Interview
with André Kudelski
Could you share your views on the Group’s performance in 2023?
In 2023, we saw an acceleration of the key trends we have highlighted in recent years. Kudelski Security, Kudelski IoT and SKIDATA continued to grow and improve, reducing losses and improving profitability. On the other hand, Digital Television continued to suffer from a challenging market environment, with lower revenues particularly from hardware sales and system integration, as several major client projects were completed in 2022. However, it is important to highlight that Digital Television remains the Group’s most profitable business, and we will continue to invest in promising opportunities in order to secure the future growth potential of this business.
What are your thoughts on Digital Television over the past year, and what direction will the division take going forward?
The market in which Digital Television operates is undergoing an important transformation, with a progressive transition from broadcast linear TV to Internet-based video. While this transformation is challenging for existing market players, the fundamental need to protect content is, in many ways, even more important as the market evolves. The Group’s demonstrated ability to win new customers in this environment, including in fast growing markets such as sports streaming, demonstrates our ability to seize new opportunities in a dynamic market.
Our strategy has always been about the long term, and over the long term, we firmly believe that our core business is security.
Why did the Board of Directors decide to divest the Public Access division?
It is never easy to take the decision to divest a successful business. However, our strategy has always been about the long term, and over the long term, we firmly believe that our core business is security. This is the key focus of our Digital Television, Kudelski IoT and Kudelski Security business units, and especially during a time when the cost of capital is high, the Group must take decisions with a long-term view in mind. By divesting SKIDATA, the Group will be better able to focus on its core business of security while at the same time increasing synergies among its business units.
How will Public Access evolve during the next few months?
Just before COVID hit the world, we commenced a transformation project at SKIDATA, and as the world started to emerge from the pandemic in 2022, we were able to demonstrate some initial positive results. 2023 was one of the more successful years for SKIDATA, with 16% growth, and the business has excellent momentum for 2024 and beyond. Our priority is to further grow SKIDATA’s business by continuing to develop the initiatives that we started as part of our transformation project, including in particular innovative solutions for integrated smart cities.
Is Kudelski Security approaching profitability?
In 2023, Kudelski Security made significant progress towards profitability. The road has been longer than originally anticipated, but with the deployment of new technologies, including AI, we expect a continuation of the growth momentum and further bottom line improvements in 2024.
Will Kudelski IoT continue its impressive growth?
Kudelski IoT had a spectacular 2023 in terms of revenue growth. It has demonstrated an impressive capability to grow a new business quickly while also satisfying the most demanding of clients. This has not been easy, but an agile team supported by innovative technology has made it possible. We expect that Kudelski IoT will continue to grow at a double-digit percentage rate in 2024, with an increased focus on improving scalability to reach profitability.
How will the Group undertake the strategic refocus on its core security activities?
In 2001, when the Group decided to expand into the market for public access solutions with the acquisition of SKIDATA, the underlying strategy was to seize promising opportunities around the convergence between media entertainment and physical world activities, with digital security being the convergence point where the Group has its competitive advantage. Over the last two decades, technology-focused synergies with the Group helped transform SKIDATA into a leading digital player in the public access space. Today, we see that securing the digital space has become paramount, with the rapidly accelerating risk of cyberthreats being among the biggest risks to modern societies. For the Group, this means that securing the digital space is expected to be our focus for the long-term growth of our business units.
What synergies do you believe will be most effective between Digital Television, Kudelski Security and Kudelski IoT?
The Group’s Digital Television, Kudelski Security and Kudelski IoT business units share many core strengths, including innovation, R&D and intellectual property. Fundamentally, both Kudelski Security and Kudelski IoT are spinoffs of Digital Television. Many Digital Television engineers and other employees have been critical to the success of Kudelski Security and Kudelski IoT. On the sales and marketing side, many Digital Television customers are potential clients of Kudelski Security and Kudelski IoT, and Kudelski Security is an important sales channel for Kudelski IoT. These synergies revolve around digital security, which is a core strength of the Kudelski Group.
What are the key market trends in 2024?
The demand for Kudelski Security and Kudelski IoT continues to grow. For both business units, we expect to win additional market share in 2024. The Digital Television market continues to change. While the traditional broadcast market continues to undergo transformation, the Group continues to win market share. The Group is also winning new projects related to Internet-based video, both with new and existing clients. Finally, the market for Public Access solutions continues to grow in the post-COVID world, with a special focus on touchless access and smart cities.
AI may be the latest buzzword, but the Group has been investing in AI for over 10 years, with some promising results.
The Group is already integrating AI in some of its solutions. How will this evolve in the future?
AI may be the latest buzzword, but the Group has been investing in AI for over 10 years, with some promising results, including the innovative concept of a subscriber’s digital twin, which allows an enterprise to simulate business scenarios down to individual customers. The Group’s AI technology is an excellent example of how we can leverage synergies among our business units. Our AI efforts were first developed by our Digital Television business unit and have since been rapidly extended to Kudelski Security for enhanced threat detection and reporting and to Kudelski IoT for enhanced device localization. AI is one of the key areas of synergy that the Group will leverage to develop promising growth opportunities in the future.
What is your perspective on what the Group's financial position will be at the end of 2024?
With the return of inflation and higher interest rates, the cost of capital has increased significantly, so as a Group, we must be smart about how we select our priorities and remain focused on leveraging our core strengths. Our decision to divest the Public Access business will not only enable the Group to drastically reduce its debt position, but it will also allow the Group to better focus on its three security-related business units and to optimize key synergies among them.
Do you have any closing thoughts?
2024 will be a challenging, but fascinating year. We have a bold and clear roadmap. The key to our success will be the quality of execution and our flexibility in confronting unexpected challenges. More than ever during these challenging times, in the name of the Board of Directors, I would like to thank our teams, clients and shareholders, whose support is critical to the successful execution of our plans.
Our decision to divest the Public Access business will not only enable the Group to drastically reduce its debt position, but it will also allow the Group to better focus on its three security-related business units and to optimize key synergies among them.