Atos SE

Good day and thank you for standing by. Welcome to ADOS Group Q1 2026 performance 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 need to press star 1 and 1 on your telephone. You'll then hear an automatic message advising your hand is raised. Please be advised that today's call is being recorded. I'd now like to hand the conference over to your first speaker today, Mr. Philip Tsao, Group Chairman and CEO. Thank you. Please go ahead, sir.

Thank you very much. Good morning, everybody. I am today with Jacques François, and we're going to talk about Q1. So let's go directly on page six on the business highlights. So first... First point is solid financial performance. I think we are quite happy, let's say, with the start of the year. We always say that's the lowest point of the year, and then we gradually, I would say, improve the growth. Further progress in the execution of the Genesys plan. So the Genesys is doing also very well. We will finish the first Genesys plan probably by mid of this year, and we have extended the plan, I would say, with another savings. to be finished probably by the end of 26. The idea for us, of course, is to have the full savings of the new, I would say, the extended plan in the course for the year 2027. We have a positive business momentum, and I will come back to this, with, I would say, a book to read that is the highest for the last five years. And so now we have a clear focus on our strategic pillars, Agency KI, we have launched a manifesto. Sovereign, we have launched also a manifesto internally, and it's going to be external in the coming weeks. And of course, cyber, where we are number one in Europe. So if we go on the key numbers on page seven, order entry is 1.5 billion. It's 89% for Atos. It's 87% with Eviden. And of course, as you can imagine, with Eviden, the order entry was a little bit low in Q1 with the war. We definitely think that it's going to be much better after, let's say, the war, but we don't know, unfortunately, when it's going to be finished. Revenue is 1.7 billion plus. It's roughly 1640, what we call with the go-forward perimeter. The go-forward, it's without bull that we have sold on the 31st of March. And Latin America, and we expect to close Latin America next week. If it's not a week beginning of May, but we will try I would say to finish this Transaction, let's say next week, which means that the perimeter now is roughly the perimeter going forward there are still Some countries we want to close but are very small But in terms let's say of sale, I think it's finished Next change of cash. I think very good news. It's minus 47 million and So you have to understand that we have $71 million of restructuring. So it means that we have produced roughly $24 million of cash. And also, we have the bull cash consumption. Unfortunately, we are not able to estimate that cash consumption for now. We will do this, in fact, when we're going to close H1. Just for information, bull, the EBITDA was around minus 25, CAPEX minus 30. So EBITDA minus CAPEX is minus $55 million. We estimate that probably there is a positive working cap, but it's possible, of course, that bull has an impact of, let's say, around 10, 20, 30 million, we'll see. So it means, in fact, that the production of cash is much higher than, in fact, 24 million. And then the liquidity in billion is a little bit above last year, December 2025. And remember also that we have bought already 62 million of the 1.5L. So, of course, there is less cash. But we have also less debt. So let's go on the three years for the Genesis. So I'm not going to highlight. Remember that there were seven pillars in Genesis. There are a lot of things that we are doing. So first, the first one is the growth. So as I say, we have redesigned completely, for me, the engine of growth. And it's going to, I would say, produce a lot of, I would say, of course, results in the coming months now and years. So I would say the teams are in place, most of them, no? We have, I would say, also put a focus with Florine, the CTO, on our three strategic pillars, so agentics, sovereign, and cyber. We have now launched this morning for two or three months a campaign also in France, I would say, to... Let's say push the image of ATOS, and I would say the main message is that ATOS is back. And as I say, now the term, the target operating model, in fact, in cells is completely in place. You will see also, for example, that the pipeline has increased almost by 1 billion in one quarter, and I would say that gives, of course, very good signs for the rebound that we estimate that will happen, in fact, in Q3. In terms of country reviews, so we sold Ideol. It's a company that was in Nordics. It's mainly, in fact, Norway and Finland. So we closed the deal on the end of Jan. South America, as I say, next week, and Bull was done also end of March. In terms of operational costs, I think we are continuing, I would say, the progress. The bidability rate now is above 80%, and it's, in fact, close to 85%, the target that we have. We are now, let's say, recalculating a little bit differently this billability rate because we take into account now the average salary of the people that are not billed versus, I would say, the salary of people that are billed. And then there is, and we see that there is, of course, a discrepancy, and there is no, I would say, magic, but usually the people that are more costly, unfortunately, are more on the bench than the people that are billed. So I would say we will... not recalculate, I would say, this rate, but we will adjust it, I would say, to the salaries. Legal entities, we continue to simplify the number of entities. We want to shave, I would say, the number of entities by hundreds still. And then we are also putting some AI internally. And right now, for example, we are testing AI revenues So, in fact, we are looking at all the contracts that we have, and it's several thousand, and we look also at the options, or I would say the paragraphs in the different contracts that we have signed where we can extend the pricing or build a little bit differently so it can give, I would say, some rooms of improvement in terms of margin and revenues for the teams. But