Welcome to a new episode of CE Talks. My guest today is An Steegen. She leads together with Carl Baudouin the imaging technology group Barco. Welcome, Ms. Steegen. Readers can ask questions directly, but we also already had many questions in advance. We will start with a reader who describes himself as a beginning investor, Werner van den Broek. He says: Barco is often described as an imaging technology group, projection group, but there is a lot in your company. Can you explain exactly what Barco does and which technology connects you?

Okay, many questions have come in about your long-term strategy. Several readers note that the Barco share has been underperforming lately after a nice profit last year. Sam asks: What are your long-term goals for Barco? Why should I invest in your share as a long-term investor? Also Pieter asks: What is the future for Barco? Patrick van Gothem asks: What steps will you take to make the company less vulnerable in the future? So all questions are about how you see the future, how you want to restore profitability.

Okay. A reader, Wim, asks: You are active in three domains, you just outlined them. He notes that some seem to have little to do with each other, like the medical branch and the meeting tools with ClickShare for example. Would it not be better to sell a division, healthcare, to invest more in the other branches? Ah, okay.

Where do you actually have all your factories in the world?

Ah okay. Another question from Pieter Jan about the medical division. He says: You are very strong in healthcare displays, but are you also working on software integration of all those products with AI recognition, for example, or help with diagnostics so that the specialist gets a solution proposed from the system? No, no absolutely. So I think more generally for Barco: we have naturally evolved from a hardware company to offering more and more software solutions. Just now, for example, in the medical sector we actually offered an AI solution on our diagnostic screens at a big conference or trade show in America last week. What does it do? It is an AI solution that helps with the diagnosis of breast cancer. With breast cancer, you have what they call dense tissue that you have to distinguish from tumors, but it is quite difficult for specialists to do that. So AI can help differentiate and detect those things faster and classify them. That is a very nice tool to see where AI can help. So yes, that comes more and more. More of our products are looking at those solutions, which can come from us or from a third party. For example, we work with a startup that uses our software platform to run their software application, and we bring that together to market.

The reader also wonders: does that happen through a one-time product that you sell, or do you also work with subscriptions? It depends, that is also an evolution in offering more software: how you ultimately offer it. So that is an evolution. I think sometimes it is still in one package, where we offer a software for quality control, for example, with our diagnostic screens. That is a one-time solution, but you do need a service over time because you have to be able to upgrade software. That is the beginning. Once you start applications, you have to start working with licensing models. So those are the first steps we are taking there. We are not from a software company that already does that, so we have to go through an evolution there, but it is coming. That can certainly help with revenue in the coming years, indeed recurring revenue, and also for margins that is a very interesting given.

The reader Arno asks: Do you see in the future the metaverse? How do you feel about it? Are you going to undertake something in it or are you leaving that aspect completely aside? Yes, the metaverse is of course a very interesting market to look at. I think Barco has historically always focused on more social interaction and the applications it offers, and in that sense we often look at solutions where we don't have to use headsets because, think of meeting rooms: if we are sitting here and we each wear a headset because we want to call in someone else virtually, I don't think that will help social interaction. So for certain applications, headsets might be more difficult. There are many other solutions, perhaps working with 3D images without glasses. Actually, the future: I often tell my people at Barco, if there is one company that really should cause a paradigm shift in visualization, it must be Barco. One of those is indeed towards more interactive, but also more towards almost being immersed in a virtual environment and 3D screens. The holodeck from Star Trek comes closer. Yes, you saw that movie too, right? The same as Avatar, that also featured that. So those are things: never say never. But you need good technologies, and then of course the application and use must be a large area, not just a very small domain. You have to be able to deploy it in many and large applications. In sci-fi movies you see, for example, a surgeon having a 3D heart in front of him. Is that already reality? Yes, we have that — you should come visit. We can show you 3D screens where you really look at a 3D screen without glasses and see a heart in 3D. What still needs to evolve is that currently those 3D screens are for one person looking. But imagine a big screen here and you want to show an advertisement, and there are multiple people standing around it; you want every angle to get a good 3D image. Yes, that is a more advanced technology that you have to develop, and those are the first steps. If you can place such a thing on your table and show a prototype of a development — those are real things that you used to see in science fiction, but they are coming. So yes, huge growth, definitely. So that is a very important aspect, but it is more than that. That is the visualization. The other is data. We have so much data, we generate so much data; a lot of data is simply not used. How can you better use data? That is by visualizing it in a smart way, doing analyses, making summaries, and then processing it very quickly to show someone so they already have a first... we are also working on that. So I think our software platforms in control rooms do that, in operating rooms, and the next step is, as we just said, if you have that, it is very easy to run artificial intelligence on those real-time applications. That is essentially Barco's big vision of where Barco wants to go with its products. Yes, and we are working hard on that.

