Atos SE

Good day and thank you for standing by. Welcome to the Attoff Group FY 2025 results conference call. At this time, all participants are in a listener-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 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Philippe Salle, Group Chairman and CEO. Please go ahead.

Hello. Good morning, everybody. Thank you for joining us for this call of the four-year results of 2025. I'm here in the room with Jacques François, the CFO. And Florine, our CTO, because we're going to talk also a lot about technology. And of course, we're going to talk about the future of the company. So the agenda of today is four topics. The first one is 2025 Excel Business and Strategic Atlas that I will manage. Then Florine will take the floor to have a tech update. And today we are launching two things, with the launch of Atos Amplified and the launch of our Agile Peak Studios. Then I will come back on operational and financial results with Jacques Francois. We're going to have together this section. And then I will finish by the outlook, and then we'll take Q&A. So let's start with the first part, and I'm going to go on page 6. So 2025 was the year for me of the reset. Remember that I want to have three phases, I would say, in the turnaround of the company. Reset, rebound, acceleration. So 2025 is the reset and 2026 is the rebound. In 2025, first, we have a very good financial improvement with clear signs of recovery, we will see that. Second, a significant progress, of course, of our Genesys plan. And the third is that we have a positive business momentum and a commercial, I would say, traction. If we go on page seven, the key numbers of the company, first in terms of top line, the revenues at 8 billion, 8-0-0-1 to be really clear. So above the target that we have set during the Q3, the last call, in fact. Operating margin, 351 million. It's 4.4% just for information. That's the best margin we have for the last five years. And I think I'm very pleased to say that we have doubled the margin versus last year, with a decreasing top line of minus 14%. And remember that we have gathered $340 million at the beginning of 2025. Next change in cash is minus $326 million, although we have accelerated, I would say, Genesys. And we paid, in fact, more than roughly $15 million of exit costs. And it's better, of course, than our guidelines that say that it will be 350 or below. And then the liquidity, and we published this already in Jan, is 1.7 billion, which is far above, of course, I would say, the covenant that we have in our debt package. That is 650 million. So we have ample cash to finish the genetic plan. And, in fact, this year we'll be already cash flow positive and the debt, in fact, will go down. Now, if we go on page 8, you can see the inflection point in terms of the revenues. So, the fourth quarter, and that's the figure we have published, in fact, in January, was around minus 9%. So, you can see, I would say, quarter by quarter, that we have, in fact, a deceleration, or let's say, a less momentum, I would say, a better momentum in terms of revenue decrease. And then you can see also the number between and the organic growth that we have, which is around minus 9% in Q4. In terms of the OM, so the EV, the pro forma of 24, for your information, we thought we agreed that we are sold in 24, and that the constant exchange rate is 172. So you can see that we have more than double the margin, and the margin was beyond 2% in 24, and in terms of 25, it's at 4.4%. And in terms of cash flow, the net change in cash was roughly minus 700 million in 24 and we have minus 300 million in 25. If we go to page 9, you can see also that the backlog for the book-to-bill, excuse me, has also improved in the course of 25. That's 94% for H2. And the total book-to-bill, in fact, for 25 was 89 versus 82 in 24. Now if we go to Genesis on page 10, remember exactly the plan that we have sketched in May 25 with the seven pillars. uh i just decided i would say exactly what we have shown in fact in may and i will now if i go on page 11 a little bit deep dive on what we have done so on the first pillar we have reviewed the top 100 accounts and it has a i would say produced one billion plus of opportunities remember that during the cmd i have said that the number of business line per The cost was around 1.4 and we want to push it, of course, to two or above, I would say, that level. And then we have also, in terms of both the streamline, I would say, the processes, and also with, I would say, a better organization in terms of sales, with salespeople in the different GOs and EVDs. In terms of HR, so we have reviewed the bonus framework. We have launched our ATI plan, which is a share plan for the top 200. and we have started also to have a leadership culture. And this year we're going to push very hard on the AI culture. In terms of company reviews, so we have roughly 10 countries that are exited or inactive. Remember that we want to go probably above around, let's say, 40 countries. And we have also sold the seven countries in Latin America and also in Nordics, which is now in Finland. And this year we want to continue to probably close or make