Interview
with André Kudelski

What are your key reflections about the Group’s performance in 2022?

Overall, 2022 was a challenging year for the Kudelski Group with revenues and profitability lower than originally planned. The main drivers for this performance were weak sales for Digital Television in EMEA during the fourth quarter and higher-than-expected operating costs in our Public Access division. On a positive note, the Group was able to grow organically in three of its four business segments. The continuing positive evolution of Kudelski Security, Kudelski IoT and Public Access positions the Group for future growth.

The continuing positive evolution of Kudelski Security, Kudelski IoT and Public Access positions the Group for future growth.

How did geopolitical issues impact the activities of the Group over the past year ?

The direct impacts on the Group of the war in Ukraine were relatively limited, negatively affecting the business activities of our Digital Television and Public Access divi- sions in Russia, a market the Group decided to exit, and in Ukraine. However, the indirect impacts have been more significant, especially in Europe, with the combination of uncertainty, high energy costs and changing market priorities complicating the business environment.

This has resulted in delayed investment decisions by our clients and consumers, who are looking to reduce their discretionary spending, with a negative impact on our revenues, especially in Europe. On the other hand, Kudelski Security’s business, particularly in Europe, and Kudelski IoT have benefitted from rising market demand for products and solutions that improve the security of digital infrastructure.

What is your view on the evolution of Digital Television ?

Despite a challenging environment for discretionary spending, the Kudelski Group’s Digital Television business has demonstrated resilience, especially in its capacity to generate recurring revenues. New market challenges are also creating new business opportunities for the Group. One of the more significant changes in the market recently has been the increasing interest of large subs- cription-based streaming operators in tackling content piracy, as their addressable market for paid subscriptions has become saturated due to the impact of significant levels of ongoing piracy, including password sharing. This provides new opportunities for our digital protection technologies, including conditional access, DRM and watermarking.

In terms of innovation, one of our most exciting new products for Digital Television is Insight, our artificial intelligence-powered solution that uses proprietary data analytics to enable customers to assess the effects of business actions, such as changes in pricing, on subscriber behavior and to optimize those actions prior to implementation. This technology uses the concept of a subscriber’s digital twin to help operators make better decisions to improve their service offerings and ultimately their financial results.

What is the future of Public Access?

Post-Covid, we see a number of new opportunities for our Public Access division, as demand increases for access solutions that leverage contactless technologies for payment and for enabling entry and exit rights. This is a global trend for stadiums, fairs, parking facilities and mountain destinations. Our SKIDATA solutions are able to use mobile devices to make reservations and payments and to grant access rights.

Going forward, we also see a growing role for our Public Access business in supporting the management of smart cities by offering smarter access to urban areas that can help manage traffic flows more efficiently and reduce a city's environmental footprint.

What are the key developments in the area of Cybersecurity ?

With the rapid digitalization across virtually all elements of society, it is increasingly more critical that individuals, companies and governments have access to a safe and reliable digital infrastructure. Kudelski Security has a key role to play here, as the opportunities for bad actors to disrupt infrastructure are growing even faster than the digitalization itself. The surface of potential vulnerabilities is increasing exponentially with the number of connected users, new services offered and the interactions between people, organizations and connected devices.

In such a fast moving environment, Kudelski Security is developing and deploying new technologies that include artifical intelligence and automation in order to identify and address new threats at the accelerated pace necessary to protect our clients and the digital ecosystem.

What are the prospects for Cybersecurity?

How will Kudelski IoT capitalize on its momentum ?

Short-term, we plan to grow Kudelski IoT’s revenues by accelerating the market penetration of solutions already deployed in the market, including RecovR, and expan- ding the footprint of our proprietary core IoT security plat- form. We also plan to expand our advanced IoT offerings to new verticals, such as indoor zoning, new applications for outdoor asset tracking and medical applications.

What are the most important trends in 2023 ?

In 2023, we see some important new opportunities in the markets in which we operate, but there is also significant market volatility due to global economic uncertainties. In this environment, the Group must be able to assess and address new opportunities and adapt to market realities quickly, knowing that some projects will not materialize as expected. To operate in this challenging environment, we must remain extremely agile by being able to allocate Group resources dynamically to the most promising of new opportunities and to retain flexibility as those opportunities evolve, while at the same time keeping costs firmly under control.

How do you expect the Group to perform in 2023 ?

As we have announced, we do not expect a strong 2023 performance in terms of revenues and profitability. However, we see the Group making important strides in 2023 towards profitable growth for Kudelski Security, Kudelski IoT and SKIDATA, while Digital Television should continue to deliver a strong EBITDA contribution.

New market challenges are also creating new business opportunities for the Group.

How do you expect the Group’s business segments to evolve in the future ?

Medium-term, the Group expects to realize the fruits of its investments in Kudelski Security and Kudelski IoT. We expect these two businesses to continue growing, with combined revenues representing about 25% of the Group’s total revenues by the end of 2024 and contribu- ting to the Group’s operational profitability. Digital Televison is expected to continue delivering profits for the Group, and we expect SKIDATA to futher increase both its revenues and profits.

What is your view on the Group’s ESG commitments ?

Since its foundation in 1951, the Kudelski Group has often considered as important issues that were not necessa- rily on the agendas of other companies. The first Nagra recorders were designed to operate with very low power consumption and were built to last for decades, even in the field. When the Group built its first headquarters in the late 1960s, Stefan Kudelski, the founder of the Kudelski Group, ensured that real thermal insulation was used, and he rejected the use of asbestos, which was a popular insulating material at the time.

Over our 72-year history, the Kudelski Group has worked to reduce the environmental footprint of our products and solutions and to respect the principles of fairness and equal opportunities for all of our employees. We believe the best way to advance ESG issues is to liveby conviction rather than by compliance.

Do you have any closing thoughts ?

Currently, there is no shortage of challenges facing the world, our markets and our customers. This makes our life as a Group more difficult, but it also creates opportunity to challenge the status quo and find new ways to build our future. This is what motivates us everyday.

Interview with André Kudelski