Atos SE

Good day, and thank you for standing by. Welcome to the ADOS Group H1 2026 Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 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, Philippe Salle, Group Chairman and CEO. Please go ahead.

Thank you. Good morning, everybody. So let's jump to the presentation. As you've seen, there are four different topics. I will take the first two, the business highlights and the operational performance. Jacques-François will talk about the financial results. And I will finish with the outlook. So, let's start with the business highlights. So, in a nutshell, first, for us, it's a strong H1 performance with a full year of targets that I confirm, and I will come back to this at the end. Ongoing further delivery of cost structuring, so Genesis is well underway. I will also comment on this one. The commercial traction also is building further. It's a long run, this one. We know it takes some time. to rebuild, I'll say, confidence with customers. And last point, increasing momentum around our three strategic pillars. And I will come back also on this one. So if we look at the key numbers, so on what we call the going forward perimeter with our build, with our Latin America, and also the small discharge that we have done in Northern Europe, the revenues were 1.661%. which is roughly minus 6% versus last year. It was in line with what we have guided in fact at the end of Q1. So it's easing versus Q1 and also it's the first time sequentially that Q2 in fact is above Q1. It was not the case in fact in 2025. The operating margin for the perimeter is 190 million. We are close to six points of EBIT and in fact we are You will see that above for Atos and still flat at 0 with Eviden. In fact, in Eviden, we have also invested heavily in the commercial activities, and we have been impacted slightly, I would say, by the Middle East. Order entry is at 91, at 1.5 billion. It's also, I would say, getting some momentum, and you will see also that the qualified pipeline also has increased. Let's change in cash that was done in fact in mid of July, so it's still minus 120 million. And just for information, the restructuring cost was minus 130. We are still contemplating a total cash out around, let's say, we say between 150 and 200 million. In fact, in Q1, it will be probably between 190 to 200 million this year. So it means that probably in the second half, it's maximum 70 million. Net debt is roughly at 2 billion, but it's normal also that the net debt is higher in H1 because we're going to have a positive cash flow. We will have also a current in advance payment. It's always lower, in fact, at the end of June. It will be much higher, in fact, at the end of December. So the net debt, of course, will go down by the end of the year. And the liquidity is close to 1 billion. It's far more than we need, in fact, as we have lowered, I would say, the cash trap close to roughly 100 million. Okay, next slide. You can see the momentum. So you can see, I would say, the different numbers that we have shown on the growth of Atos. So I would say for the first time we are now close to minus 7%. Remember that last year we suffered a lot from the Stop of contracts and also, let's say, stop of clients, unfortunately, from their will in 24 and early 25. We can say right now that there is no loss, in fact, in H1 this year. And, in fact, we don't foresee any loss, in fact, in the course of H2. And that's why it's easing versus, I would say, last year. In terms of group OM, last year was 133 in H1. Remember that it's with the new perimeter. Without the new perimeter, it was around 110. And this year, we are at 190, so roughly two points above last year. Now, if we zoom a little bit on Genesis. So Genesis, we launched it, in fact, early 25. I commented, in fact, in the CMD in May. The Genesis, the first... The program, the 615 million gains, in fact, has been done in Q1. So we have done the Genesis in one year. I have launched, in fact, a second phase of Genesis to ensure that the profitability will continue to increase, of course, in 27 and 28. So we are now at 800 million or above. But the Genesis will be finished by the end of the year. So the restructuring will be really 25, 26. So we can refocus, I would say, the... Mind of the management to the top line, of course, which is the challenge for us, but definitely we have good signs that it will come. Now, if we go to the next slide, you can see also on the workforce, so after, I would say, all the diverse teachers, the genesis, we are back roughly to 54,000 people. We are probably at the right level. There will be probably a little bit more, but not that much. What is interesting to note is the attrition rate at 12%, which is probably a little bit too low, versus the 16%, but it is for me a good signal that I would say our staff are motivated, and I would say that we