it active around 20 countries. In terms of portfolio review, first we have sketched, I would say, the different branding. So you have Atos Group, which is the holding, and under Atos Group you have three brands now. Atos, of course, the service LSA company. Eviden product and software, and Atos Amplify, the new name that we are launching today for the consulting arm. So we have six, in Atos, six business lines and six NGOs. And with Eviden, after the disposal of BUL, the high computing, we have three product lines. In terms of PM and GM, so in terms of project margin and gross margin, so that's the way we look at our P&L internally, your revenues, project margin, gross margin, and then EBIT margin. So we have, I would say, a plan. Remember that we are looking at 650 million of savings, and we have already achieved 80% of it. 350 will be millions. We have increased the billability ratio by three times. We are now above 80%. We have also continued, I would say, to push the offshoring. And as you can see, we have also a different, I would say, action on the reduction of the surpluses, just switching, I would say, bench people. I would prefer, of course, to utilize people on the bench. Just for information, very important, the discipline also on the new contract we have signed. Remember that we want to have a margin of 25 to 26 in the future. And in fact, if you look at the black contracts, we are already at that level. And on average, last year, we have signed roughly all the contracts on the book today, so the 8 billion plus and 7 billion plus today, is around 24%, which is roughly 2.5% above what we have done in the course of 24. And it's very important to understand that we could have probably a better book to read in the course of 2025, but the idea was really to protect the margin, and I prefer to say no, and for some tender, then I would say to have, let's say, more revenues and less margin in the future. Pillar 6 is the cost review, is the GNA, so we have done a lot of things there, and for information, we reduced the GNA by roughly 26%. Remember that the target we have in GNA is 5%. We are close to six, so we still have one point to gain in the course of this year and next year. And then in terms of cash, for the pillar number seven, the DSO is at target. We have reduced solar use by 13%. We have reduced the width, in fact, for the beam by roughly 27%. And we have managed quite very well, I would say, the capex. And without blue, in fact, we are at roughly at 100 million plus. Just on the bottom, you see also that we have a complete review of the target operative model on the top, and also the government has been simplified. Now, if we go on page 12, today we are launching, as I said, two things. I'm going to talk on Amplify, and then we're going to talk on the Adjantic Studio with Florine. So Amplify is the consulting arm of Bodhi, I would say, of Fatos. It's still the brand of Fatos because it's very linked to the services that we provide with Fatos. And the idea is that we're going to refocus Amplify on AI. The idea for us, it's a door opener, in fact, in artificial intelligence that will help us after that, of course, to push the studio that we're going to. In terms of workforce, on page 13, we are now at 63%. and also the restructuring we have done. And if you want to see without Latin America and without DUL, we are close to 57,000 people. That's the number of staff that we're going to have after the diagnosis. Last, on page 14, that's the order book. So we have the key numbers. As you can see, the renewal rate, in fact, is 92%. It's not bad. I want to have a bit more this year. And in fact, in this year, for the large accounts, what we call the large bids, over 30 million per year, we estimate that we're going to win most of them, or all of them, in fact. The number of strategic bids is 19, and it was 10, in fact, in 2024. And there's a good fraction, in fact, in cloud, cyber, and data AI, where at the business end, we are pushing more than the rest. You can see, I would say, different names on the, I would say, expansion or win. with them, we're going to do probably 250 million in the course of 26. Last, on page 15, just to also recognize that we also continue, I would say, to be recognized as a sustainability index. So we have one of you that we test on the in terms of stability. You can see this on the left. And then many are business aware from the analyst that we continue to have in the course of 25. I go quite fast, in fact, because I think it's very important that we spend some time on the technology today, because there have been a lot of buzz on AI and probably a completely crazy movement for me on the share price in the different companies, on that also. And we estimate, in fact, that for us, we are very well placed in AI. And, in fact, we don't do EPO. That is probably, I would say, the business that is going to be attacked for me by agentics. And definitely, I think that there is a big opportunity for us, in fact, with the AI going forward. So with this, I give the floor to Florin, who is in the room with us, and he's going to talk about you, about, I would say, the AI and the agenda we're going to launch today.

