ATOSS Software AG

Hello, everyone. Welcome back to our third earnings call, where we will be discussing our results for Q4 and full year 2025. We are pleased to have you here with us today. I am joined by our Chief Financial Officer, Christoph Leiber, and we are glad to have the opportunity to walk you through our performance and outlook. We will be referring to the earnings call Q4 and full year 2025 presentation, which was published earlier this morning and is available for download on our Investor Relations website, as well as via the link provided in the webcast. The detailed Investor Relations presentation was also published this morning, which we encourage you to review for further insights, but will not discuss during this call. Please note that today's call is being recorded, and the recording will be made available on our Investor Relations website after the call. Before we begin, I would like to start with a disclaimer. Please note that the presentation contains forward-looking statements based on the beliefs of Atos Software SE. These statements reflect the current views of Atos Software SE with respect to future events and results and are subject to risks and uncertainties. Actual results may differ materially from those projected here due to factors including, but not limited to, changes in general economic and business conditions, the introduction of competing products lack of market acceptance of new products, services, or technology, and changes in business strategy. Arthur Software SE does not intend or assume any obligation to update these forward-looking statements. With that, I will now hand over to Christoph Leiber, who will walk you through the key developments of the fourth quarter and full year of 2025. He will start with a general business update, then cover our financial performance, followed by our outlook for 2026 and beyond. We will then wrap up with a Q&A session. Christoph, over to you.

Thank you, Carla, and a very warm welcome from my side to the entire audience. I'm happy to be here today and walk you through our Q4 figures as well as our full year 25 results. We appreciate your time and interest in ATOS and look forward to sharing an update on our performance and outlook, including our AI roadmap well beyond 2026. Let's get started on slide four with key takeaways. We are proud to announce that 2025 marks our 20th consecutive record year, 20 years of continued year-on-year growth, top line and in terms of EBIT. Our CAGR for the years since 2014 has been at 15%. Overall, this is a unique success that makes everyone at Atos extremely proud. We also successfully completed our midterm guidance that we gave on the back of 2022 for the years 23 to 25. For this period, we projected a CAGR of approximately 19%. Now, we came in at 18.5% CAGR for that period. Also, we projected an EBIT margin by the end of 2025 above 30%. Now, our EBIT margin is two years in a row above 35%. You've seen the numbers presumably already this morning. So, Atos once again has demonstrated its exceptional success as a software company and our delivery ability on demanding guidances. This is success that I like to dedicate to our employees, our customers, and our clear commitment to our vision. At the same time, we've built a platform at Atos that's extremely well positioned to continue on this path in the future. But let us first focus on the results for 2025. We've delivered solid results with full year revenues of 189.3 million and an EBIT margin of 36% well above guidance and reflecting the quality of our earnings. As for the growth within our medium term guidance, once again, the growth has been driven by cloud and subscription revenue streams. This sort of revenue was up 28% for the full year of 2025. And we closed the year really on a high note. Q4 came in strong with 12% top line growth quarter over quarter, driven by once again strong momentum in cloud and subscriptions, which was equally up 28% in Q4 as for the entire year. I mentioned last quarter that comparables in Q4 have been expected and actually were tougher, and still the team has delivered. Many thanks to everyone at Atos for making this possible. On the order intake side, we've seen a substantial improvement in H2 2025 over H1 2025, and we believe that Q1 and H1 2026 should show a continuation of this positive development. In particular, we are pleased with the development on the new ACV generated for cloud and subscription. Here we saw strong growth comparing H2-25 to H2-24 and still good growth comparing full year 25 to 24. Again, cloud and subscription remain our main growth engine, supported by strong order backlog, healthy ARR momentum, and a solid new ACV development. These are the key areas to determine, from our perspective, the value of RTOS. Now, building on this momentum, we enter 26 with confidence. We confirm our outlook of around €215 million in revenue and an EBIT margin of greater than 32%. As always, our revenue target is realistic yet ambitious with a bandwidth of roughly 2%. Our EBIT margin And target is conservatively set, meaning we have lack room to either outperform, cover the lower end of the revenue bandwidth, or end initiate additional investments. For 26, we expect cloud and subscription revenues to grow by 25% plus. and total recurring revenues by more than 15% while on-prem licenses will continue to represent a smaller and more volatile share of the mix. Also, for 2027, we stand by our projection of around 245 million euros with a bandwidth of 3% and an EBIT margin of at least 33%. Now on slide 5, let's take a look back at the development of the phenomenal 20-year record history that we at Atos have achieved. Since 2014, Atos has even increased its growth momentum with an average annual rate of 15%. This was substantially driven by strong development in recurring revenues, in