suffer a loss, an attrition, excuse me, that is very small. and just for information, we have done a survey on the morale of the employees worldwide and what we call our internal NPS went up by 11%, so it means that there is more. I think the staff is understanding exactly what we are doing with the group. If we go on the commercial track, I think the very good news first is the book-to-bill. Remember that the book-to-bill at 91 doesn't mean that we're going to decrease. Just because, for example, the framework agreements, we don't count them in the book-to-bill. And if you see below, for example, on the far right, with the European Public Sector Agency, it's a massive contract that we have signed, 187 million for four years, but this is not in the book-to-bill. And the different framework agreements that you can see, one with the Dutch police, one with the European Patent Office, This is typically I would say contract that we don't book in fact in the portfolio. Good news is that the France, UK and Eviden are above 100% in Q2. So it means that there is traction in these countries and I would say bit by bit there will be traction in fact in the different NGOs. The second good news is the qualified pipeline. It continues to increase by 800 million. It was already up 900 in Q1. So it's roughly 1.7 billion more, I would say, tenders in H1, which I think it's for me a sign that there is, first that Atos is invited, of course, in the different tenders everywhere, and also the fact that I would say the commercial activity has some traction, and of course it will pave in the coming quarters. Renewal rate is 94%, so we are back to normal. It was the case, in fact, in 2024. And we have done also NPS, I would say, for the customers. We have, I would say, good signs that know that the customer understands the strategy of Atos and also are confident that the group will continue, I would say, to serve them on their different challenges in the future. You can see some major contracts, the BO. And, for example, in the UK, on the left, it's a new logo. Very interesting logo. A client where we start with CM&I and G2 Workplace and we will continue with application AI in the future. Just for the different pillars, so remember that the three different pillars that we have launched and where we are now focusing the group, which is agentic, so agentification of the company, cyber security and sovereignty. This is a typical, I would say, wins that we had during H1. So Eurocontrol is a big client of ours. We are now modernizing, I would say, their applications. You can see DEFRA, CNA, the big contract we have signed with the U.S. It's a TCV of close to $500 million. And we're going to put also agentification in the contract. You have also examples with Primétage and Communidad. I think what is important to understand is that AI is in fact embedded in the different projects that we do. So we have, of course, I would say, projects fully on data AI, data, for example, on Data Lake, or making sure, I would say, that the company has the right data momentum, let's say. and we have also some identifications, but we have also, I would say, AI in the different contracts that we sign in cyber and CMNI and digital workplace. Now, for the different pillars, remember, we also assign different, I would say, we have, let's say, some other companies also that are accompanying us, I would say, in this journey. So for Adjantic, we use the PI. We assign also a big contract with Microsoft. With digital sovereignty and cybersecurity, you can see SAP, IBM, and for example, CrowdStrike and Salesforce. Now let's go on the operational performance of the first semester. So if we look at the top line, the revenues, So last year, it was roughly 1.9 billion. Then, of course, we need to restate from Bull, Latin America and Northern Europe, some foreign exchange. So, in fact, I would say on a like-for-like, the turnover was roughly 1.8 billion, and we show 1.7 billion, so minus 6.3 in Q2 in terms of inorganic growth. If we look at the countries by countries, in fact, I would say that it's easing everywhere. We are a little bit, let's say, disappointed by North America. It could have been, let's say, probably better. It's probably the country where it's a little bit more difficult. North America, however, is roughly at $96 million revenue per month. I would say it's roughly flat, flat plus. But as I said, there is no major loss, no, I would say, in America. And of course, If you look at, for example, the revenues of North America in December last year, it was 92 million. It means that we will restart growing probably in the course of the Q4 this year. For the rest, France is leading also at minus 5, probably close to 0 in Q3. Germany also, probably trying to be close to 0 in Q3, we will see. The UK and Ireland continue, I would say, close at plus 9. And international markets, it's