Thank you so much, Philippe. Good morning, everybody. Thank you for joining us. Delighted to be here. So what I suggest we do for the next few minutes is for me to walk you through the way that we see the market developing in general in the space of technology. And I will double click on AI, of course. And I will share with you how we are planning on attacking and delivering this very exciting space. So I'm sure you're well familiar with the fact that global AI spending is booming. a lot of increasing AI infrastructure, AI services, AI software, AI cyber, and we genuinely and truly believe that Atos is very well placed to win in all of those areas. We do have some very strong moats. So the background and the history of Atos, as you all know, is to work and help our clients in highly regulated environment where security is a top concern, where sovereignty is increasingly becoming a priority, where the IT landscape is very complex and where a lot of the systems are truly life and death and are genuinely mission critical. And what we see happening is that in all of those environments, there is a flying wheel convergence happening between sovereignty, AI, and cyber. And the fact that we have this decades-long managed services relationships with the clients, the fact that we have really deep know-how of their environments, of their data, has truly enabled us to progress very fast into packaging those into agentic AI as a service offerings. And I'll cover this in more detail. As you know, the technology space is quite complex right now. It's evolving super fast. There are daily announcements from left, right, and center. And our clients are really hungry for a level of clarity and assurance. And I think we play a very important role as, if I'm allowed to use the word, Switzerland of governance. The ones which are able to provide secure, cross-platform, neutral, agentic AI. And we're doing this through a very exciting set of partnerships with the big players, but also through a set of unique partnerships with AI-native and sovereign startups. So let me double-click on all of this into more detail. So if we go on the next slide, what you'll see is the three big bets for Atos going forward. We believe these three pillars are going to be substantial drivers of growth for us in 2026 and beyond. The first one is mission-critical agentic AI. This type of agentic AI is fairly different to the type of AI that is most commonly mentioned in media. When you're doing agentic AI in really complex regulated environments with high level of governance, requirements around sovereignty, reliability, security, and responsibility, the type of technology and the type of services is fairly different. We're also seeing digital sovereignty be super important for our clients, and actually this is the case in North America, in Europe, and international markets as well. And what we're doing is that we have embedded digital sovereignty as a core design principle across all of our portfolios. And last but not least, cybersecurity, of course, continues to be a high area of focus. Development in AI are, of course, helping us to deliver cybersecurity services in a better, faster, more efficient way. But AI actually, of course, also opens up new attack surfaces and new potential vulnerabilities. So what we see happening is that there is this flywheel of self-reinforcement powers between AI, sovereignty, and cyber, and we believe we have the right to be winners in all of these three areas. Sovereignty, of course, requires security controls to be able to be fully enabled. Sovereignty is, by definition, more complex than non-sovereign solutions, and therefore AI can play a role to make them more affordable and more innovative. As I mentioned, AI has a huge impact on security. There is a quest to secure AI, but also to use AI to drive more security solutions. So you will hear us going forward really focusing and doubling down on these three areas. And what I would like to do is to double-click into each and every single one of those to give you a flavor of what we're doing, the success we've seen so far, what we see happening in the marketplace, and to give you a glimpse into the future. So if we go to the next slide, slide 19, We are very excited to have four Atos sovereign agentic studios come out of stealth mode in UK, in US, France and Germany. This will serve the local markets based on their needs, the focus industries, their requirements and they're all built for truly mission critical production from day one with extraordinarily high focus on the topics which make AI adoption at scale more difficult in most organizations, which is governance, sovereignty, reliability, security, and responsibility. So the reason we're launching this studio is that we see that our client spend is converging services and technology budgets into a unified value pool this value pool and the size of those budgets are increasing, of course. But there's also a very high demand for measurable value generation at scale. Everybody is sick and tired of pilots and proof of concepts and prototypes. Organizations really want to make sure that they have AI which is secure, which is reliable, which adds business value at scale. And they The main challenges in this space is governance and orchestration. And this is where we believe that Atos is an absolute key power player. And then we're actually also seeing sovereignty emerge for AI as a very high priority. So our clients are very happy to use closed black box models for governance the typical back office functions, which are important, but which are not differentiated. But they actually are increasingly becoming wary of developing their own brains, so