Atos SE

Ladies and gentlemen, thank you for standing by and welcome to ATOS management conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your telephone. I would now like to hand the conference over to the ATOS management team. Please go ahead.

Thank you, thank you, operator. Good morning, everyone, and thank you for joining us today for the presentation of Atos Q123 Revenue. I'm Nordin Biman, Group CEO and Co-CEO in charge of Tech Foundation, and I will be joined today with Diane Galb, our Group SEVP, Philippe Oliva, Co-CEO and in charge of Eviden, and Nathalie Senechaud, our Group CFO. In today's call, I will first share the group's quarterly highlights. Then Philippe will give you a little bit more color on the performance of Eviden. And I will lead also on the tech foundation. Following that, Diane will provide an update on our steady progress that we are making in our strategic transformation project. And Nathalie will then go into more detail about Q1 revenue. And lastly, I will finish with a full year outlook before going to Q&A. So now, taking a look at our highlights. In the wake of our full year result, our Q1 performance exhibits the ongoing momentum we are experiencing and the benefits and improved fundamentals that we are gaining quarter after quarter through our transformation plan and the relentless efforts of all the ATOS team, which we would like to thank here. Specifically, at the group level, we delivered in Q1 a robust organic growth at 2.8%. Eviden, who recently launched its new commercial brand, reported another solid quarter with high growth at plus 9.5% organic growth. And Tech Foundation confirmed the early than anticipated stabilization of its core activities, which had flat year-on-year organic growth. Our portfolio reshaping action have driven the stabilization of that core revenue and simultaneously the deliberate reduction of our non-strategic activity, the value added resale and BPO, resulting in a minus 2.6 managed revenue decrease across the entire portfolio. We also continue to make significant progress on all fronts of our strategic transformation. In Q1, We finalized the sale of our Italian operations. We launched the Evident brand. We continue to run down the non-strategic business in tech foundation. And we rolled out our new client-centric organization, which we will talk about more later on. We confirm our objective to finalize our transformation project in H2. Lastly, with our ongoing momentum and the positive changes, We are all seen, we are glad to confirm our full year outlook for 2023. Now looking specifically at tech foundation on slide seven. The first quarter of 2023 has been another milestone delivering on our roadmap as we continue the stabilization of our core business, which is hybrid and multi-cloud, digital workplace and professional services. These are our core synergetic activities where we have strong position and deep industry expertise and in which we are investing and regaining traction to continue our turnaround. In Q1, those core activities delivered a flat organic revenue, confirming their stabilization for three quarters in a row now. At the same time, we continue to deliberately decrease revenue in our non-strategic activities BPO and value-added resales, resulting in a contraction of minus 2.6 in total for Tech Foundation. This decrease is deliberate and embedded in our plan and is needed to extract the best value possible for our core business. So the top line is where we want it to be. And the same goes for our recovery plan, which is going full steam on all fronts, in particular the adjustment of our cost base. Restructuring was twice as high as in Q1 last year at the group level. Diane will touch on this later on. This is essentially coming from tech foundation and the benefits in terms of margin are already following through. So the turnaround is happening and the results are really, really encouraging. Let's now move to slide eight and focus on the commercial activity. At 68% in Q1, Tech Foundation Book2Build continued showing improvement year over year as it compares to 59% in Q1 last year and 54% in Q1 in 2021. Are we happy with the progress? Yes, we are. Even more so because we continue to apply strict selectivity in our order intake, which is showing tangible benefits in terms of project margin in the order entry. with an increase of circa 150 basis points of a project margin this quarter versus same quarter last year. That said, are we happy with the current level? Of course not. We are working hard on rebuilding strong business development team with large deal hunter as well as a solid commercial pipeline which takes, as I mentioned before, between 12 to 18 months given the duration of our contracts. The good news is that the opportunities are there. You can see from the top right chart, the commercial pipeline for this semester is as high as it has never been over the last two years. So it is really up to us to go out and seize these opportunities in the next quarter. Demand is increasing, and especially in the current macro context, demonstrating the defensive and contracyclical nature of our TfCO business model. Importantly, our focus on margin and cash ensures that we are winning and signing this deal at a better cash profile than current business. We won interesting deal in Q1 and our sales of new logo and new offering represented 36% in our order intake, significantly higher than the 25% we had in Q1 last year. Let me walk you quickly through some of our deal we closed. We signed a major contract with Airbus And Atos Tech Foundation will digitalize Airbus Help Desk to transform the support experience. We will support 190,000 user, employee, and subcontractor in France, Spain, UK, the US, and Canada via an omni-channel solution focused on service excellence and user customer experience. In the Nordics, we have signed an up to seven-year deal with Ambu, the Danish medical device manufacturer, to enhance their digital foundations. With EMBU willing to move towards a cloud-based and scalable future, Atos will pave its wider transformational program, including laying the foundation for an upcoming digital twin solution. We also won a large contract with Technip Energies to provide digital workplace services for 2,000 end users across more than 30 countries. Finally, we want several deals with national grid in the US. Atos will migrate the existing digital identity estate and move to a state-of-the-art AI solution in the cloud. So as you see, a lot is happening right now at Tech Foundation. We are performing better than anticipated a year ago. The transformation has already started. We have the right teams, the right plan, and the right mindset. We believe that beyond the turnaround, many opportunities lie ahead for Tech Foundation. So I'm pleased to invite you to take a fresher look at our business during our next Investor and Analyst Day, which will take place June 7 in Paris. We will update you on the venue and agenda very, very soon. But I invite you to mark the date And I'm looking forward with my team to see you all and share more with you at this event. So with that, I will hand over to Philippe.

