Atos Origin Sa

Good day and thank you for standing by. Welcome to the ATOS third quarter 2022 revenue conference call. At this time all participants are in listen only mode. After the speaker's presentation there will be the question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Nordin Biman. Please go ahead.

Thank you. Thank you, operator, and good morning, everyone, and thank you for joining us for the presentation of ATOS Q3 Revenue. I'm Nordin Biman, Group CEO and Co-CEO in charge of Tech Foundation. And for this presentation, I'm joined today with Diane Galb, our Senior Executive Vice President in charge of Strategic Project and Support Functions. and Philippe Oliver, the co-CEO in charge of Avidian, and of course, Nathalie Senechaud, our Group CFO. Now, let's turn to the quarter's highlights. Overall, in the past quarter, Atos continued to improve its business performance as we pursue our in-depth transformation. In terms of revenue, we delivered positive revenue growth at a constant currency, showing a strong sequential improvement compared to previous quarters and reflecting the steady improvement in operational performance. Q3 is a lower quarter in terms of book-to-bill in our sector, but it did come out low at 71% book-to-bill at the group level. We'll get into detail by business later, but the pipeline is still strong and increasing. We should start seeing significant improvement before year-end with more large yields, more new logos, as we are building sales capabilities and providing assurance on the execution of the separation. Book-to-bill is expected to recover strongly in Q4. On the people side, our attractiveness and our ability to retain talent are intact. Group headcount was stable in Q3, reflecting the selective hiring approach we implemented. Gross hiring at 8,400 associates, of which 64% in offshore and nearshore locations. In parallel, we have made significant progress with our separation project, putting us well on track to complete the operation in H2 2023. Diane will comment later on our progress. And lastly, based on our robust revenue performance in Q3, we are precising our revenue growth objective for the full year. With that, I propose now to give you an update on Tech Foundation. So let me say, I'm really pleased with the momentum we have in TechFoundation. As I said last time, this newly formed business line with a refocused strategy combined with our decision to invest in this business has sent a powerful signal to all our employees and customers. Our current strategy is a stark contrast to our previous one where part of the TechFoundation business were going to be disposed and where the group's focus has shifted away from our core infrastructure business. On the revenue side, the momentum is clearly visible. We stabilize our top line in Q3 at plus 0.3 at constant currency, which is a strong improvement coming from minus 11.4% last year and minus 2.6 in H1. The stabilization is happening earlier than anticipated and is the result of that renewed focus and effectiveness of our new team in charge. In particular, the decrease of our core infrastructure business is much more contained than last year, and our professional services business has been showing really growing evidences in the last months. On the commercial side, while we have still a long road ahead, we are making good progress. After a difficult year in 2021, we are gradually rebuilding our commercial pipeline, which takes some time due to the long cycles in our business. typically between 12 to 18 months, as already mentioned. Q3 book-to-bill was 58%, driven by a slippage of a key large deal and increased focus on margin and cash profile of our deals. Despite being more selective, booking in Q3 represents a four points improvement over our prior year booking. As you know, traditionally, Q3 is our lowest quarter in terms of booking, and we anticipate a significant improvement in Q4 as we have experienced historically. However, we see several signs of improvement in our core business. Specifically, our new logo bookings were five times higher compared to last year. An early indication of results from our ongoing investment in large deals and increased focus on new logo acquisition. Our pipeline is also higher by more than 3 billion versus last year at the same period. So we do expect the book to build to improve in Q4 to pave the way for a successful 2023. While these results are encouraging, they do not yet reflect the full potential of our business and the change we have implemented in our commercial model, which will take the 12 to 18 months to fully bear results. So to summarize, a positive momentum on the top line, still some work to do on the commercial front, but things have clearly started to move in the right direction and more rapidly than expected. So on this slide, you could see a few examples of important contracts we signed this quarter. A contract with a major American manufacturer in the automotive industry for mainframe services taking over the entire application support and on top of it, being responsible of the migration of the mainframe application to AWS. Next one, I will mention it, is the six group. It's a five-year contract to provide something, a mainframe managed services to the entire six Swiss infrastructure and exchange to be the IT provider end-to-end. Other one, it's Paragon. It's a large contract to provide an end-to-end IT services solution to that global communication provider in order to develop a digital dynamic infrastructure to support their growth. And the last one, it's an outsourcing operation deal with NRG, a German energy provider based in Nuremberg. And this is their first generation of IT outsourcing and they have choose to trust us to make it happen. So the last three that I mentioned are new logo. And as I said, we significantly increased our order entry with new logo, which indicates encouraging success in rebuilding our commercial pipeline and second, that our client believe in tech foundation ability to deliver top quality services in the long run. So with that, I will now hand over to Philippe to present a vision performance.