to say. So they own their future, and they have full control of their data, the controls, and the intelligence which they're building. So we are very excited to announce a unique partnership with one of the absolute leaders in foundational models for a Gemtech enterprise, which is Poolside. And this will allow us to deploy and develop sovereign solutions in Europe, in North America, in international markets. And this will help and is helping already our clients to harness the full power of AI on their terms and without compromise. We're, of course, also working with the major market leaders here, such as Google Cloud, SAP, IBM, AWS, Microsoft. As a little anecdote, we've just received frontier partner status with Microsoft, given the fact that we were one of the leading organizations leading the path around AI and innovation. But we're also working with this really interesting set of AI-native startups, which allow us to add unique value across the entire value chain of AI. So we're using KYT, which stands for Know Your Potential, to help our clients mine and redesign processes. and to really understand the business case and the value generated with AI on a very specific and data-driven manner. We're working with the likes of Emma and M8N to create and orchestrate and manage the digital AI employees, the agents. We're working with PayEye to really be able to measure and value the highly how should I put it, movable cost of AI consumption and to have the causality and the correlation to value. And we're working with clarity around helping our clients drive this continuous change. And we're using all of this technology for our own back office and front office transformation as well. So I know I've used a lot of words here, a lot of concepts, But let me move to the next stage and try to make this very real for you with a number of client examples. So to be honest, we have more demand than we can almost handle right now. We have incredible interest in this agentic AI studios and just sharing with you a couple of examples here. One is Scottish Water, where we're working together to really transform the way they are doing operational planning, risk assessment, decision-making across the entire national and wastewater networks. And this is really mission-critical environments where AI agents are used to continuously monitor the network, to analyze proposed changes, to automatically generate contextual risk assessment. And as you can imagine, this is the type of AI which really needs to work, which really needs to be secure, which really needs to be accurate and timely. Another example is DEFRA, the UK Department for Environment, Food and Rural Affairs. Their mission is to make the air purer, the water cleaner, the land greener, and food more sustainable. So obviously a very important mission and vision. So what we're doing with Atos is that we're using a new set of highly differentiated agenda solutions we have developed to rapidly modernize and transform their entire application portfolio. We call those digital transformation engineers. They're AI agents which work in collaboration with our human experts to achieve things which, frankly, wouldn't have been possible to achieve just a few months ago. So we're seeing a close to 30% time-to-market efficiency gain around how to modernize those mission-critical applications. Another example is mBank. We are really working very closely with them to develop their entire advanced digital foundation. And again, this is not AI, which is an add-on. It is mission-critical AI, which is being used to improve operational resilience, to create real efficiency in their business, to manage risk, and to really make a difference around their customer experience. And there are many, many, many more examples of this. So we're very proud about this Sovereign Agenda KI Studios. Much more to come in this space going forward. If I go to the next slide, I'd like to share with you the perspective around how we're approaching the Sovereign space. So what we see is that clients they have an increasing desire to retain control, authority, and accountability over their data, their infrastructure, their applications, and digital operations, and to have distinct compliance with all the applicable regulations to minimize dependency, exposure, and disruption risk. I think it's important to note that this is not just a European development. We see sovereign requirements being very high in North America as well, both in the United States and in Canada, and also in our international markets. And in actual fact, there are data points which point to the fact that over 80% of requirements from clients going forward are going to include a critical demand for sovereignty. And this is a massive business opportunity. It's currently estimated to be in the 40 to 50 billion euro of total addressable markets, and it is growing quite fast. And frankly, we believe that we are one of, if not the best player in this space. I'd like to draw your attention to the quote on the bottom right corner from one of the leading independent analysts, which is basically, and I'm quoting, few players can claim the unique combination offered by the Atlas Group, an umbrella of sovereignty, which provides the whole with an unprecedented career. So we are able to do this in a variety of models because sovereignty takes different shapes and forms in different countries. What UK means by sovereignty is slightly different than what France and Germany means by sovereignty, which is different than what US means by sovereignty and so forth. So we're able to offer this full spectrum of solutions ranging from enhanced native clouds, to controlled clouds, to trusted