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.

Okay, thank you. So on the last slide on page 33, so I think the message, of course, is that with the, let's say, the profile of the U.S., we estimate that the organic growth will be around minus 5. So we guided between minus 1 and minus 5. In fact, I was weighting, let's say, probably better data from the U.S. I think it's more prudent to say we will be around minus 5 if, I would say, the US doesn't pick up. So it's, let's say, at 96 million roughly per month. Of course, we want to beat that, so it's probably conservative, but I definitely think that it's reasonable. The operating margin, it's like last year, I think. Whatever happens on the top line, we will deliver, I would say, the bottom line, and we are quite confident, in fact, because we have accelerated, of course, Genesys. And then the net change in cash, should be positive. Remember that in H1 we pay the bonus, roughly $110 million, and we have also $130 million of Genesys, second quarter, no bonus payment, and also Genesys probably max $70 million. So just, I would say, the difference between the two, it's roughly $160 million of cash more, of course, than I would say H1. And of course, we have more EBIT, we're going to have less interest, we're going to have less also black accounts, and we can continue of course to work on the DSO. That's why we are quite confident also that the cash also will be back to positive and that's why the net debt of course will decrease at the end of the year. Remember also that we are launching the factoring. We will see if we can touch several hundred million which is the target for us and of course it will help us I would say probably to buy back again some bonds to reduce I would say the debt. We continue I would say to Consider that after that we're going to accelerate. As I said, Genesis will be finished by the end of the year. We are very confident now, I would say, that we are focusing on the top line. We think that the market is healthy. There is no problem for us, and we are still, I would say, a small player versus, I would say, the size of the market. There are many opportunities. AI is not disrupting a company like us. It's not disrupting, in fact, the competition. In fact, it's a big opportunity for us. And AI, for me, it's a marathon. It's probably a five to seven-year, I would say, effort, probably, let's say, slower in Europe than probably in the U.S. So for 28, continue the acceleration, growth between 5 and 7%. We continue to think that we will be around 10% in operating margin. In fact, next year we'll be probably above 8%. And then we continue, of course, to deliverage because the cash flow, of course, will be highly positive in 27 and 28. So we will start, of course, deliveraging with the cash and also with the increase, of course, of the profitability. So I would say the management is confident. I definitely think that I would say we are doing our job. It's not an easy one. This turnaround is not an easy one. But I definitely think that we have good signs now that I would say the activity is picking up. We have done the job on the cost and, of course, on the cash. And we are now, I would say, very highly confident that there will be, I would say, signs of restarting, I would say, the stockpile growth probably this year and, if not, of course, in the course of 2017.

With that, I hand over to the questions.

Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile a Q&A roster. Our first question comes from the line of Frederic Boulan of Bank of America. Please go ahead. Your line is open.

Thank you. Good morning, Philippe and Jacques-François. Maybe firstly, Philippe, if you can come back on the demand environment. You flag some better commercial traction. It would be great to have any color around the nature of discussion, any impact from the current macro uncertainty, interest rate environment, etc., and then maybe within that, what's going on in terms of competitive or pricing dynamics. And I don't know if you want to contrast between the US, France and the rest. And then, Jacques-François, we'd love to hear your thoughts around what's next for you to do after a lot of work around the portfolio from an asset perspective, from a refinancing perspective. Any opportunities ahead? Any specific moving parts you want to call out for the rest of this year and next year? Thank you.