Thank you, Nordin.

Hello to everyone. So on the Hevedian side, so we continue to grow in Q3 at 2.1% at constant currency. This is in line with our H1 trend and ongoing business and overall, let's say, market dynamic. A solid growth in digital, where the market remains strong, particularly in our digital application transformation and sovereignty requirements, and also with the contribution of our recent acquisitions, especially related to the positioning that we have and that we want to reinforce in cloud services and sovereignty requirements. Also, a solid growth in cybersecurity, where we are benefiting from our market leadership position, as you know, and very strong customer demands, reinforcing the requirements on data sovereignty and cyber protection related to attacks that they are facing on the market. On the other end, we face a lower level on the HPC revenue that has mitigated our growth. So we expect that business to start ramping up in Q4. And this is related to the very strong book to build that we had in Q2. I would remind that we signed a very large HPC on the Barcelona Supercomputing Center in Spain, as well as some other ones that we are currently pursuing on the international basis and that we're expecting to materialize in Q4. In addition, we had a book to build in Q3 standing at 85%. This is a result of a low quarter in HPC business following a stellar Q2 you remember that we had let's say a very strong book to build on the HPC side in the second quarter and due to the cyclicality of that business that's the reason why we're expecting let's say to get back on track in terms of strong growth on the HPC side especially in the quarter four to recover the situation and the low order entry that we had in Q3 all in all we are making great progress we still need to continue improving to reach our potential and our mid-term target of 7% organic growth on average over 2022 to 2026. So how do we go from 2% to 7%? So to begin, we need to better capitalize on Evidian's truly unique assets. So we need to continue focusing on optimizing and bringing our assets to the market in a much more efficient way. As we mentioned during our capital market day, we have very strong offering synergies between cybersecurity and the requirement of public cloud, especially to embrace the sovereignty requirements. This will translate into very powerful differentiator and we're currently engaging with all the hyperscalers to bring that capability to the market. What I also want to insist on is that in certain key attractive segments, such as military and defense, energy and utilities, manufacturing, financial services, which at the moment are not getting, let's say, the commercial traction that we could expect. But what I want to expose is that we are currently delivering very strong pipeline growth on those core segment activities that we're expecting also to benefit from, especially in terms of order entry in the fourth quarter. So we have a clear roadmap to unleash our potential, and at the same time, we are focusing on execution. I want to also share that our billable utilization rate is continuously growing, especially in Q3. And going forward, we expect to start seeing some first positive results, starting with an acceleration of our revenue growth in the fourth quarter. And as tangible indication of our progress, let's now look at the core, let's say, references that we had in the fourth quarter. First, on an insurance company in the US, We sign a very significant deal that is, let's say, bringing a brand new go-to-market model and information system for the sales force of our clients, leveraging all our artificial intelligence and machine learning solution design and capabilities. On the other end, we are capitalizing on the strong forces that we have on SAP implementation and managed services, where we've been awarded by a Dutch public administration for an end-to-end public cloud migration on the SAP information system. Then the last one that matters a lot, especially related to the current environment, it's related to energy and utilities, where we built a very strong application providing predictive and preventive maintenance, one more time leveraging our BDS capability and artificial intelligence requirements. for wind farm management and system reliability for end-to-end solution for this energy and utility company. And lastly, we extended a strategic partnership with an Italian internet service provider for cloud migration, data centers management, and workplace transformation tied with cybersecurity requirements. If we now look on the next slide, that is related to our talents. So we all know that we're operating, let's say, in the labor-based environment. And regarding talents, our headcounts remain broadly stable over the quarter. We hide close to 8,400 people, of which 64 coming from offshore and near-shore locations. Specifically, Most of our hirings work on the Evidian scope, where we need our talents to nurture our contract and especially to continuously deliver the revenue growth that we're expecting. Attrition levels remain stable, around 20%, which is in line with the industry average, but I have to say that it's even below the industry average in terms of attrition level. Lastly, in September, for the first time, Atos was listed by Great Place to Work as one of the Europe's best workplaces in the world in the 2022 annual list. So clearly, we are still a hot spot for talents. I have to say that the strategy that we explain, the convictions related to the differentiation that we have in terms of portfolio are protecting, let's say, the attractiveness of the company, and that's something that I'm really proud of. I will now hand it over to Diane to update you on the progress of the separation project.