particular since 2021. Today, our recurring revenues account for 94% of software revenues and 70% of total revenues. And this share continues to rise. Internationally, we kept expanding, averaging a 30% growth over the past five years. In 2025, revenue outside of the Dachen region accounted for 6% of total revenues. More importantly, we have won great new customers internationally in 2025, and in particular, in H2 2025. Two large retailers in Benelux, one retailer in the Middle East, and somewhat as the icing on the cake, one international retailer headquartered in France in Q4. Moving on to margins, margins have been substantially increasing during our 20-record year trajectory, and practically in all years, we outperformed our guidances on margins. As you know, we tend to keep our margin guidance conservative, and we will keep it this way. Now, with that, let's move to the income statement on slide six for the full year 2025. We have delivered a solid year 2025, keeping the track we were on in Q3 2025, with revenues increasing by 11% year on year, driven by software revenue growth of 13%. As said, cloud and subscription business continues to be the major driver of this growth, with 28% year-over-year increase in cloud and subscription revenues, which now account for nearly 50% of our total revenues, up from 42% last year. For other revenue streams, consulting continued good growth at 10% year-on-year. and other revenues, including process consulting, even stronger growth of 31% year-on-year, whereas hardware revenues and perpetual licenses, as already alluded to, saw a decline in 2025. On the margin side, we stayed strong despite the investments in our go-to-market organization and its now completed transformation. Looking at Q4 alone and on slide seven, top line growth was again strong at 12% year on year. Software revenues grew at a similar rate of around 12%, keeping both metrics broadly in line with the levels of the previous year. Overall, this was a solid quarter in terms of order development with particular strength on the cloud and subscription side in order intake revenues and overall very strong margins once again. This provides a good support for our revenue development going into 2026. Taking a closer look at our cloud and subscription and overall recurring revenue ARR performance on slide 8, we continue to see a very positive development. Our total ARR grew by 18% to 140 million euros last year. This trend is largely driven by very strong momentum in our recurring revenue streams. Cloud and subscription ARR increased year on year to 101 million euros by the end of Q4 2025. And looking further into the drivers of our cloud and subscription ARR, it is important to highlight that the majority of the ARR growth in 2025 again came from new business rather than migration. Out of the 22 million ARR increased year on year, more than 80% came from new ARR with existing and new customers. With existing and new customers evenly split. And only 20% or roughly nearly 4 million euros came from migrations. This demonstrates the externally driven momentum of our cloud offering and confirms the attractiveness of our solution in the market. When looking at customer value dynamics, our net retention rate came in at around 111% for 2025. And as I mentioned already multiple times and some time ago, our long-term ambition has always been an NRR above 110. That is where we are. and that has been expected from the outset as our cloud customer base over time becomes increasingly larger and the share of newer customers with more appetite for expansions of the cohort decreases now coming to our Backlog, which gives us good indication of future AR development. Our total AR backlog increased by 18% year on year, reflecting the strong level of contractually committed additions for the next 12 months. In addition, the incremental cloud and subscription backlog added in 2025 increased. You see that on this slide. It kind of increased after two years of rather flattish environment. So, this shows a positive change in the last year with 8% growth of that incremental cloud and subscription backlog added in 2025. Both indicators further strengthen our visibility into 26 and underline our continued robustness of our recurring revenue model. Together, these developments provide a solid foundation and support a positive outlook for our ARR development in 26. Now turning to cash flow and liquidity on slide 9, operating cash flow in 2025 came in lower year on year. This decline does not reflect weaker underlying operating performance by no means. It is essentially driven by exceptionally high tax cash outs in 2025. Because of additional taxes set after the final tax assessment for 23 and additional prepayments for 2024, all in total tax payments in 2025 amounted to 28.4 million versus 9.8, so roughly 10 million in 2024. When normalized for the additional tax payments for 23 and additional prepayments for 24, the operating cash flow would have increased year-on-year in 2025. Now, on the liquidity side, we remain with a very strong position. Even after dividend payment of around 34 million in Q2, we closed the year with a liquidity level of around 123 million, slightly above 112 million at year-end 24. This strong foundation allows us to continue investing in the business while maintaining a very healthy financial posture. Moving on to people and organization on slide 10. At the year end 2025, our total headcount stood at 856 compared to 820 at year end 24. This reflects a moderate, largely planned expansion of our organization, which is overall still in line with our transformation efforts. With regard to our go-to-market organization, we are clearly on track. At the year end, our sales and marketing headcount stood at 201 employees, which is within the range that I was giving on the last or previous calls between 