Yes, a reader, TopLab, asked a question about the golden goose, as he calls it, ClickShare. How important is ClickShare for you, and how can you secure the future of ClickShare, because he also notes that there is quite a lot of competition in that area? Yes, so ClickShare is important for Barco. I think one of the trends we see after COVID is naturally that many more meetings are now hybrid. People go back to the office, not everyone on the same day, so I think we all know the phenomenon: every meeting has someone dialing in. Those are hybrid meetings, which means those meeting rooms must be equipped with video conferencing equipment, and that is where ClickShare offers a solution. Today, believe it or not, only 12% of all meeting rooms have that video conferencing equipment. Very few, actually. So there is still a huge growth trajectory. That does not mean we are the only ones in that application space. How do you differentiate yourselves from the rest in that area? I think if you look at ClickShare, it is a very flexible wireless solution that works with every system: with your virtual platform as I said earlier, with any equipment, camera, audio equipment in your meeting room — that makes ClickShare very flexible. You have a button or an app, by the way it can also be software that you plug into your laptop and your screen is shared, and your screen takes over the video and audio equipment. That is very flexible. It means if you are a guest at Barco and we do not allow you on the Barco network — that happens in companies — you can still easily present something and participate in a meeting in a Barco building. You cannot do that with the other type of solution, which is what they call a room system. So that is something where we are very flexible. What we also see is that for more high-end meeting rooms that sometimes already have such a room system but face limitations, like you always have to program a meeting in advance, they say: actually for certain meetings we cannot run on such a room system, we would like to switch to ClickShare. So this year we actually brought to market what we call a switch, so that depending on what meeting you have in that room, you can switch between the two. Do people want to invest twice in high-end meeting rooms? Apparently they do. So that is where ClickShare differentiates itself. The market will certainly continue to grow there. What we do see is, for example, reader Victor asks not only about ClickShare: are there pirates on the coast? Are there new players coming? Who are your competitors? How strong is Barco actually? So I think in what we call the wireless agnostic — meaning it works with everything — we are actually growing very strongly in market share, so I think Barco is definitely the frontrunner in that space. The other part, the room systems, you have big players; I won't name names here, but there are a few very big players. But finding a way to collaborate and find a way to coexist, as I just said with the Switch, is also a path for us to take steps. So I think there are certainly opportunities there. The other thing is: there are so many other meeting rooms that need to be equipped, also for smaller companies that sometimes have only one or two meeting rooms. How can we offer easier, sometimes cheaper solutions there? That is another way we can grow ClickShare further.

There is also a question from a reader about specifically video walls and LCD screens. He notes that Barco does not have a very active role in that. What are you doing there, and is there a strategy to also break into the SME landscape besides products like ClickShare, but also with smaller video walls, smaller screens? So historically, Barco has offered all different types of video walls: LCD, LED, also rear projection cubes, an older type of video wall. We offered that for control rooms, also in the business world, SMEs. This year we have looked at our strategy specifically for those video walls, and what we see is that especially in the business world where you only need a video wall without a software solution like in a control room, those video walls are becoming commodities. So that is not attractive for us, and it is a bit difficult. So we have indeed decided to no longer offer video walls for control rooms. But we still have high-end LED and LCD video walls in our portfolio today, but as I said earlier, control rooms are evolving more towards remote, smaller, more focused on the operator, so much more towards software. That is where we want to focus much more in the future.

