QUADIENT - 2020 Universal Registration Document

RISK FACTORS AND INTERNAL CONTROL Risk factors

OPERATIONAL RISKS

Risks

Risk management system

High risks Transformation

The "Back to Growth" strategy, implemented early 2019, implied many changes and was built around the following pillars: reinvest in Quadient highly cash generative legacy ● Mail-Related Solutions offering; focus on four major solutions in the main geographies; ● seize bolt-on acquisition opportunities; ● streamline the Group’s organization; ● either grow, improve or divest the Group’s Additional ● Operations by no later than 2022; adapt the Group’s shareholder return policy. ● Transformation and the ability to move quickly are key for the Group financial result in the future. The phase two of “Back to Growth” will encompass further changes in Quadient’s operating model. While the COVID-19 crisis is accelerating digitization, the needs for customer communications management, customer experience management, accounts receivable (AR) and accounts payable (AP) automation solutions are increasingly converging. Quadient has therefore decided to combine its Customer Experience Management and Business Process Automation software solutions into a true end-to-end cloud-based global business communications platform named “Intelligent Communication Automation”. Going forward, Quadient will continue to build on its strengths to roll out the second phase of its “Back to Growth” strategic plan. Developing and launching new products and services requires major investments. The Group’s results and future financial position will depend in part on its ability to improve its products and services, to develop and produce new ones at the best price, and within the deadlines set by demand, and to distribute and market them. The Group’s main supplier is Zhilai for parcel lockers. Zhilai accounted for 6.4 of total Group purchases in 2020. The top five suppliers and the top ten suppliers respectively accounted for 19.6 and 27.9 of total purchases in 2020 compared to 18.7 and 27.6 in 2019. The Group works also with OEM vendors. A disruption in supply from any one of these suppliers could significantly affect the Group’s business, despite the contractual clauses in the agreements protecting the Group against such risk.

Implemented early 2019, the “Back to Growth” strategic plan involved both a strong refocus of Quadient’s solutions portfolio and a major transformation of its operating model. Quadient aimed at building leading market positions in highly growing businesses that are synergistic with its foundational mail-related activities. Customer communication and experience management, business process and document workflow automation, as well as automated parcel locker solutions were selected to be the company’s growth engines while continuing to benefitfrom Quadient’s strong position in the highly profitable and cash generative mail-related business. Gradually increasing the part of these growth engines within Quadient’s total revenue has been set as a critical metric of Quadient’s transformation: in two years, combining organic growth initiatives and targeted acquisitions, the software and parcel locker solutions went up from 18 of total revenue in 2018 to 27 in 2020. This best-of-breed suite of business communications management software, which addresses the needs of customers of all size, features Quadient Inspire, Quadient Impress as well as Quadient’s comprehensive SaaS AP/AR automation offer which has been strengthened by the recent acquisitions of YayPay and Beanworks. Based on 2020 figures, Intelligent Communication Automation already represents 183 million euros in revenue, including 59 of subscription-related revenue, the latter having increased by 13 in 2020.

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Low risks Time to market for new products

A very strict procedure is applied for each launch of a new product. It includes Group project, planning, risk assessment and steering committee. All departments concerned by this launch are involved in the project and in the steering comity.

Dependence on suppliers

The Group has put in place alternative solutions in case such an event should actually occur. The Group works with three OEM vendors (tier one suppliers), which assemble entry-level and mid-range machines in Asia. Production is divided between these three tier one suppliers. In the event one of these suppliers should fail, the other two could take over production. Quadient also has a choice of strategic tier two suppliers, and for each of these, a replacement supplier has been selected. In addition, the Group is the owner of all molds, specific tools and industrial design. The Group has put in place alternative solutions for procurement. The Group has not been or very few impacted by the COVID-19 crisis for procurement.

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UNIVERSAL REGISTRATION DOCUMENT 2020