Genesys is going very well. The Genesys, the initial plan will be finished mid-26, so we estimate that the $650 million saving plan is almost complete. And that's why we have extended now the plan to have, I would say, a plan that will finish now end of 26. So it means it's a target above $700 million. In terms of workforce on page 9, as you can see, so we started the year at 63,000. We continue, I would say, the restructuring, and we also manage the levers versus irings to be negative. So we finish at 61,000. You take out bull to 2,500, so we are now at a little bit below 59. If you take South America, we are probably close to 56,000, so that's probably where we will be probably at the end of next week. And I would say the I definitely think that we will land around 55,000 when Genesys will be complete. So we are almost there. We go on page 10 on the order book. So first, the book-to-bill is very strong, 89 for Atos. And in North America, it's above 100. Just for the analyst, I always say that the book-to-bill is a proxy, unfortunately, of growth. And I think we have a very good example The book-to-bill of North America is above 100. They continue to decrease, unfortunately, in terms of top line in Q1. The book-to-bill of the U.K. is below 100, and now they're growing. So as I say, unfortunately, it's not an immediate, I would say, reading when you have a book-to-bill at below 100 that it means that we're not going to grow. I don't think that is the case. We are still looking to find a better measure. It's not an easy one, but we are working on it. I hope that we can probably share some, let's say, results in H1 at the end of the year. The qualified pipeline, as I say, is up roughly close to $1 billion. We are now at $13 billion roughly of qualified pipeline, so almost two years of revenues, a little bit less than two years, of course. The renewal rate also is 94%. The good news is that we don't have big renewals now going forward. So, in fact, for this year, I think we are not going to lose any other contracts. It has been done, of course, in the course of 25. The two big contracts in the U.S. have been renewed. One has been signed, in fact, at the end of March with CNA. It's a very big contract, 480 million dollars. And we are also discussing probably to extend the contract to more than this 500 million. We have probably, we're still in negotiation in the course of Q2. And the second one also is in California. We have won the contract. It will be signed in the course of April or May. It's done. We are just waiting, I would say, the signature of the client. And then for the U.S., it's done. We don't have big renewals, in fact, in other parts of the world. There is a medium-sized contract, in fact, in BNN right now. We are waiting the answer probably next week. And that's all, which I think is very good news. And that's why we are very confident on the rebound of the top line in Q3. And then, as you can imagine, we have a good traction in cloud, in cyber, and in data AI because we are growing, in fact, in these three service lines, let's say. You can see below some contracts that we have renewed. So, for example, CNA in the U.S., it's a very big contract. There is some CMNI, there is a digital workplace and cyber, and we are also now looking for digital applications and data AI, in fact, for the client. It's an insurance company, so I definitely think that Adjantic has a big impact, in fact, in this company. We have, for example, with Gigalith in France, renewed a four-year plan with Cyber. It's what we call framework agreement, so it means that we have after that the possibility, I would say, to tender, put people, or put, I would say, new projects in place. Most of the framework, in fact, are not in the book to build, so we are very cautious on this, and that's why it doesn't, I think, probably the book to build is a is a minor, I would say, minor of probably what is going to happen on the revenues going forward. In the UK, we have won a very good contract with the Ministry of Housing, 63 million per seven years for digital applications. And for example, in Germany, Austria, in Austria, we have won also a very big contract with OBB, 48 million for nine years. But I think that there is good traction. I see that there is more and more, I would say, appetite. Those are open from the clients. I think it's much better than last year. And definitely, I think now we need to win, I would say, the contract. So I would say we are back to a normal business. If we go on page 11, this is the three pillars in terms of technology. This is where we're going to invest most of our R&D and push, I would say, very hard. So agentic, sovereign, and cybersecurity. So agentic, as I say, we launched already the manifesto. We have already studios in place in the four big countries, and we have now signed different clients. And there is an ecosystem around us of startups that will help us, I would say, deliver the agentics and the agents in the different scenarios of our clients. Then with the sovereignty, so there is a manifesto also that we're going to produce. It has been already shared with the top 200 within Atos, in fact, last week. And we're going to share it now externally in the course of next week or probably beginning of May. There is a lot of appetite, as you can imagine, right now, especially in Europe. And then cyber, of course, there are a lot of things going with this. We see a Also some developments with there and of course we have a very strong position as you can imagine in Europe and we are pushing also cyber in North America. Now if I go to the next page, so the next section is the Q1 revenue performance so I can go through I would say the main numbers. So first, as you can see, when we looked at the Q1 restated, it's roughly 2 billion. We take out the scope and the foreign exchange, the divestitures. So in fact, the perimeter going forward, which is without bull and without ideal, and of course, without Latin America, was roughly 1.8 billion. We finished at 164. which is roughly minus 11%. And as I said, we're, in fact, anticipating, let's say, a weak Q1. It will be much better, in fact, in Q2. And we are still looking to make the rebound in Q3. If