200 and 210. The particular focus area continues to be our quota carrying organization. At the end of Q4 2025, when combining the staff on board and the already hired staff with entry date up to April 1st, approximately 70 quota carriers and first line managers will be on board. While this is slightly below the target of around 80, we are making steady progress and remain confident that we will close this gap very soon. And in parallel, we continue to drive efficiency improvements across our go-to-market setup through better processes, AI, and digital tools, ensuring the productivity rises overall. Overall, this gives us a significant stronger commercial engine entering into 2026 with more structure, more capabilities, and greater resilience against macro fluctuations. With a strong finish in Q4, on slide 11, we close out 2025 as our 20th consecutive record year. For the full year, we delivered revenues of more than 189 million, fully within our guided range, and achieved an EBIT margin of 36%, clearly above our already raised guidance of 34% EBIT margin. On the recurring side, we saw continued strong momentum, total recurring revenues grew by around 18% year-on-year, and cloud and subscription revenues increased by 28%, both in line with our expectations. As mentioned earlier, the risk in the model continues to be limited maybe to the on-prem licenses and a bit on hardware. which represent a very small fraction and a very limited share of our total business. Looking ahead to 26, we confirm our guidance. We expect revenues to come in around 215 million, meaning a 2% bandwidth. And in continuation of our conservative margin guidance practice, an EBIT margin of greater than 32%. This outlook is supported by strong ARR and backlog in cloud subscriptions and the progress that we've made in transforming our go-to-market organization. Our medium-term guidance also remains unchanged. We continue to target revenues of around 245 million by 2027, representing a CAGR of roughly 14% from 2025 onwards. Naturally, the pace of growth will depend on macroeconomic conditions and our sales execution. But overall, the progress we made in 2025, we feel well positioned for the years ahead. Looking toward 2030, we believe that leveraging our position and the market dynamics for workforce management, we can build an organization of around or with around 400 million euros in revenue by 2030. In this direction, we continue to invest to even increase our current organic growth, and we are opening up to selective inorganic growth. But of course, it is an ambition and not a guidance. Now moving to slide 12, one area amongst others for our future growth is continued investment in our AI roadmap. Atos has started the AI journey in 22-23 with industry specialists like University of Mainz for Hospitals, Fraunhofer Institute, and others, which this led to the initial set of AI services. In 2024-25, Atos has started delivery of AI services with a clear focus on forecasting, as this is the base for any optimization of workforce scheduling. This has already positively impacted the development shown in our ARR order backlog, in particular for cloud and subscription in 2025. For hospitals, there are substantial advantages in faster assuring the right forecast and thereby building planning decisions on this accurate and faster and readily available forecast. applicable, of course, not only for hospitals, but also for the rest of the industries as well. The topics here are general forecasting, illness rate forecasting, as well as vacation or other absence forecasting. That is what we have already delivered last year. However, the AI roadmap is obviously much more And as you see on this slide here, it is key to the entire roadmap of ATOS for all of our solutions. Our focus on AI agents creating workforce efficiency, productivity, and simplification is clear. We cater to end users, employees, and experts, and thereby covering the full breadth of the workforce. This year in 26, we will have the first AI agents for the expert users and employees across the product lines. Furthermore, we have a multi-year roadmap with focus industries touching upon every aspect of workforce management. On our roadmap are multiple agents for others, configuration agents, voice agents for multiple use cases, for managers, casual users, etc. Agents for specific industries like retail, just to name a few of this list here. Multiple agents equally for ATC, AI assistance to speed up and automate the planning process. AI support for forecasting, et cetera. Business intelligence also for ATC. And even for Crewmeister, we have multiple agents on the road. on the roadmap, AI-based crew administration, as well as AI-based scheduling suggestions, et cetera. Now, there's a lot to come, and we are just getting started. From our perspective, success in AI is based on three pillars, if you will. Domain expertise and workforce management is an area with a huge moat for RTOS that is rooted in this domain expertise. Deep embeddedness in customer processes and understanding, for example, of the regulatory compliance and complexity. How else should an AI leverage the potential thereof? And lastly, access and ownership of the data that is relevant to workforce management. Now, Atos, we are bringing all of this and combine it with our AI innovations. This will further deepen our existing mode in workforce management and still has much more potential. Now, I guess this concludes the presentation part of the call. We'd now like to open the floor for questions and are happy to dive deeper into any topics that you would like to discuss. Thank you.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and 2. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and 1 at this time. The first question comes from the line of Nicola Herms from Deutsche Bank. Please go ahead.