Okay, hello Raphaël. So first, I would say that if you talk to CEOs, and of course I see, and I will see a client again this afternoon, I would say several of them every week, and probably you're right, between US and Europe, I definitely think that the pace is probably a little bit different. But I would say, at board level, for me, two topics are very important, which is cyber and AI. Sovereignty also probably is a broad topic, but I would say probably less to an extent than probably AI and cyber. So we see, I would say, and that's why the three big bets that we have, I think, are completely in line with, I would say, what the board and the CEOs right now have in their mind regarding the technology. So AI, it's a long run. As I say, AI, it's not an easy catch. We see a lot of things, but it's not... The agentification of a process or agentification of operations takes some time. I think I have already said that it's not a problem of technology because building an agent is not that difficult. It's mainly for me data and process first. And that's why we simplify. We have, let's say, more and more consulting, let's say, projects on this one because you start first to look at your data and look at your process. So I would say top of mind, cyber and AI. Of course, sovereignty in Europe probably is more important than, let's say, in the rest of the world. Also in the U.S., they are talking about sovereignty, but I would say in the U.S., they have everything in the country to be, of course, sovereign. Europe is probably a different play. What we see for the moment is that the budget of CIOs are not decreasing. I think they are still at a level or above. There is, of course, a lot of questions on AI because there is so many articles right now in the press that it is difficult, let's say, to escape that kind of conversation. But as I say, it's not an easy catch, so it doesn't translate immediately, let's say, to AI projects. So my view is that in technology, the sentiment is okay. There is still a lot of work, the switch to cloud for some of the companies, installation of ERPs. We have a lot of demand, for example, for SAP, where we are very strong. And of course, the modernization of the applications. and modernizing, I would say, with Agence, it's not an easy ride. It takes some time. It's sometimes very, it could be, I would say, let's say, dangerous in terms of cyber because it depends on the LLMs you are using. So I would say, for me, the environment is healthy. There is no problem for me of demand. As I say, we are small compared to the size of the market. The market is a Several Android billions in the US and Europe, and as I said, the market share in the US is less than 1%, and we are roughly at several points in Europe. So that's what I say to the team. I think that there are many opportunities. Competition is fierce, because I think that there are not that much, I would say, in good shape. They are fighting, I would say, to keep the market share, specifically in Europe. But I would say we have won a lot of, we have been able, I would say, to win some contracts in France, in the different countries in Europe, and show, I would say, the difference between Atos and the competition. So, for me, I think that the market is there. Atos now is back to normal. We need now, I would say, of course, to continue to reinsure, let's say, the clients, because it takes some time. I would say the 24 events was a shock to a lot of clients. and I see also in the US because I go there every quarter that the sentiment also is gaining traction and in fact I have said we lost a lot of clients and we will finish probably at 1.2 billion this year and at the peak we were at 2.3 billion so we lost roughly 1 billion plus. Some of the contracts we are happy to lose. Probably several contracts of 100 million we will probably regain them because I think that when I talk to some customers they are not happy in fact with the competition. So there is a big opportunity, in fact, for the U.S. to make a rebound. Either in 27 or in 28, it depends, I would say, on the length of the contracts that we have lost. Some of them will appear in 27, and some of them will appear in 28. But overall, I would say I'm quite confident on the market. I think that there are quite a lot of opportunities. The fact that we are, let's say, shifting the profile of Atos on the three bets that we have, AI, cyber, and communications, and Sovereignty, definitely we see a lot of traction in terms of client discussions. Now, of course, like you, I want to see the result on the top line, and that's exactly what we're going to show. In fact, it's going to ease again in Q3. So in Q3, we'll be much better, of course, than Q2, like Q2 is much better than Q1 in terms of inorganic growth. So it's easing and we are still aiming, I would say, to probably be flat, flat plus by Q4. That's the goal we have, of course, for this year. And then, of course, then after that, an acceleration of the top line in the course of Q7. Jacques-François, if you want to.

Yes, hi Fred. So with regards to your question on the asset portfolio, it's true that when we look back, a lot of things have taken place in the last 18 months since Philippe joined. and, you know, the exit, the announced and executed exit of the bull perimeter, the sale of some assets in South America. Then, in terms of capital structure as well, the first step of the refi, which has taken place in May 26th. So a couple of answers there. The first one is that in terms of asset disposal, there is nothing big, nothing big to expect. We just have a few tale of country exits which were announced at the Capital Market Day with the Genesis, you know, a country with a little perspective of growth or synergy with the rest of the group. That's on the M&A front. and not so much in the short term in terms of our acquisitions because our capital allocation policy has not changed. This is priority to deleveraging. So we want to reduce the debt. We have demonstrated in H1 that we have bought 109 million of bonds on the open market. We clearly signal our intention to do so in the future. Priorities in terms of capital structure, this is to refine. So I cannot give you a date because it depends on many things. When are we ready? What are the economics? What are the different levels to pull, et cetera? But clearly in the next 12 to 18 months, we want to make some other significant steps with regards to getting out of the December 24 capital structure because that's still attached to the restructuring and we want to get out of that as soon as we can in good conditions, of course.

Thank you. Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Sam Morton of Invesco. Please go ahead. Your line is open.

I have a question for Jacques-François, please. So I guess first on the phasing of the factoring program, can you help us understand the sort of cadence at which those factoring proceeds will come into the company and then also maybe how you would look to use the proceeds as they come in? and then I think the second question is really about the liquidity statement and in particular I think the conservative outlook you provided for year end 2026 I think that caused some disappointment in the bond market and I was just hoping that you could go through some of the areas where you think that you've been particularly conservative and maybe talk about the potential areas of upside if the conservative outlook proves to be misplaced.