because of large clients. In fact, I decided, I would say, to... Internalize, I would say, the CMNI business line. So, in fact, it has a very big impact because it's by far the biggest customer in this market. And then BNN, roughly minus five. The news, of course, is that Eviden, of course, is growing at plus 14%. We definitely see that in the defense, let's say, area, there are a lot of opportunities for Eviden and, of course, for Atos. Now, if we look at the operating margin, as I said last year, we were at 113 million. Then, of course, we restate with the loss of Bull, because Bull was losing money in H1. It's always, I would say, a negative EBIT in H1 and a positive EBIT in H2. Latin America also, and then you have the foreign exchange, which means that on the same perimeter, we are at 133 million, so 3.7% margin. and we have increased the VBIT roughly by 43% on a decreasing turnover. So it means that, of course, GenuVing is yielding, I would say, the results we are, of course, expecting. And we are quite pleased, I would say, that the margin of ATOS is above 6% already in H1. If you look at the different components on H1, Page 18 of the different operating margins. So on the right, you see the operating margin that is published. So it means with the loss of bull, because as I said, bull is always negative in H1. But on the current perimeter, it's on the left at 190. And you can see the different numbers of the different GOs. And then I will go down, GO by GO now, let's say, in the coming slides. So if I start with Germany, Revenues, organic was roughly minus nine. We still, in fact, cut a lot of contracts last year. There are some black contracts, and there are no more black contracts right now in Germany. And as you can see, the genesis, of course, we have reduced the staff heavily, in fact, in Germany and also in the region. which of course now can produce, I would say, 30 million EBIT, 29 exactly, and we estimate we will be probably close to 90 million this year. Then if we go to North America, as I say, that's the country where we decrease the most. It's still difficult. Remember that we decided not to renew a very big contract, 100 million plus. This contract was in force until Q4 last year, so it has a 10% impact. on, I would say, the growth, plus the fact that we continue to have a different impact on some contracts we have stopped and lost. But it will ease, as I say, in Q4 this year. So definitely what we are doing right now is just to make sure, I would say, the profitability stays around 10%, and of course now pushing hard to make the rebound in the U.S. France, minus 5% in organic growth. Just also because the public sector was again weak in Q1, but it was the case also in 25. We have roughly stabilized, I would say, the margin, and we have done a lot of actions where we think we can now increase the EBIT. It will be probably in 27 different actions we take in place with Genesys. Unfortunately, France takes more time, I would say, than the rest of the different NGOs. If we go to the U.K., This is the country, I would say, that has done its turnaround in the course of 25 with a new CEO, in fact, in the beginning of last year. So we have a 9% organic growth. We have signed a lot of different contracts and new logos, and we have been able, I would say, to push quite hard, I would say, the profitability. So we are quite pleased with a double-digit margin. Now, with international markets, on page 23, as I said, The main, let's say, decrease is just one customer, unfortunately, in Asia. We have made the turnaround, in fact, in the rest of the different NGOs. It's mainly Spain and Switzerland. And, of course, with this LC, let's say, customer, the margin is a little bit down, but we are still able, I would say, to show a 6% margin. Last, Benelux, also minus 5 in terms of top line. We have also, with Genesis, we have restarted, I would say, to protect the margin going forward. So there are more actions to come. So in fact, for Genesis, it's mainly, right now, let's say, Benelux. So Belgium and Netherlands and France, where we're going to do, I would say, more in the course of H2, the rest is almost done. Eviden, our project brand, so there is a good traction, in fact, with Eviden. Remember that, in fact, we could have done much higher because one business, Vision AI, has been impacted heavily, in fact, by the Middle East. In fact, the revenue is almost close to zero, but we definitely think that there will be a catch-up in each suit. But there is, of course, work in the defense industry. There is a lot of, let's say, opportunities there. The margin is roughly at zero, but it's also a change of the global cost allocation. So probably I would say the comparison we flashed here is not the right one. But for sure, we need to do something in the profitability, and it will be the case, in fact, in H2 and, of course, H7.