Okay. We also received many questions about your position in China. China was one of the reasons why Barco's results were somewhat disappointing. Reader Simona asks: How is it going there? Do you already see signs of improvement? Koen wonders: Is Barco really so dependent on China? Will the share only bounce back when it improves in China? Reader Mark Luiks also about the prospects in China, which are slowing your overall growth. Ronnie van Nunen asks roughly the same question. He also asks: What are the options if it turns out that the target profit from China is not achieved? How is it actually going with the Chinese in China? Yes, yes. So I think for China and for Barco in China, it was a difficult year. Let that be clear. Also something we had not really anticipated, and I think much of the results of the year... When we at the end of last year, beginning of this year, the signals were actually that the economy would pick up faster after COVID. The first COVID waves in China, we always saw a quick market recovery. But now it appears that the very strict COVID policy that the Chinese government implemented has naturally seriously impacted their budgets, especially those of local governments. So yes, they are loaded with debt today. Also the whole real estate story in China — you know the Chinese invest heavily in real estate — that has also collapsed, so consumer confidence to invest heavily has really gone down. Are there signs of recovery? So I think directly not, not yet in our figures, no. We see indirect signs, for example in cinema. You know cinema is measured in what they call box office, the income of the entire cinema industry. There you do see growth again, not yet at the 2019 peak year, but you see that return growth. Those are first signs that people are going back to the cinema. And then typically, the cinema owners start to regain confidence after a while and start investing again. You also see some tax incentives here and there that help to stimulate consumer confidence to consume again. Now for Barco, this is of course very sensitive because the markets, for example entertainment, medical sector, we really depend on those local governments. For example, in the medical sector, hospitals receive funds from local governments, so they can invest less and buy fewer Barco products. So yes, that is slowing down, that is what we feel now. Will it recover? Absolutely. I am convinced. China is such a large market; there is still so much growth potential, and they really want high-quality technological solutions and are still a bit less far in adopting than the rest of the world. So China remains an important market for Barco, absolutely. So what we are doing now is we continue to execute our China strategy. That means if you want to create market in China, you have to be locally present, even with R&D, making derived products, even with two factories there.

Reader GPM also wonders: why the focus on China? Asia is much larger, why not India? Wait, that is legitimate. So today, Asia last year was about 21-22% of our revenue including China, and China the largest part of that. We see huge growth potential in Asia, but also in China because it is such a large market. So that is a legitimate remark. We do see growth there, and for Barco it is perhaps not short-term; we have to wait for the Chinese economy to recover. But we want to be in pole position so that when that market bounces back, we are there with the right solutions. Does Barco completely depend on it? No, Asia is 21-22% of our revenue. And there is more than that. This year we also had the luck that cinema is growing so well, which can compensate for China in the rest of the world.

Yes, a reader, Sasia, also expresses doubts about the Chinese. No, no, no, a reader, let's say: the Chinese are not known for developing everything themselves. Do you not fear intellectual property theft? You also have a joint venture in digital cinema in China. How about the protection of patents? Are you confident about that? So for that specific one, the China Film Group is our partner in China. It is essentially a way to go to market in the cinema world in China. The China Film Group is our distribution channel to distribute our projectors in China. Do not forget, to dwell on that for a moment: of the 200,000 cinema screens in the world, 70,000 are in China, so a very large market. We have more than 60% market share there. But again, you have to produce locally but also distribute locally, and the China Film Group does that. They have their own screens, they are in the film industry. A partnership of more than 10 years, a very favorable partnership for Barco. So I think they are a good partner for us, and they are in a different domain; they do not make the projectors, so we of course protect our IP and intellectual property.