Thank you, Philippe, and good morning, everyone. So I am very pleased to share with you today the significant progress we achieved in Q3 with regard to our separation project, which is on track to be completed in H2 next year. Starting with the group's financing, on July 29, we signed a new 2.7 billion bank euro debt package replacing our former revolving credit facility, composed of €1.5 billion unsecured term loan, a maturity of 18 months and two 6-month extensions at the Group's option, a €0.9 billion RCF maturing in 2025, and a €0.3 billion unsecured bridge to disposals with a maturity of 12 months and a one six-month extension at the group's option. The syndication of this new debt package was successful as the term loan was largely oversubscribed and showing strong support from our banking partners. In addition, Pricing conditions were very good, as margins are 160 basis points for the term loan and the bridge, and 80 basis points for the RCF. We also reset the covenant, which is now 3.75 times net debt to OMDA, invested once a year in December. With that, the group is fully financed for the interim period until spin-off and our liquidity is ensured. Moving to the next slide. In Q3, we achieved significant progress in our separation project. On September 7th, we launched the information and consultation process of ATOS European Works Council. what we call the SEC. This process is currently ongoing and at the same time we initiated social dialogues at country levels. This is a very important milestone. We believe that social dialogue is essential as employees are its number one asset and the key driver to value creation. Secondly, all separation work streams are mobilized and currently progressing according to plan. We are talking about no less than 20 different work streams involving more than 500 executives across the group and covering all separation topics, go to market and commercial continuity, carve out operations, operating model and support functions setup, as well as program coordination. Lastly, as you already know, we launched a disposal program back in June with 700 million euros expected proceeds, of which 220 million have already been secured with the sale of our stocks in Worldline. This program is on track. We currently have several processes ongoing involving business of various sizes and including small-sized transactions which are already signed. This progress shows that there is interest for what we are selling and our ability to execute rapidly only four months after the program was announced back in June. Looking now at the next steps on the next slide, So, following the completion of the SEC process, we would have a clear path to complete all carve-out workstreams so that we would be internally 100% ready in Q2 2023, and find Evidian's prospectus and convene a shareholders meeting thereafter so that we would be in a position to distribute and list the shares of Evidian in H2 2023. We are, as of today, fully on track with this objective. And I would like to reiterate that we are mobilized and committed to the successful execution of this project, and we are convinced that it will maximize value creation for all the group stakeholders. Turning now to CSR on the next slide, which is a key aspect of ATOS overall strategy. In the middle of this in-depth transformation, we have remained deeply focused on our CSR performance, where we are best in class. As a result of our commitment, this year again, ATOS has been awarded the highest recognition by world renowned ESG rating agencies. For the third year in a row, ATOS received the EcoVadis Platinum Award with our highest score to date at 84 points out of 100, confirming ATO's top 1% position in its sector. Additionally, in October, we were upgraded by MSCI ESG to their highest rating available at AAA, and we are now ranked in the top 7% of our sector. And MSCI highlighted ATOS leadership in clean technology initiatives as well as our strengthened governance. On the governance topic, let's turn to the next slide. So over the past month, ATOS has significantly strengthened its governance by renewing more than a third of its board of directors. With four new independent directors, Elizabeth Tinkham, Astrid Stange, René Provillot, and Caroline Ruelan, and Katopsi Katopskins, who represent the employee shareholders. Together, they are bringing a wealth of expertise in digital, finance, human resources, and corporate governance. In addition, three of the new independent members have now been appointed as chairs of various committees, Elisabeth Tinkham, for the nomination and governance committee, Astrid Stanger for the remuneration committee, and René Proglio for the audit committee. The board also created an adult committee in charge of overseeing the study and implementation of the separation project, which is composed of the majority of independent directors and chaired by René Proglio. To conclude briefly, ASTHO's transformation is in motion, and the whole group, with its management team and board of directors, is fully mobilized make it a success in the best interest of all our stakeholders. With that, I will now hand over to Nathalie for our Q3 financial performance.