With that, I hand over to Jacques-François on the financial results. Thank you, Philippe, and good morning, everyone. So I will now take you through the financial section of this presentation, starting with the P&L below operating margin, then moving to free cash flow, net debt, liquidity, and our updated debt maturity profile following the refinancing completed in the first half. The key message is that while the group continued to record a net loss in the first half of 2026, this loss mainly reflects the continued execution of our restructuring plan and the financial effects of the refinancing. At the same time, our cash performance was controlled, our liquidity remained strong, and the first step of refinancing materially improved our debt profile. So let me start with the bridge from operating margin to net income. In H1 2026, reported operating margin amounted to €169 million, including the negative contribution of divested businesses. This compared with €113 million in H1 25. This improvement is consistent with the improvement at current perimeter and reflects The benefits of our operational transformation and cost discipline despite continued revenue pressure. Other operating income and expense amounted to minus 314 million euros compared with minus 566 million euros in H125. The main components were Genesis-related reorganization costs of 113 million euros, rationalization and associated costs of 8 million euros, amortization of intangible assets for 17 million euros, equity-based compensation of 18 million euros and other items for 157 million euros. These other items mainly included onerous contracts and customer losses for 44 million euros and litigation for 94 million euros. As a result, Operating loss stood at 145 million euros in H126 compared with 452 million euros in H125. Below operating loss, net cost of financial debt amounted to 294 million euros compared with 162 million euros last year. This increase mainly reflects the impact of the refinancing completed during the period, including accelerated depreciation of fair value adjustment for 47 million euros according to IFRS 9 and the anticipated first lien bond early repayment call premium for 63 million euros. Other financial expenses net amounted to 27 million euros including debt leave related charges and pension related charges. After a tax charge of 37 million euros, net income amounted to minus 504 million euros compared with minus 695 million euros in H125. The important takeaway is that the net loss has reduced by 190 million euros year on year even though it still reflects the cost of restructuring and refinancing actions required to strengthen the group for the long term. Turning now to cash flow. At current perimeter, net change in cash amounted to minus 120 million euros in H126. This figure starts with ONDR at 315 million euros after reintegration of CAPEX and LEASES amortization. From there, CAPEX represented 33 million euros, lease payments amounted to 118 million euros, and the change in working capital requirements, excluding working capital actions, was minus 14 million euros. It was impacted by the unwinding of bonus payments for the fiscal year 25 in the first half of 26. Restructuring cash out amounted to 127 million euros in the first half. This is an important element of the cash flow bridge as it reflects the continued execution of the transformation plan. Tax paid amounted to €21 million, net cost of financial debt paid to €82 million, and cash outflows related to onerous contracts and litigation amounted to €39 million. As a result, net change in cash at current perimeter excluding change in working capital actions stood at minus 120 million euros. This performance reflects both the normal first half seasonality and the restructuring cash out and it also confirms that underlying cash discipline remains strong. Let me now move to the debt, the net debt. At the end of December 25th, net debt excluding IFRS 9 fair value treatment stood at 1,843,000,000 euros. The increase over the period reflects the negative net change in cash at current perimeter, as well as the impact of completed divestments, changes in gross financial debt due to peak and call premium on the first lean refinancing. It also reflects change in working capital actions that reduced by 146 million euros in the first half. This is made of two elements. Firstly, the reduction in the unsolicited cash received in advance of the payment due date for 153 million euros, because most of the cash in advance takes place at the year end, so there is logically less of that at the end of June. Secondly, the initial positive impact of receivables factoring. The reason I am highlighting factoring, although it is a small amount for now, is that we expect the program to ramp up over the coming month. and we see that as a secure, sustainable and relatively cheaper source of financing. Overall, this evolution should be read in the context of the first half seasonality, the execution of the restructuring plan and the refinancing completed during the semester. Importantly, despite the slight increase in net debt during the half, the group maintained a strong liquidity position at 30th of June 26th, and strengthened its financial profile with the December 24 first lean refinancing, giving us the financial flexibility to continue executing our transformation roadmap. Indeed, during the first half of 26, we successfully completed the first step of our December 24 debt refinancing. This was a major milestone for the group. The transaction included the issuance of €950 million of senior secured fixed rate notes due May 31 and €300 million of senior secured floating rate notes due in May 31 for a total amount of €1,250,000,000. The proceeds were used together with cash on the balance sheet to repay the first lien term loan and repurchase or redeem the first lien notes including accrued interest and call premium. This financing strengthened our financial profile in several important ways. Firstly, it reduced the weighted average cost of financial debt by around 220 basis points, down to 7.4%. Total cost of debt was reduced by 59 million per annum. Secondly, it extended the average maturity of our debt by seven months to around five years. This was achieved in a market context where the transaction attracted significant investor interest, confirming the market's confidence in the group's transformation trajectory. It was a first step towards the normalization of our capital structure. Following the refinancing, the group now has no debt maturity before December 30, when the first and a half lean debt is due. The total amount of this tranche has reduced in the semester thanks to 109 of bond buy-back on the open market, as well as 38 million from the early repayment corresponding to the proceeds from the sale of our South American operations in April. Let me mention, by the way, that we intend to disclose clearly that we are considering buying back more debt in the coming months. The new capital structure gives Atos Group a materially improved runway to execute its transformation plan, continue improving profitability, and move progressively towards sustainable cash generation and deleveraging. At the end of June, our leverage ratio was 3.4 times. We aim at reducing it to below 1.5 times at the end of fiscal year 28. That concludes my presentation, and I now hand over back to you, Philippe.