Thanks, Nordin. And good morning to everyone. So in Q1, if I'm putting aside, let's say the financial figures, we also saw exciting developments at Eviden, in particular with the launch of our new commercial brand and logo, which I'm pleased to share with you today and going forward. The business line of digital, cloud, cybersecurity, and big data will be presented to the market under the Evident brand. Believe me, it's not only about branding and communication, it's much more than that. Our new name and identity are really creating a strong traction with our employees and our clients, notably in the US where our digital business is mostly made of recent acquisitions, particularly in the cloud environment. And the world, to be honest, the Atos brand was not strongly on court. So we have a real and strong momentum in our employee engagement, restoring the pride, building up a motivation, and creating a new sense of belonging, which will no doubt will translate into enhanced business performance. If we are now looking at the great result that we deliver in Q1. So if we're turning to next slide to discuss the evidence Q1's revenue, We delivered another quarter of high growth, standing at 9.5%. As Nodine mentioned earlier, we are pushing our momentum forward and really driving a sustainable acceleration of our revenue growth. You may remember that I mentioned during the earnings release of Q4 that the profile of our order entry was skewed towards short-term signings that will yield revenue rapidly. This is exactly the demonstration of what I said in the first quarter. And it's really the case and already showing in our Q1 numbers, a strong momentum in our ability to drive short-term revenue. Q1 growth was also well balanced between digital cybersecurity and big data. That means that all the engines of Eviden are working well. Growth did accelerate in digital, mainly driven by our new business around application development, cloud modernization. move to cloud, particularly in Europe, where we are seeing a very strong traction at the moment. This strong growth in advanced computing has been delivered also in our high performance capability with the continuous ramp up of our revenue. And what I want to reinforce is that as Nordin mentioned on Tech Foundation, the rise of sovereignty is creating a significant momentum in terms of pipeline development on our high-performance computing as we are currently relying on the largest pipeline that we've seen for years. Our cybersecurity business continues to outperform the market with double-digit growth in Q1 in digital security. And you remember that it's a business that we are increasingly focusing our next generation of services and improvement of our portfolio especially around artificial intelligence applied to cybersecurity in our managed detection and response offering. Now, if we look at the next slide in our commercial activities, you can see that our booktube bill stand at 79% in Q1. But keep in mind that we delivered an outstanding fourth quarter that was running at 130%. As you may know, in our industry, Q1 is always lower than other quarters in our business. Moreover, we have a large HPC deal that's flipped into Q2, and I will make an announcement later on related to the size of this contract. We've also continued to be very selective and focused on deals that are more short-term, as I mentioned before. Why? Because they're offering faster revenue yields. 59% of our Q1 bookings were contracts with less than 18 months of contract duration. compared to 51% in Q4 that I mentioned in the last zoning release. They're also smaller in size. That means that 73% of our Q4 bookings were below 10 million of total contract value compared to 66% in Q4 last year. Why am I mentioning those two KPIs? First, because it's showing a very strong performance of our go-to-market strategy. to build a reliable volume-based engine, and that is what is giving us the level of confidence required related to the revenue growth performance that we're expecting on the evidence side. If we look at the key deals that we signed in Q1, first in cybersecurity, you've seen over the past quarters that we were really doing well. on the connected course capabilities so we sign another large contract with a german car manufacturer to provide the best capabilities to start let's say delivering very strong protection of connected core vehicles and to ensure the architectural design of the future in cloud We are also performing quite well. We mentioned the grand opening of our new cloud migration capabilities and cloud engineering capabilities in India and in Eastern Europe. And I want to reinforce that very strong reference that we have, and the name will be disclosed also in the coming weeks, that is related to a very large application migration and extraction of a mainframe to move to AWS. with the entire application layer that is shifting to a born in the cloud solution it matters because we all know that in the financial services industry this is a massive market and we're currently improving the capabilities that we have on that front in decarbonization through our commercial brand eco act we want also a very large carbon offsetting contract that is covering five continents for a major transportation and logistic company that is located in europe Through Ecoact, you remember that we provide carbon offsetting solution and helping our clients to deliver better commitments in sustainability and decarbonization commitment to their company, their employees, and obviously for the benefit of the world. Lastly, to illustrate the new momentum that we're creating on our computer vision platform, computer vision platform is all about artificial intelligence applied to image recognition. We won a large contract also with La Liga, that is one of the major European Football League, where we are delivering AI automated content production in all the clubs that are linked to first and second division. This innovative solution is also generating very strong traction on multiple use cases, especially in terms of public safety capabilities. And we can now demonstrate that we have a very differentiated solution that is also running with a very cost effective capabilities. With that, I will now hand over to Diane for an update on our strategic transformation project.