Thank you, Diane. Good morning, everyone. I will now go through the group revenue performance for the third quarter. EITOS recorded revenue of €2.8 billion in Q3, up by plus 5.7% compared to Q3 last year. Growth at constant currency turned positive in the quarter at plus 1.1% coming from minus 0.6% in H1. So quite an improvement driven by a stabilization of organic growth at minus 0.1%. I will come back to that. Scope impact was plus 1.2%, primarily reflecting the contribution of CloudReach which is consolidated in our accounts since January this year, as well as other acquisitions that were made in 2021. Forex impact was quite significantly positive, plus 4.6% or €122 million, and is primarily due to our exposure to the US dollar. Let's take now a closer look at organic growth. Organic growth has significantly improved quarter over quarter, coming from a very low Q4 2021 at minus 8.9%, which was impacted by the reassessment of a large BPO contract in the UK, as we said previously. Excluding this impact, Q4 2021 was still down by minus 6.1%. minus 2.4% in Q1 this year, minus 1.9% in Q2, to finally stabilize in Q3 at minus 0.1%. As mentioned earlier by Nordin and Philippe, this improvement is the result of an earlier than expected stabilization at Tech Foundation, while on Evidien's side, growth in digital and cybersecurity was still mitigated by lower HPC revenue, indicating a potential for acceleration when HPC starts ramping up. We are clearly confident that this momentum will continue and that organic growth will turn positive in Q4, thanks to first, an acceleration at Evidian, as Philippe mentioned, and second, the continuation of positive trends observed at tech foundations. This is not contradictory with the level of order entry we had into three as our contract miss has shifted to contracts that have more short-term revenue yields. So a very good momentum in organic growth that will continue into Q4 and which is reflected in the slight improvement we are making to our revenue guidance. Nordin will give you more details on this later on. Now let's have a look at our performance by regional business units. As you can see on the slide, the performance is a little contrasted across business lines, with growth in Americas and Northern Europe and APAC, helped by acquisition, as well as good trends in digital activities, as well as an improvement in tech foundation in Northern Europe. Conversely, Central Europe and Southern Europe recorded slight contractions, minus 1.2% for Central Europe, primarily driven by the UCC business, and minus 2.2% in Southern Europe due to a low HPC revenue coming from a very high level in 2021. With that, I will hand back to Nourdine for the full year objectives.

Thank you, Natalie, and thank you, Tim. So based on our Q3, we are confirming our full-year objective and refining our revenue growth target, while operating margin and free cash flow target are unchanged. So for the full year, the group expects revenue growth at constant currency in the upper half of the minor 0.5 to 1.5 range that we indicated previously. Q3 was robust. and we expect growth to continue and accelerate in Q4. Operating margin at the lower end of the 3% to 5% range, we have a solid set of improvement measures in place, which we presented in July, and the whole organization is mobilized toward this objective. And lastly, free cash flow is expected at the lower end of the minus 150 to 200 million range, excluding additional impact from our transformation plan. In addition, the cash impact from this plan are expected at around 250 million euros at this stage, in line with what we said at our capital market day in June. So to summarize, in QFRED, we showed tangible improvement with revenue growth turning positive at constant currency, especially with an earlier than anticipated stabilization of tech foundation top line. While we still have some work to do on the commercial side, the momentum that we carry shows that we are going in the right direction. On the separation project, we are making tangible progress and we are fully on track to complete within our timeframe. The entire Atos employees, Atos team, is engaged and committed to successfully deliver our transformation. Through this transformation, We are better positioning our two businesses for long-term success and unlocking the value for all our stakeholders. So with that, we will now take your question. Thank you and back to your operator.

Thank you. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for a name to be announced. Please tell Bob we will compile the Q&A roster. This will take a few moments. Now we're going to take our first question. Please stand by. And the first question comes from the land of Amit Harkandani from Citi. Your line is open. Please ask your question.