Thank you, Sam. Good question to clarify. And actually, your three questions are, in the end, for me, it's one question. Because the answer to your second question with regards to why we have decided for the first liquidity test to be in our forecast at the level of 1.1 is precisely because the cadence of the factoring Even if we are working hard on that, it's taking some time. And it's not something which goes with a finger eclipse. It takes some time to ramp up. We have signed already one geography before the end of June. This is starting to ramp up as we speak. We are in the process of negotiating to open three more geographies, which should place in the coming months. So, honestly, I cannot give you a precise phasing or a precise amount, but as Philippe mentioned earlier today on the call, we are talking about several hundreds of millions. And this is the determining factor for... You know, putting more and having more, because of course, when we get that money, that's not the only element. There are other elements, I will come to the others. But when we have this money, you recall that above 100 million, 50% of these amounts go in immediate, early, mandatory repayments, which we will of course implement. That leaves 100 million plus 50% of what is above. So we are very seriously contemplating utilizing this money for, you know, earlier than December 26th slash January 27th, early reimbursement through purchases on the open market. You have to put yourself in our position, which is that when we do a forecast, I think that's a very important element, despite our upbeat confidence and Perspective, which we are reiterating today. You know, we confirmed the free cash flow positive, the margin trajectory, the guidance on revenue. Despite that, we need to be prudent. I don't want to give away some money before I have it and before this is materializing. So if there is any grain of salt, you know, in the process, which is whatever delaying, preventing, creating issues, et cetera, you know, I don't want to have given that money away. So factoring was clearly the building block the most important. There is another one which is quite significant as well. You know, I mentioned in my slides that the cash in advance, which is the unsolicited payment at the end of the year in advance of the due date, is something which typically happens quite a lot at the end of the year. And it's true less so at the different quarters Q1, Q2, and Q3. Now, you know, our scope has moved. We don't have the bill perimeter anyway. So, like I said, the content of the different business units and geographies, et cetera, has evolved a little bit. So, that's another reason to be prudent and not completely bank, you know, the full amount which we had in prior years, which were, you know, between $200 and $300 million at the end of the year of this cash in advance. So those are the most important building blocks, but rest assured that this is completely a priority, as I said as well in the earlier question to Frédéric. The leveraging, reducing the amount of debt is absolutely a priority for the company.

That's great. Thanks a lot.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Raman Narula. from Principal Asset Management. Please go ahead. Your line is open.

Hi, good morning. Thank you very much for the presentation and for taking my question. The first, just a quick clarification. Did I hear correctly that you said you're targeting 700 million for the factoring program, ultimately?

Several, several. Several means a few. It doesn't mean seven. Several, yes. Thank you for allowing us to clarify.

Okay, perfect. Yeah, I guess the first question I had just on the renewals, like if we don't count sort of bundling increases, if we don't count bundling of other services into the renewed contract, are you renewing contracts on similar scope and terms, i.e. price duration? I guess what I'm trying to gauge, like if there's any price deflation when you're renewing these contracts and some of your Product lines.

So most of the renewal is, I would say, on the same scope. Where you are right is that when we are given contract or given customer, we want to do what we call fertilization. So we want to increase the different scope that we can provide, like cyber, digital applications, et cetera. But I would say renewals is free, I would say, Most of it, it's mainly on the same scope. And the price deflation, when I look at the margin of the contracts we have signed, the margin is close to 25, so there is no price pressure. Or we are also managing, I would say, so that if there is some price, of course, effect, and it happens, but we are also managing, I would say, our internal delivery to ensure we stabilize, I would say, the project margin. So there is no, I don't see price pressure right now, in fact, in the P&L.

Understood. And I guess the second question I had was on the incremental Genesis savings above 650 million, the original plan. Is this all going to be a reduction in personnel costs, or are there other cost lines that are going to see costs taken out?