Okay, that is a clear answer. Maybe move on to another aspect: the independence of Barco. Reader Freddy notes: Have you received takeover proposals? Would the company be willing to consider them, or is the independence of Barco a certainty? Another reader notes: Is Barco, with the enormous investments you are facing — you just mentioned that multitude of innovation branches — is Barco big enough to finance all that? Yes, so I think we as Barco certainly have a solid financial base. We are very independent, and that is certainly the intention, to keep it that way. The biggest priority today is really those organic investments to bring the whole innovation and portfolio to market. But also with our cash position, we are actively looking whether we can make a step with an external acquisition, so taking over ourselves instead of being taken over. I think that is more on the agenda now. The two have to dance in an acquisition, so that is of course always uncertain, but a strategic acquisition that can give Barco a step forward in growth, that can really help us make a serious step, those are more the aspects we are working on at this moment.

Yes, reader Sasia also notes: Charles Baudoin regularly buys Barco shares. Is a delisting a realistic possibility? Yes, well, you have to ask Charles that in the first place. But that is not on the agenda for Barco, it is not an issue. And I think simply the fact that Charles and our other shareholders are buying more is also a sign of confidence in the company. So we stand with a very solid strategy that we are now fully implementing, and in the long term, it will bear fruit. That we are now having some issues with China and that we made wrong assessments there, that is correct, but fundamentally we are still with China. But those are all post-COVID effects. And yes, COVID has really done something to the economy. First there was COVID, everything closed, then there were shortages, remember the components, everyone huge inflation, everyone stockpiled, also our customers stockpiled. Last year big growth, but there is still some stock in the pipeline. So everything is normalizing, and it will be fine. It is a short time; it will be fine. And besides that, we absolutely stand behind the strategy we are implementing.

Okay. Reader Josh asks: Is cooperation possible with the imaging company EVS? And then about another share listed on the Brussels stock exchange, reader Erik asks: Will there ever be cooperation with Agfa? Ah yes, actually we work with both, but in projects. EVS is more downstream in events, where our projectors and image processing applications, they integrate that into the full show, so we work with them on a regular basis. And Agfa is actually a customer of ours in diagnostics. They make the capture of X-ray images, and we supply the visualization screens to actually display those images. So you already work with both? Yes, we work with both.

Maybe a question about the share itself and the share price. Reader Mats asks: Do you think Barco is too harshly punished on the stock market? Hm, maybe a difficult question. I will leave that to the journalists and analysts to answer. But in fact, even if you look at our figures in the macroeconomic climate that exists today, our figures are still quite decent. Of course, we had higher ambitions and we had to adjust the revenue growth. That is a given; we have also learned lessons from it: can we predict that better in the future? Honestly, China — I think many misjudged that, even the Chinese government, that growth would come back so slowly. So in that sense, yes, we have been heavily punished. I think we have been dealt a heavy blow. Yes, yes. Maybe that is also an answer to the question from reader Eric: Why should I buy Barco shares? You have already given quite a few answers naturally, but I think the valuation is good at this moment. It is... I think we also have a very healthy cash position, with which we — I just explained — have possibilities. I think we really have a solid strategy going forward, and also simply the medium term in financial results. We maintain that high percentage revenue growth mid to long term. This year we will already bring the operating profit from 12% to around 14%, and in the coming years to 18%. So that growth is certainly still there, that growth is simply there.

Yes, I have also received four questions about something very recent: due to the split of Solvay, you risk falling out of the Bel 20 index. That is new. Do you think that chance is real, and how do you feel about it? Well, it is of course good to be in the Bel 20. I think it gives a kind of confidence, also pride, for our Belgian press, our individual shareholders in Belgium, and also for our employees. But the major shareholders of Barco are institutional investors. They typically do not follow the Belgian indices; they are in New York, Paris, London. They are less interested in membership. So it is not an insurmountable problem, absolutely not. Of course we are ambitious and we will do everything to get back in as soon as possible if that happens. And we wish the other party good luck, but we will take it sportingly if it happens. But we are ambitious enough and we do not lose sleep over it. It is not an insurmountable problem.