clouds, to disconnected clouds, to fully sovereign AI, as I mentioned previously. So I would like to give you, again, a little example of this. One of them is Eurocontrol. Eurocontrol, you might be familiar with. They are the organization which manage and control the European skies, they are providing a really mission-critical service to the entire continent. If their systems and operations wouldn't work and flights would not fly, that would obviously have a very, very high impact on the entire economy. So what Atos is doing is that we're one of their leading partners to ensure the strict resiliency safety, security, compliance requirements around the entire IT value chain. And we do this in a way which is coherent, is aligned with the industry regulations, and generally spans infrastructure, application, artificial intelligence, and so forth. And this is a solution where we are partnering with Microsoft as well around the Azure cloud. If we move on to cyber, that is of course a very hot topic, and it continues to be so. And what we're seeing is that AI security has really changed the game. So it's become the primary focus area for the way our clients spend. AI is truly redefining threats, defenses, and vastly expands the attack surface and cybersecurity is shifting to an always-on compliance model where our clients are required requiring very much verifiable controls and sovereignty aware architectures and again this is a space which is moving super fast and really redefining the game. So to give you a little anecdote, it is estimated that there are 80 times more machine identities in any organization today compared with human identities. And this is, of course, because of the advent of agentic AI. So that type of AI where you have agents which perhaps only need to have split-second life cycles, they need to be controlled, they need to have verifiable access controls, they need to be spanned up and potentially terminated in under a second, really redefines the rules of the game. So we believe that we are super well positioned in this space. We have very much an end-to-end best-in-class set of cybersecurity services, ranging from advisory, which Philippe just mentioned. We have very much embedded AI agents in our entire lifecycle of threat intelligence, threat detection, investigation, and response. We're also, we believe, one of the market leaders in post-quantum cryptography. And of course, with the Evident Group, we have some fantastic EU European sovereign cybersecurity products. So again, to make this real, I'd like to give you a sense of the work that we're doing with the European Commission. This is one of the most important cybersecurity services in Europe, full stop. And ATOS is on point and has won a substantial framework agreement to provide operations, incident response, digital forensics, threat intelligence, threat monitoring, Offensive security in the areas of vulnerability management, penetration testing, and red teaming. And again, I draw your attention to a number of independent analysts which continue to recognize us as a market leader in the cybersecurity space. So let's move on. to the next slide and try to give you a big picture of where we're at and how we see AI impacting our businesses. So this might be a little bit of a busy slide, so please give me a chance to walk you through it. So at the bottom of the slide, you're seeing our different historical business lines with data and AI, cyber, evidence, and so forth. And the Harvey Balls are representing the way we see AI impacting those specific business areas. So on the top row, you're seeing how AI is impacting the addressable market expansion with the full Harvey Ball, meaning it is very high expansion, more opportunities for us. or a limited partial harvible demonstrating or indicating a limited expansion. And then the AI top-line pressure row is basically a way of indicating how we see AI impacting or having the potential to impact our top-line revenue. ranging from low to high. So all in all, all in all, we see AI being a strong driver for growth in Aptos. We are very much on the offensive. We believe that AI is a game changer, and we are super well positioned in this space. But the important bit to mention here is that we have a leading position in a number of these building blocks in the colorful table below that what we are doing very successfully is to combine and recombine them into these three big bets that I've been talking to you for the last few minutes. So again, please remember the growth engines of Atos are agentic AI, digital sovereignty and cybersecurity. And we're seeing substantial opportunities and a lot of momentum in those areas. And we truly believe we have the right to win. So moving on to the last slide, as a little bit of summary, we are still going through a massive transformation. We've turned the corner. We are reimagining and we have reimagined the entire technology function in Atos. We're attracting some absolute top-notch talent. We have done a full portfolio redesign, doubling down on agentic AI and AI in general, digital sovereignty, and cyber. we have a very unique and differentiated approach to sovereignty and security we're boldly and ambitiously embracing this new world of services software where increasingly we are building very unique very specialized ai solutions powered by software to augment and enhance our services and the agentic sovereign studios which we have just launched are really a showcase of much more to come. We really look forward to sharing with you progress and a lot of success in this space. So having said that, handing over to my colleague, Jacques François, to walk you through some interesting numbers.