Good morning. I'm Amit Harkandani from Citi, and thanks for taking my questions. A two-way finding. As a first question, could you kindly give some more insight on the growth of the Evideon business? If you could help us understand the moving parts, the growth seems a bit slower than I would have anticipated. So how do you think about the growth going into Q4 and beyond? And in particular, if you could talk about the digital and the cybersecurity segments within the Evideon business and As a second question, if I may, given the interest rate environment and given the fact that you have an element of floating debt, you've used factoring in the past, could you give us a sense for what are some of the pressures you see in terms of cash flows, given the debt position, given the use of factoring, given potentially other changes in the macro environment that could add additional challenges in terms of financing as you go through the next 12 to 18 months? Thank you.

Thank you, Amit. So Philippe will take the first question for Evidien, and Nathalie will take the second one.

Yes, so thank you.

So what I want to say, especially in terms of growth, so we mentioned that The dynamic is quite strong on the digital front related to revenue growth. It's pretty close to be aligned, let's say, with the target that we had and that we announced at the Capital Market Day. But as you know, we have, let's say, an impact related to the cyclicality of the HPC business that's following, let's say, a very strong Q2 that we had in terms of order entry. Where are we going to start materializing the revenue growth in Q4? So we are really expecting to deliver a stronger Q4 in terms of revenue growth. We don't disclose at this stage, let's say, the breakdown between BDS and digital, but clearly this year BDS is affected by a low level of HPC revenue, where we are, as I said, going to get back on track, especially in terms of revenue training 2.4 on the advanced computing part, including HPC. That will help, let's say, showing the overall improvement that we have for the evidence scope.

So on your second question, we still have a large part of our growth debt at fixed rates with respect to our bonds. On the bank debt, and as Diane mentioned it, we have successfully refinanced in July our bank financing. As we mentioned, the cost is variable, but will ultimately depend on the amount we would draw down from these facilities. And as an indication for this year, we expect a net cost of debt between 30 and 40 million. And on the factoring side, we would remain at the same level as last year.

noted thank you thank you now we're going to take our next question please stand by and the next question comes from the line of the wrong door from kabla chavro your line is open please ask a question yes thank you and good morning ladies and gentlemen uh two for me as well if i may

My first question is on the infra business going into next year. I mean, basically you're doing better than expected in 2022. What would be the moving part for 2023? Do you have some contracts that are ending that could be a headwind? What about the book to be that has been weak this year? Any impact? Basically, I'm trying to see if the resilience you're seeing right now can be extended into the next 12 to 18 months. And I have a follow-up after.

OK. Merci. And hello, Laurent. In fact, maybe to put it in perspective, while you may judge whether book-to-bill has been low, it has been better than last year on every quarter of this year. So Q1 book-to-bill of Tech Foundation was better than last year Q1. same for Q2 and same for Q3. So we are in the recovery mode in book to build. So looking at next year, I'm in a better position in January 2023 than in January 2022 in that particular business. But coming a little bit more in your underneath question behind it, the amount of renewal that we are having, I don't have, So we don't have so many large renewal upcoming. As I already mentioned, our average rate of average duration of contract is 3.5 to 4 years contract. So when I look at the distribution of the renewal amount between this year and next year, it's almost the same. So I'm not expecting a big renewal year next year. What I see, however, is in the current contract that we have, we are capturing more and more add-ons. I will say the change request, which was not the case in the previous years. So I think the main topic, which is also driving that stabilization of the top line is now the team are mobilized to capture more change requests, more what we called in our world, fertilization or upselling on top of our base contract, which is generating some additional activity and translated into

When you talk about add-ons, are you talking about 5% to 10% business that you've been able to sign? And don't you think that with the macro getting tougher, it may be a bit more complex to have the same amount in 2023 on those more discrete spending?

It's a fair ask. In fact, and I have seen that behavior speaking with several customers in this summer, while in H1, and I will say in the last almost 18 months, the only discussion we had with the customer is give me the services as fast as you could. And that was about speed and velocity of helping them transforming coming out of COVID. What I have seen with the macro environment, started happening or starting taking place in my dialogue with the various CEOs and CIOs of our customer is a cost containment looking forward. And you know, when we enter those kind of dialogue, the outsourcing world or the managed services world has that value prop of reducing or helping customers fixing their costs on the IT side and especially looking at how you could help them optimize even more the run to be able to invest on the change. So I will say to the opposite of other business, what I'm saying with the macro deteriorating a little bit is the managed services model is coming back on the table and the cost containment is an argument for that business model that we are pushing with Tech Foundation.