No, it's mainly personnel costs. You're right. In fact, when I launched Genesis last year, I was, let's say, expecting probably less a decrease in the top line in 2025 and 2026. So that's why we tailored, I would say, the Genesis plan with, let's say, a better top line. Unfortunately, it didn't happen, and also because we lost a lot of customers in the U.S. So I have just adjusted, let's say, Genesis to protect the margin. So the idea for me is really to be at 7% this year, to be between 8 and 9 next year, and of course above 9 in the course of 28, between 9 and 10, in fact. Whatever is the top line, of course. And of course, if we accelerate, and I definitely think it will come, the marginal growth will bring a lot of, because I will keep the cost for 3-flat-plus, So it means that the marginal growth, of course, will bring marginal EBIT. And that's exactly the way I would say I've said also. In fact, I have ensured, I would say, that with the decrease of 25 and 26, we continue to deliver the margin that we have, in fact, put at the CMD last year. And that's why I'm quite confident that we can reach, I would say, the 10% margin in 20 years. It's just because we have increased the... The shaving of costs, and it's mainly personal costs, yes. In fact, when I say Genesis will be finished, all the actions will be taken by this year. There will be no new actions, in fact, in the course of 27. Of course, some actions we're going to take in September to December, for example, in France and Netherlands, they will have some impact in the course of 27. So that's why it will continue in the course of 27. But I would say at the end of the year, my main message to the team is really we finish completely Genesis. We know exactly what kind of reduction we want to have going forward. We just need, I would say, to execute the decisions we're going to take in the course of 26. And of course, now I would say the mindset should be on the top line and the delivery, of course. Very important also that we keep the quality of delivery, and I think Atos has probably a moat on this one. I think we are very well known to, I would say, the excellence of delivery of the different projects that we have.

Got it. So just to be clear, the total restructuring cash costs of circa 200 million that you expect to spend this year, this will take you to the cumulative 800 million of Genesis Savings?

Yeah, exactly. But in fact, the total cost, so we spent roughly 400 million plus last year in Genesis. This year, close to 200 million, a little bit below, so we will be probably at 600 million plus. And I always say Genesis is roughly a 700 million envelope, so we will stay in this envelope for Genesis. So it means that there will be still between 50 and maximum 100 million next year. and with the same envelope, instead of 650, we're going to have 800 million plus savings.

Understood, that's very helpful. And just the last one from me, can you sort of give us a sense of how H126 on a constant perimeter, the performance has been across the various sort of product lines you have, so CMI, digital workplace, etc. And if you're able to give an indication of the

We don't track the profitability per business line, not yet. Probably we need to do that in the future. What I see is that, of course, evident the product and the Data AI is double-digit growth. We see more and more projects on Data AI, but as I said, the Data AI business line, we track only projects focusing 100% on data AI, but in fact we do also data AI in different projects in CM&I, in digital workplace, etc., even in cyber. So it's impossible for me, I would say, to give you that kind of information, but there is no pattern of one business line, except data AI, that is growing very fast, except evidence, the rest were filled in line with what we have done, I would say we have shown. There is no one business line going, let's say, deeper in terms of deep reach in top line.

Okay, understood. Thank you very much.

The only business line where I don't push very hard is digital workplace. That's the only, because I don't, for me, it's not really, let's say, a 90 project. So this is a and, in fact, that's the business line with the lowest project margin, which is normal. It's more a commodity, let's say, product. So that's the one where I don't, let's say, push the team to fight on this one. The rest, I definitely think that, of course, it's pure IT, managed services, for example, of mainframe, et cetera, or switch to cloud. If we say the only business line that we probably will decrease the most will be digital workplace, but on purpose, because I definitely think that we can propose different options, I would say, to the client than this one.

Okay? Understood. Thank you.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Laurent Dar. of Kepler Chevro. Please go ahead. Your line is open.

Yes, great. Good morning, gentlemen. I have a question, in fact. The first one is going back to the P&L and below the restated operating profit, you still have a lot of other losses. So if you could clarify the litigation and client losses you put below, And why do you treat that as exceptional? And more importantly, if I remember well, a year or two ago, you were planning to achieve a pretty clean P&L mid-term. So I want to be certain that maybe this is the last time we have such elements below the line. My second question is on your 5% to 7% mid-term growth. I think none of your competitors is expecting this kind of growth rate. even the very best. Does it mean that you are planning more because you think you're going to win back part of the losses, client losses you had in past years? And do you already have clear evidence of that? And my last question, I would like to have a clear update on the additional P&L savings coming from Genesis 2 Thank you for that.

