Atos SE

Good day and thank you for standing by. Welcome to the ATOS Q1 2022 revenue conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. Our speakers today are Rodolphe Belmer, Atos CEO, and Uwe Stelter, Atos CFO. I would now like to hand the conference over to your first speaker today, Rodolphe Belmer. Please go ahead.

Good morning, and thank you for attending Atos Q1 2022 conference call. I am Rodolphe Belmer, CEO, and I am joined on this call by Uwe Stelter, Group CFO. Over the last few months, Atos has been actively laying the foundations of its transformation with a swift rollout of our new organization while continuing to capitalize on our core expertise and be successful in our day-to-day business. Today, we are pleased to share with you an encouraging Q1. Looking into the key highlights of this first quarter. Revenue at constant currency was only slightly down, minus 0.6% at constant currency and minus 2.4% organically, which is a significant sequential improvement compared to Q4 last year, which was down 5.4% at constant currency and 6.9% organically if we exclude the impact of the large BPO contract reassessment. This sequential improvement is is clearly an encouraging sign that our revenue is moving in the right direction. It is also fully consistent with the quarterly sequence embedded in our 2022 guidance. We hired more than 8,000 new talents in Q1 on a highly competitive labor market. Most of them will reinforce our capabilities in digital and BDS, predominantly in marketing. offshore and near-shore locations. Together with an attrition rate that remained below industry standards, this is once again a strong testimony of our intact ability to attract and retain talents, which is key in our markets. Book-to-bill was 72%. This is an exceptionally low level that is not representative of future revenue trends. I will elaborate on that later. Lastly, we fully confirmed today our 2022 objectives. Turning now to commercial activity on the next slide. Order entry was 2 billion euros in Q1, which is a book-to-bill of 72%. While Q1 is traditionally low, this is a particularly low level, which is not representative of the revenue trend we expect for the coming quarters. And why is that? because first, we had a lot less renewals in Q1 this year, as significant renewals already took place in prior quarters, including in Q1 2021. Second, the average duration of contracts has decreased, reflecting a change in the contract mix, which is increasingly skewed towards shorter contracts. Excluding these two structural impacts, we would have been in the 90% range. While the shorter average duration is likely to remain going forward, we do expect a higher book to build in Q2. With that regard, our full qualified pipeline remained broadly stable compared to the end of last year at 6.9 billion euros. Our backlog at the end of March was at 23.3 billion euros, representing 2.1 years of revenue. I will highlight a few significant wins from the quarter. Cloud managed services and IT verticalization for a French engineering company, mobility as a service application development for a transportation company, critical system management for a French public agency, and lastly, will develop the Space Institutional Awareness System for the German Federal Armed Forces, which will allow to monitor satellite activity. As we are moving forward with our transformation, we continue to capitalize on our core expertise to be as successful as possible in our marketplace. In January, we finalized the strategic acquisition of Cloudreach, strengthening our multi-cloud capabilities. We welcomed over 600 highly skilled cloud professionals, adding new expertise to our Atos OneCloud practice. In February, we unveiled our new exascale class, Bull Sequana XH3000 supercomputer. It's an hybrid computing platform with unparalleled flexibility and performance. This is Atos' most efficient and powerful supercomputer and a key element, in securing today's and tomorrow's digital economy sovereignty. In March, we opened our next-gen security operation center, SOC, in Bulgaria. It is designed to rapidly identify and limit the impact of security incidents for large organizations globally with a 24-7 threat monitoring, detection, and targeted response supported by state-of-the-art technology. And very recently, Gartner ranked ATOS number one worldwide in managed security services. This means that today, we are the number one partner to support customers in protecting their data. We are proud to have reached this position, and we will continue to develop leading technologies and services to protect our clients against cyber threats. With this, I will hand over to Uwe, but before that, I would like to thank him utterly for his years of service and contributions at ATOS. Particularly, I want to thank him for his very strong involvement in the last phase and in securing a smooth transition with his successor. I'm very grateful, and we wish him the very best in his next endeavor.

Thank you, Rodolphe, for those kind words, and good morning to everybody. Let me give you some more details on our financial performance in Q1. Q1 revenue reached 2.75 billion, only slightly down at constant currency by minus 0.6%. This is the combination of minus 2.4 organic decrease, which is, as Rudolf mentioned, a significant sequential improvement compared to Q4 last year, where we were down 6.9% organically, excluding the large BPO contract reassessment. and the 1.7% growth from acquisitions, mainly CloudReach, which we started to consolidate in January, but also the acquisitions we made through 2021. Currency impact was positive, plus 2.7%, reflecting the appreciation of the American dollar and the pound sterling against the euro over that period. Now turning to revenue by regional business units on slide nine. These are our new RBUs, regional business units, with small adjustments compared to the previous ones. We have included a reconciliation in the appendix of our press release. Americas lead the way up 1.5%. Growth was driven by the contribution of recent acquisitions and the growth in digital activities, in particular with the ramp-up of a large contract in healthcare and life sciences. Northern Europe and APEC decreased by 2.3%. Strong business growth in manufacturing and healthcare and life sciences was offset by a decrease in telecomedia and technology from a volume reduction in its lab as a service activity and in financial services following the reassessment of the large BPO contract in Q4 2021. Central Europe decreased by 1.8%. Most industries delivered growth, in particular with the start of new contracts for a global food service retailer, and the leading logistic company, but we faced a decrease with two large telecom customers due to contracts ramped down. Southern Europe decreased by 1%. We recorded strong growth in healthcare and life sciences, digital activities, as well as in manufacturing. Conversely, revenue decreased in public sector and defense due to lower high-performance computing sales. also in financial services and insurance due to termination of a contract with a major Spanish bank, and finally in telecom media and technology due to lower hardware and software resale. Rest of the world, revenue grew strongly by 18.3%, was supported by business related to the Olympics, and a solid growth across most industries. Looking now at industries on page 10. Please note, this is the last time we comment on industries. as who will start reporting by business line instead starting next quarter. Manufacturing grew by 5.6% at constant currency, rebounding from a low Q1 in 2021. This trend was supported by the acquisition of Procescia in June 21 and by increased cloud volumes. Financial service and insurances decreased by minus 4.3% following the reassessment of the large BPO contract conducted in Q4 2021, and determination of a contract with the major Spanish bank, as mentioned previously. Public sector and defense decreased by minus 2.7% due to lower high-performance computing sales and the ramp down of digital workplace projects with the U.S. state agency. Telecom media and technology contracted by 10% due to volume reductions in the lab as a service activity, as well as contracts ramped down in telecoms. Resources and services grew by plus 1.6%, driven by solid growth in transport and logistics. And finally, healthcare and life sciences posted a strong 8.4% growth with solid growth across most regions. Turning to headcount now, as Rodolf mentioned, we continue to press ahead with large-scale recruitment in our growth activities and are well on track with more than 8,200 new hires in Q1. mainly in digital and BDS, and focused on offshore and nearshore locations. We also welcome 742 CloudReach employees, adding key expertise to our cloud capabilities. In an intense labor market, attracting and retaining talent is key to secure future growth, and in this context, our attractiveness has remained intact, as you see from the displayed numbers, and attrition rate is stable to Q4 and below industry standards. Before I pass the mic back to Rodolphe, I would like to thank all of you for the interactions and healthy dialogues over the last two and a half years and wish you all the best, most importantly, good health.