And my second question is for Philippe on Evidian. I mean, you did not give us a lot of detail in terms of a breakdown. I'd like to come back on the HPC and business impact. First, what is the underlying trend? Do you see any improvement in business ex-HPC? And if I remember well, I think the SPC was only 10% of your sales. So even if it drops double digit, I mean, it's not probably the only explanation why you're not going at 7% organic right now. And basically in Q4, What kind of assumption have you taken for this business? Thank you.

Yes, so I can understand the frustration related to, let's say, but you can do some quick math also because I gave an information related to the fact that digital is pretty close to the growth that we are, let's say, expecting, especially related to the five years plan figures that we mentioned at the Capital Market Day. And even though you're right on the global contribution of the HPC business, but you know that HPC, the average transaction is oscillating between 50 million and more than 100 million, especially for the largest one. And we're currently having in the pipe opportunities that are even below 250 million on the HPC side. That can drastically move the needle, especially in terms of short-term revenue generation, because you know that those transactions are generally generating revenue between, let's say, a range of 6 to 18 months maximum. So that's the trend that we have. We mentioned in Q2 that we had a very significant book-to-bill with a transaction that was above $100 million that we disclosed to the market. And related to the manufacturing, let's say cycle, and then the fine-tuning of their transactions. HPC environment that we are expecting to start let's say ramping up our revenue on the HPC in Q4 so without giving you let's say more details but the HPC is going to get back to a significant growth in Q4 and that will protect let's say the trend that we mentioned with a level of confidence on growing at the pace of the capital market their assumptions in Q4.

Philippe, that's really my last point. So I want to have a clear vision. Does it mean that in Q2 or Q3 your HPC business is down like 25%, 30% or I'm missing something?

No, no, absolutely not.

So the drop is less than that?

Yes.

OK, great. Thank you. Thank you, Laurent.

Thank you. Now we're going to take our next question. Please stand by. And the next question comes to the line of Nicolas David from OdoBHF. Your line is open. Please ask your question.

Yes, good morning. I have actually a few from my side as well. The first one is regarding the commercial activity. And could you share some details and to which extent do you think that your lower commercial activity in Q3, but also year to date, is due to internal issues and your ability to deliver, or is it rather due to all the noise around the company, regarding the spin-offs, potential disinvestment, and so on? And regarding the internal part, which actions are you taking to improve this commercial momentum and can we see an improvement in the short term? And maybe could you share what kind of book-to-bill level we could expect in Q4? So this is for the commercial momentum. And the second is regarding North America. You showed a nice improvement in constant currency growth. Could you give us a bit of details regarding what drove this improvement? Is it a VGN or a tech foundation? My last question is about tech foundation. I remember that at the CMV you mentioned that you were about to scale down the reselling activities. Did you start to do that already or is it something you plan to do rather next year? Thank you.

Philippe, I'm going to start related to the commercial momentum. First, you highlighted, let's say, a very important point that is related to short-term revenue generation. And you know that in our activities, we have, let's say, long-term signings and short-term signings. It's obviously easier to move the needle on the book-to-bill when you are signing, let's say, pluriannual contracts let's say, operating on four to five years, let's say, contract duration with very large TCV, but that's not, let's say, yielding more revenue in the short term. And what we did with our sales force related to the revenue growth challenge that we had, especially in terms of recovery plan, is that we heavily focused on the, let's say, digital transformation on the Avidian side that are, generally speaking, oscillating between six to 12 months of, let's say, revenue generation. So it's shorter signings that we had in terms of further entry. That's the reason why it can appear as a surprise that on the Evidence Scope we have 85%, let's say, book to bill, even though I explained that a big part of that figure was related to the low level of further entry on the HPC side. But it's also a deliberate strategy to protect the revenue growth that we have to drive. I want to insist on the fact that what Nordin and I are seeing on the market, especially with all the interaction that we had with CEOs and CIOs, not only on our base account, but also on the new logos, that we have a very good momentum. Also, because one of the key strategies on the Abelian side is to really capitalize on where we are strong. You remember I said we stop running after everything that is moving on the market. We are much more focused, much more concentrated, because we need to reach the level of industrialization in our portfolio and go-to-market model to get a better result and more profitability over time. So that's the clear focus that we have. And no, I didn't see any, let's say, distraction related to the noise that's going on in the marketplace. Our sales team is focused, they want to restore the pride of the company and that's where the senior management team, we are helping them out in making sure that we are showing to our clients first that we are bringing innovation, that we are delivering on our commitments and that we are focused on transforming the company as you know.