you look, in fact, on page 14 by region, we're probably a little bit, let's say, not surprised, but North America probably is too weak. The sentiment, in fact, the economic sentiment is... is a little bit, let's say, challenging in this area. The rest is OK. As you can see, the UK now is growing at plus 5. We estimate also that Germany will be on positive growth in Q2. So we see, I would say, region by region, that I would say we are coming back to a positive territory in the coming quarters. If I go, let's say, region by region, so I start with Germany on page 15, I think Germany is doing quite well. As you can imagine, also, the EBIT now is positive in Q1. It was negative last year. And by the way, just for information, the EBIT of the group has more than tripled without bull in Q1 versus last year. We don't publish, of course, the EBIT. We will do this, in fact, in Q1. But I would say we see the benefits of Genesys now falling through, I would say, the P&L already, of course, in the beginning of 26th. then you have, I would say, some contract wins. I'm not going to go over, but I would say we are stabilizing, I would say, Germany. And as I say, we estimate that the rebound will happen in the course of this year. Now, North America is probably the most difficult, let's say, region. In fact, the start of the year was probably lower than anticipated. But we are signing, in fact, a lot of new contracts. And the book-to-bill is 160, so it's big. And definitely now we estimate that we're going to ease, let's say, this contraction of revenue in quarters. You can see below some big wins. The biggest one, of course, is CNA. And also we have another one, CMNI, at $30 million, as you can see below on the bottom, I would say, of the page. Seventeen is France, so France is still so challenging. Remember also that we did not have a budget in January and February, so it freezes a lot of our public and defense customers, and public and defense in France is 40% of the revenues. So we know that the start of the year is probably, of course, lower than anticipated in the budget for us. But we have some very good signs. For example, with SNCF, when I arrived last year, they said that they want to stop to work with Atos, and finally we won a very big contract with them. So it means that now the doors are open, as I say, in many customers. Gigalith also, it's a bigger contract. We have one also for Cyber, and you can see also other, I would say, wins and qualifications. UK, on page 18, so that's the The rebound of the UK and also the profitability also is skyrocketing, as you can imagine. So we are very happy. And there is more to come. I think we have also a big contract in Q2 that will probably be public. So I would say we are quite confident right now in the UK. And as I said, that's the first region to come back to growth, and there will be more, of course, in the coming quarters. Last, the international markets on page 19. So we have taken out the 28, 30, that's Latin America. So, in fact, without Latin America, it's around 220 million, so minus 12. It's mainly, in fact, impacted by one client in Asia, in fact, that is stopping the CMNI contract because they want to manage internally, I would say, their data. The good news is that we suffered, in fact, in 25, and we continue to suffer in 26. But at the end of the year, this ramdown is completely finished. So it means that we are quite confident that we will restart growing, in fact, in the course of 27. You can see also some wins that we have in Singapore, Spain, and Slovak governments. Last, in fact, and it was not international, sorry, is, of course, at Benelux, so Benelux or BNN, what we call with Fatos, This is also a slow, let's say, start of the year, but we are, I would say, quite confident also that this region is doing very well. We have a win also with Eurocontrol, in the automotive sector with DAF, and also in the financial services, as you can see. Now, as you can see on page 21, So without Bull, in fact, the revenues were 71 million, and we are roughly at 69. It's roughly flattish. In fact, we have been impacted by the war because part, for example, for Vision AI, a big chunk of our business is in Middle East. So we definitely think that it will be much better after the war concludes, but when, nobody knows. But I would say we have a good traction in terms of also... and we are very confident that we will accelerate both in the book-to-bill going forward and also, I would say, in the top line. So that's it for me. I give the floor now to Jacques-Francois for the liquidity position.

Thank you, Philippe, and hi, everyone. So on page 23, as a reminder, the publication of the quarterly liquidity position is part of our regular reporting requirements, which have been defined and agreed with the group's financial creditors. So the certificates are available on our website. Our liquidity position remains strong at the end of March, thanks to the limited estimated cash consumption over the last quarter. In Q1, the net change in cash is estimated to be approximately minus 47 million euros, which includes 71 million euros spent related to the restructuring. This figure is reported without any use of the account receivable factoring or without any specific optimization on trade payables. This number is also reflecting the results before the estimated impact. So we take them from the left to the right on the slide. So A, the change in the unsolicited payments received in advance of the invoice payment due date during the year. So that's the minus €115 million. Then you have the exchange rate fluctuation, which amounts to approximately minus €2 million. You have the MLA impact, which is plus €257 million. And you have the debt repayment of minus €62 million. So these amounts are excluded from the net change in cash, which I announced is minus 47 million euros. And that brings us, as a result, as of the end of March 26, to have the Atos Group's liquidity at 1,736,000,000 euros, which is to be compared with 1,705,000,000 euros at the end of December 25. And this is more than 1 billion above the minimum requirement of 650 million euros set by the credit documentation. So with that, I'll now hand over to Philippe.