First, on the growth of 5%, I don't know what the competition is saying, and I don't care. Sorry. Also, remember that we are now a medium player. We have also a lot of opportunities in the U.S. because I definitely think that we have lost contracts we should not have, I would say, lost. It's because of the credit rating of the debt. And, of course, for example, there are two or three clients at $100 million plus. So if we gain two or three clients like this, it's 200-300 million, it's already more than 5% growth, in fact around this 5%. So yes, I'm quite confident that we're going to regain this. And then there are traction, as we see, I will say that Atos is back. So we are invited in all tenders in the different countries. So we see we can regain, I will say some of the traction we have lost. I definitely think that we have probably lost too much. I know that the financial instability was, of course, a big question mark for clients, especially for contracts for five or seven years. But I think that there is, yes, there is a rebound possible because we will catch up, I would say, the loss that we have unfortunately witnessed in 2024 and 2025. We will see. You will see. And then I would say the competition is different. First, they are much bigger, if you talk about CAPS. or Accenture. They are probably in a different space for me. Some of them suffer from engineering, so I think that I would say we don't have exactly the same pattern. Remember that we don't do BPO, and BPO will suffer a lot with Adjantic. So I think we are well positioned for the future. In terms of saving for Genesys, yes, there is 100 million plus going in from 27 to 26. So it means, and of course, again, we have increase of salary, etc., so there will be a minus, of course, in 27 versus 26. But I would say the savings that we're going to have pro forma and going forward, let's say, for 27 is around 100 million. The question is that do we are going to have more savings in 28? It's possible also because I'm going to identify also the process. Even I would say our own back office. So I don't – it's possible that we have even more. I would say it's not Genesis anymore for me. It's the fact that we're going to – Be smart in terms, let's say, of cost in a GNA. In fact, when you look at the GNA as a percentage, the goal was roughly to be at 5%. We're not there yet because, of course, the turnover is too low. So it's possible that I do an action probably to have more savings in the course of 28 weeks.

for the first question. Yes, yes, yes, thank you, Philippe. So your question about the P&L, full clean P&L, midterm, et cetera, and at what horizon does that happen, and is that already completely clean? Remember last time we discussed, we explained, you know, Genesys is a three-year program. Philippe just reminded us a couple of minutes ago about the fact that Genesys There is still some cost to come with Genesis, even if some cash will be out of the door next year. But in terms of P&L and other items and extraordinary items, I think you're putting the finger on the line other, which I commented very briefly upon, but I can elaborate a little bit. Mainly, this is driven by two things. One is I don't want to give any name, but you have noticed that during the second quarter there were some developments and some things happening on the front of the litigation for us. So in the spirit of being absolutely well covered, even if we are fighting to defend our position, we completed our existing provisions just to make sure we are very well covered. That's the first point on litigation. Regarding Onero's contract, we've been as well very transparent consistently about the two big black accounts remaining for the company. One of them is not in run, but still in project mode. And it's true that at the end of December, we thought and we took the provision which we assessed at the time as being right. Now, six months later, we have to reassess and add some other amounts of provision for this onerous contract. So at the moment now when I'm speaking, I'm confident this is the right amount. Can I commit that nothing else will come in the future? I'm afraid at this stage I cannot because we still have this black account which is still in project mode, so it's not completely over. When the migration will happen, it will be in run mode, will be of course 100% comfortable. That's not the case yet. and maybe to conclude on your when do we have the clean P&L, well, the target is this year.

Yeah, remember that it's a four-year project, so Genesis, we are year two. So you say mid-project? Yes, I think by the end of 26, the P&L will be clean. Normally, I would say for the rest, for 27, you should not expect, I would say, big amounts, except probably the refinancing cost if we refinance in the course of 27, of course.

So to be clear, the onerous contract is mostly one contract, it's not all over the place, right?

Yes, correct. Yeah, that's 95% is one contract and it is treated as extraordinary because we are consistent with the previous accounting methods applied. So in a way, we don't have the choice but to book it there, which is, you know, abnormal, unfrequent and extraordinary event.

So remember that we are finishing the cleaning of this company. It's not a new black contract. There are no new. In fact, black contracts, there are only two now. There is one that is losing roughly 10 million per year, which is going to be a maximum of two years. And we are probably trying to sell an upside in the course of 27. So we could have some good news. So we are back to one. And then on mitigation, you know exactly that's also the legacy, unfortunately, of the past we've created.

Great, thank you.

Okay.

Thank you. There are no further questions. Speakers, please continue.

Okay, so if there are no more questions, I think as a conclusion, I think you can imagine we are quite confident. I think that Genovese now is fully in place. As I said, the second part will be fully in place by the end of the year. and as I said the mindset of the management team including mine of course is really not to accelerate the top line and continue of course let's say the restructuring that we have done and the turnaround of this company but I definitely think that after year two we will be in a different path in the course of 27 so I'm quite pleased with the work that the team has done in 18 months and we will show you in fact in Q3 that it's easing in terms of stop line and we are ready for the rebound. So thank you for your time this morning. I know that there are lots of different publications so free your time and of course if there are any other questions or whatever we remain at your disposal. Have a good day and talk to you now for Q3 at the end of October.

This concludes today's conference call thank you for participating you may now disconnect.