Thank you Philippe. Nicolas on the two other questions. In North America, yes, indeed. Finally, I will say we see a strong recovery in the U.S. And to give you a little bit more flavor on it, I think it's due to a fantastic work that has been done with Philippe and the team over there because the evident performance has been pretty, the evident recovery has been pretty impressive in North America. While I will say in Tech Foundation, we are still rebuilding the momentum. And it's linked a little bit to your first question regarding commercial. In the previous setup of the company, remember, we lost a little bit of sales capabilities on the infrastructure side. So we are rebuilding those teams with a new tech foundation leadership team. And it's true that it's taking time also in the U.S. And then the other point on the VAR in-tech foundation, obviously I will not disclose, but what I could tell you is, yes, we started. Yes, we started a long time ago. And yes, it has reduced significantly. I'm not sure, Nathalie, if you want to add any flavor to it.

Yes, on the VAR transaction, that's true that we have a trend of decrease on H1, which were significant. In Q3, we are seeing a decrease of the VAR transaction or more than 30% decrease. Thank you.

that's clear thank you and very important thank you dear participants as you're reminded to ask a question you will need to press star 1 1 on your telephone and wait for a name to be announced now we're going to take our next question and the next question comes to land of Frederick belong from Bank of America your line is open please ask your question

Hi, good morning. A couple of questions from my side. The first one is on the announcement you made that you have been approached by several parties, both for Evidian and Tech Foundation. Can you explain a little bit the parameters that you take into consideration when you look at those offers? And in particular for Tech Foundations, that business has been up for sale since the middle of last year, part of that business. So, arguably, this is an opportunity that you should look at very seriously. So, it would be good to understand a little bit how you look at how you assess this transaction from a risk value perspective, et cetera. And then second question, if you can give us an update on the current level of liabilities at the group level that you have, whether that's factoring, pension, et cetera, and any further sort into the financing structure of the two units post-spend. considering the financial profiles. I mean, you explained you were shooting for three times leverage at inception for FDM, but if you can explain a little bit how you're going to allocate cash between the cash and financial abilities in the two units. Thank you very much.

Thank you, Frédéric. Thank you, Frédéric. Diane, you want to take the first one?

Yes, thank you. Regarding the Mark of Interest received, it is our duty and the one of our Board of Directors to study all Mark of Interest received and our compass there is the interest of the company and of its stakeholders. So its shareholders in terms of value creation and certainty, I would say, of reaching a transaction, our employees, and our customers. This is the compass that we are following in studying these marks of interest. Coming back to tech foundation, as you mentioned, So we received a mark of interest for tech foundation activity and we highlighted that such transaction or the hypothesis of such transaction remains highly uncertain and that we are examining the mark of interest. Our central to remind everyone that, as you understood from our Q3 presentation, we are fully mobilized on our central scenario, which is our priority, which is the spin-off that we discussed.

Frédérique, on your second question, So on the future financing of the two entities, again, we will communicate on the debt allocation in due course, but again, the goal is to ensure that the capital structure of both entities will be an adequate capital structure adapt to the own growth of each entity and its cash generation. At this stage, the central scenario is that the existing bonds would be transferred to Avidian because of the different financial profiles between Avidian and Entec Foundation. On your first part of your question, you know on Q3, we don't really disclose the balance sheets of the group. But as you've seen, we've managed to refinance our bank financing in July. And again, we are fully financed. for the interim period and the liquidity is fully ensured for the group in order to deploy and execute our plan.

Thank you very much.

Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad.

I propose, operator, that we stop here. Maybe just a last word on my side. Again, we have seen Q3 with tangible improvement. You have seen that we are at least good progress and on track on our separation timeline, and we will continue working on improving this group and making sure that we satisfy all our customers. Thank you again, everybody, and looking forward to speak with you soon. Bye-bye. Thank you.

That does conclude our conference for today. Thank you for participating. We now all disconnect. Have a nice day.