Atos SE (ATO) Earnings Call Transcript & Summary

Greetings, everyone. Today, we issued a new market update. As part of that update, as you will see on the Slide 3, Atos is confirming that its fiscal '23 revenue and operating margin results are in line with the guidance. Our fiscal '23 second half free cash flow was negative EUR 109 million. And for the full year, free cash flow was negative EUR 1.078 billion. Our net debt position at the end of the year was EUR 2.230 billion. For fiscal '23, earnings release is going to now be rescheduled for March 20. This is to allow our external auditors to complete the audit of the company's noncash goodwill impairment results. And finally, discussions with EPEI on the potential sale of Tech Foundation have concluded with no deal being reached. If I take you to the next slide, you will see the results for the fiscal '23 operational -- and their objectives have been met for revenue growth and operating margin. On the slide, you will see the fiscal year '22 for the group, Eviden and TF, the guidance that we have provided for fiscal '23. And in the blue sections, you will see not only the revenue for each one of those -- for the -- for each one of the items for group, Eviden and TF as well as the organic growth. So for fiscal '23, the group revenue was EUR 10.693 billion for a growth rate of 0.4% organic growth rate, which is within the guidance that we provided for 0% to 2%. And for Eviden, we -- the results were EUR 5.089 billion in revenue and 2.9% organic growth, which is an acceleration over the 2% that was the organic growth in 2022. And for TF, the objective was to manage its decrease. And the revenue was EUR 5.6 billion, a decline of 1.7% compared with the prior year of 1.6% decline. Operating margins, again, are within the guidance that we have provided for the group, Eviden and TF. Our guidance for fiscal '23 for the company was 4% to 5%. In 2023, we achieved 4.4%, which is within that range. Eviden, the objective was improvement over the 5.2% in the prior year in terms of margins, and our results show a 5.8% margin. For TF, for our Tech Foundations, the expectation is to have positive profit margin, and we delivered 3.1% compared with 1.3% in the prior year. And finally, for the free cash flow, our guidance was to be at about minus EUR 1 billion for the full year. And we came in slightly short of that at a minus EUR 1.078 billion. Moving on, on the next slide. We talk about our year-end capital structure. At the end of the year, our net cash position was EUR 2.4 billion. Our net debt was EUR 2.230 billion. And our year-end leverage ratio was 3.34x, which is within the bank covenant of 3.75. If I move on to the comment I made that our earnings release date now has been set for March 20. The reason for that is there is a noncash goodwill impairment test that is performed by the company every year. But our group external auditors, Deloitte and Grant Thornton, are awaiting an independent business review to complete their audit of the company's noncash goodwill impairment results. This annual goodwill impairment test is performed at year-end in compliance with standards, accounting standards and in the context of the contemplated disposal of assets. So the delay in our earnings release and the rescheduling to March 20 is simply due to the auditors needing more time to complete their audit of the work that we have done on our noncash goodwill impairment. If I go now to the next slide and to talk a little bit more about the Tech Foundation and the potential sale that we were considering to the EPEI Group. And then as we indicated in our press release in the context, we had an exclusive negotiation going on with the EPEI Group for the potential sale of Tech Foundation. That is a deal that was announced back in August 1. And both parties have not reached a -- we could not reach a mutually satisfactory agreement. The discussions and the put agreements have, therefore, been terminated by mutual consent. There will be no indemnification by either party. Each party will be released from any future reciprocal obligation subject to maintaining the confidentiality agreements. Now for Atos, we will continue to run Tech Foundations and Eviden as separate businesses, and I'll show you that in a second. And we'll continue to consider strategic options for -- at Atos for all of our assets in a way that is -- that serves the interest of our customers, employees and shareholders. As I mentioned a moment ago, on the next slide, you'll see that we'll continue to operate Tech Foundation and Eviden as separate businesses, but we will stress a coordinated go-to-market strategy. You'll hear a little bit more about it on March 20. On this slide, you see the offerings for the Eviden business as well as the Tech Foundation. And we'll be leveraging the strength of our complementary offerings to serve our clients. So in closing, our key takeaways, we are confirming our '23 revenue and operating margin results in line with the guidance that we were providing you. Fiscal '23 second half free cash flow was negative EUR 109 million. Our full year free cash flow was EUR 1.078 billion -- negative EUR 1.078 billion. Our earnings date, release date has been now rescheduled for March 20. And finally, the discussion with EPEI on the potential sale of Tech Foundations have concluded with no deal being reached. With that, Nadia, I'm going to turn it back to you and to open the forum for questions and answer.

[Operator Instructions] And the first question comes from the line of Nicolas David from ODDO BHF.

Yes. Just one question from my side regarding Tech Foundation, the fact that you are keeping the asset so far in your portfolio. What are you going to do regarding the abnormal working cap or the working cap optimization? Are you going to unwind this anyway? Or are you going to roll it over as the business goes?

Yes. We have been -- actually, that's a very good question, Nicolas. We are unwinding the working capital actions. In fact, when you'll see the details in -- on March 20, you will see that we have actually -- when I compare our working capital actions in the end of '23 compared with what it was in 2022, we are -- just have EUR 500 million less working capital actions at year-end than we had a year ago. And we're going to continue just to drive that number down.

Okay. That's a -- and was it initially expected when you guided on minus EUR 1 billion free cash flow in August last year? Or did you perform better in other elements which enabled you to unwind? And at the end of the day, despite unwinding this, having the free cash flow close to your guidance?

Yes, good question as well. What happened is that we were expecting to do more working capital actions. We did less. Second of all, the reason why our cash flow was also off by EUR 100 million versus being flat, that was our objective for H2 if you recall, that is -- was much more due also for some deals that just really slipped from the end of the year that otherwise would have contributed to our cash flow.

All right. And a second question from my side is, could you provide us some color regarding the bookings of Q4 at group level and by division?

Yes. I think we'll go in more details at the beginning on the 20th, but I will say to you that all of the Eviden business was a book-to-bill of 100%, and Tech Foundation was close to 117%, 120%, okay?

Okay.

And the whole company was 108%.

[Operator Instructions] Dear speaker, there are no further questions. I would now like to hand the conference over to Paul Saleh for any closing remarks.

Well, again, thank you for joining us on short notice for this update, and we look forward to our earnings call on March 20. Thank you.