Okay, a few questions also about dividend and your cash position. How safe is the dividend, several readers ask. And would it also not be an option to buy back own shares with the cash? Yes, on dividend: I think we have a very good track record historically, a stable track record that we really share that dividend with the shareholders. And at this point, typically we share a part of it and reinvest the rest in the company. Formally, we will announce that in February when we present the results, but we of course want to do everything to guarantee that continuity. Buying back own shares: yes, at this moment, perhaps not immediately, because we are looking at potential external acquisitions and want to see if we can invest our cash there. So not immediately buying back own shares.

Reader Gerry wonders: You are active in many countries. This is a more general question: Do you think there is still enough room and political will in Europe to let the manufacturing industry flourish here? Yes, I think so, and I certainly hope so. We invest certainly in Europe. We are modernizing our factories in Italy and in Kortrijk, so that is important for us. Now, Europe will have to do everything to keep the competitiveness of manufacturing companies high, so that we can remain competitive. That is in everything: in contracts, permits, attracting talent. Can we still attract that talent in Flanders? Those are certainly things where we can use all the help.

There is also a question about how you actually manage to attract enough skilled people and really talented managers. Yes, and I will tell you, in that period during or right after COVID, it was a problem. We need such highly specialized tech people with a technology background that you do not always find them. So one thing is that we want to be present at universities as much as possible to recruit locally. We also have R&D teams spread around the world to tap talent in the US, Europe, China, and Taiwan. Then we can consult via ClickShare — we consult a lot via ClickShare — but yes, we have to go broader because it becomes really difficult for a technology company to find everyone at one location.

Another question from reader Peter: You are co-CEO with Charles Baudouin. How do you actually make decisions, especially if you have opposing opinions? And how do you then communicate those decisions to the management team so that the rest of the team can also work with them? Yes, yes, very interesting. Is it difficult to have two at the top? No, no. I think Charles and I get along extremely well. So I think there must be a similar philosophy: where do I want to go, where does Charles want to go? We have known each other for a very long time, already before we started at Barco. And I think that joint mindset — Barco is a technology company, and innovation and entrepreneurship that we really want to promote, how we want to grow the company — that is in both our DNAs. That is a very important starting basis. Then we naturally divided tasks: I run the business and technology; Charles runs the factories and China. So we each have our responsibilities. Have there been moments where we really disagreed? No, never actually. But that does not mean we do not brainstorm. I look with a different lens, Charles with another, and it is actually a one-plus-one-equals-three story because that reinforces each other. Certainly compatible. So no, I think it actually works well.

Reader Katharine asks: You are one of the few female CEOs of listed companies in Belgium. Did you find it more difficult to grow than men in the business world? And she wonders: Do you think the glass ceiling still exists? Well, honestly, speaking personally, I have had little trouble with it. I studied civil engineering, so you start with a study where there are not many women. Yes, she also asks if you have tips for women... Maybe I will say, but I think from a very young age I always had to prove myself in a man's world. But I must say, the companies I worked for were very progressive regarding diversity. And I think you are always surrounded by people of different nationalities, gender, whatever, who just look at what you bring to the table, what your expertise is, and as long as you contribute, little problem. But one tip I might give: especially for women, if you really want to climb the ladder — self-confidence, self-confidence. I think just go for it, you have something to contribute, and you should not be afraid of that. I think that sometimes women are still a bit too reluctant, and you should not be. It should be no issue at all in these times. And I think many companies, Barco certainly, now focus on what they call DNI, diversity and inclusion. It is also super critical to do that.

Maybe a last question just coming in: You spoke earlier about using the money possibly for acquisitions. What level of debt would Barco be comfortable with? Yes, we have to consider that. We also have to consider how we can finance something like that to limit debt. But that is where we certainly take no unnecessary risks. Yes, I was just going to say: we will not take unnecessary risks. No, we will not take them. Okay, that is a very clear answer. Thank you, An Steegen. And thank you for watching. We will be back on January 10 with Sergio Van Herck from EVS. Until then. Thank you.