Atos, a global leader in digital transformation, high-performance computing and information technology infrastructure, announces its revenue for the third quarter of 2022.
Atos’ leadership team, Nourdine Bihmane, Diane Galbe and Philippe Oliva, declared: “In Q3, we remained fully focused on continuously improving the business performance: revenue growth at constant currency turned positive, with an earlier-than-anticipated stabilization at Tech Foundations, while Evidian continued to grow despite fluctuations in the HPC business, and is set to accelerate in Q4. Based on this robust performance, we confirm our full-year objectives, with revenue growth now expected in the upper half of the previously indicated range. In the meantime, we achieved important milestones in Q3 towards the envisioned separation. We finalized a €2.7 billion financing providing the means to execute our transformation until separation while ensuring the Group’s liquidity. We launched the works councils consultation process and made tangible progress in carve-out preparation workstreams. The separation project is well on track to be completed in H2 2023 as initially planned. Atos is resolutely pursuing its in-depth transformation: the whole organization is mobilized and committed to the successful execution of our strategic plan, which we are convinced will create significant value for all Atos’ stakeholders.”
|
In € million |
Q3 2022 |
Q3 2021 |
Change |
Change at constant currency |
|
Evidian Perimeter revenue |
1,278 |
1,191 |
+7.3% |
+2.1% |
|
Tech Foundations perimeter revenue |
1,540 |
1,475 |
+4.4% |
+0.3% |
|
Group revenue |
2,818 |
2,666 |
+5.7% |
+1.1% |
Revenue growth at constant currency turning positive in Q3
Group revenue was €2,818 million in Q3 2022, up +5.7% year-on-year. Growth at constant currency turned positive in Q3, at +1.1%, while organic growth stabilized, at -0.1%, showing a strong sequential improvement compared to previous quarters (-1.9% in Q2 and -2.4% in Q1). This positive momentum reflects the continued improvement in operational performance brought by the Group’s new organization and management team. Acquisitions contributed +1.2% to the Group’s revenue growth. Foreign exchange contributed +4.6%, mainly reflecting the appreciation of the US Dollar against the Euro over the period.
Evidian’s revenue was up +2.1% at constant currency in Q3. Digital recorded a solid growth, driven by buoyant trends on digital transformation markets, as well as by the contribution from recent acquisitions. Q3 activity was supported by a good level of fertilization of existing customers. Cybersecurity continued to benefit from market leadership and strong customer demand. Revenue growth was affected by Advanced Computing, with a low level of HPC revenue, expected to ramp up from Q4 onwards based on the very high order entry recorded in Q2.
Tech Foundations’ revenue stabilized in Q3, at +0.3% at constant currency (+0.5% excluding UCC). This positive top line momentum is a clear sign of an earlier-than-anticipated improvement of the business line’s performance, resulting from renewed management focus under the Group’s new organization and strategic project. The core infrastructure business reported a much more contained decline than in 2021, while professional services grew strongly. Digital workplace services and UCC recorded a slight contraction due to persisting supply chain tensions.
Significant progress achieved in separation project
The Group is making significant progress in its separation project and confirms that it is well on track to complete it within the previously announced 12 to 18 months timeline[1].
The Group successfully signed a new €2.7 billion bank debt financing on July 29, 2022, ensuring the interim period leading to the envisioned separation is fully financed. The syndication of this new debt package was finalized in a short timeframe and received very strong support from the Group's historical lenders. This unsecured debt package includes a €1.5 billion term loan with very satisfactory tenure and pricing conditions, a €0.9bn revolving credit facility supporting the Group’s liquidity, and a €0.3 billion bridge loan to be repaid out of the expected proceeds from the Group’s non-core businesses disposal program. Financial covenant was reset to 3.75x net debt to OMDA[2], tested at year-end.
On September 7, 2022, the information and consultation process of Atos European works council (SEC), regarding the Group’s envisioned separation into two listed entities, was launched in line with the project timetable. In parallel, social dialogue has also started at country level.
All separation workstreams are mobilized and progressing according to plan, across four pillars: (i) go-to-market and commercial continuity, (ii) carve-out operations covering tax and legal structuring, strategic agreements and preparation of carve-out financial statements, as well as Day-1 operational readiness, (iii) operating model and support functions set-up and (iv) program coordination.
Atos is convinced that this project is the most value-creating for all its stakeholders. Evidian will emerge as a global digital pure player fully focused on growing markets and combining a unique set of highly synergistic areas of expertise. Tech Foundations’ turnaround is already underway and showing encouraging signs of earlier-than-anticipated recovery. Once turned-around, Tech Foundations will take a fresh start as an end-to-end orchestrator of digital infrastructure, leveraging its core operations to deliver solid margins and cash generation.
Moving ahead with disposal program
On June 14, 2022, Atos announced a disposal program of non-core businesses representing €700 million of expected proceeds, as part of the financing of its transformation plan. On the same day, the Group completed the sale of its remaining 2.5% stake in Worldline, for net proceeds of c. €220 million. The remaining €480 million expected proceeds pertain to the disposal of non-core businesses mostly within the Evidian perimeter.
This disposal program is progressing as planned, with several disposal processes currently ongoing, including 2 small-sized transactions already signed, indicating market interest for the businesses selected by Atos as part of its disposal program, as well as the Group’s ability to execute swiftly, only four months after the disposal program was set up.
CSR: outstanding external recognition
In September 2022, for the third year in a row, Atos was awarded the EcoVadis Platinum Award for its Corporate Social Responsibility performance, with the highest score ever received by the Group, at 84 points out of 100. Atos therefore confirms its position in the top 1% companies assessed by EcoVadis within its sector.
In October 2022, Atos was upgraded to the highest rating available (the AAA rating) in the Morgan Stanley Capital International (MSCI) ESG rating 2022, ranking it among the top 7% of companies in the “Software and Service” industry with a good performance in Sustainability measured through the Environmental, Social and Governance dimensions. MSCI highlighted Atos’ leadership in clean technology initiatives, as well as the Group’s strengthened governance. Since the beginning of the year, Atos’ Board of directors has welcomed five new members: René Proglio, Astrid Stange, Elizabeth Tinkham, Caroline Ruellan and Katrina Hopkins, who collectively bring a wealth of experience in digital, finance, human resources and corporate governance.
Commercial activity
Order entry was € 2.0 billion in Q3 2022, representing a book-to-bill ratio of 71%.
For the Evidian perimeter, the book-to-bill ratio was 85%, impacted by fluctuations in the HPC deal flow, following a very high order intake in Q2, as well as a lower number of large application management services contracts.
On the Tech Foundations perimeter, the book-to-bill ratio was 58%, while Tech Foundations is in the process of gradually re-building a strong commercial pipeline and enhancing its sales capabilities. However, positive evolutions were noted in Q3, with a significant increase in order entry from new logos, and the benefits from a higher contract selectivity.
Book-to-bill ratio is expected to recover significantly across both perimeters in Q4.
At the end of September 2022, the Group’s full backlog reached € 21.8 billion, down €0.8 billion compared to the end of June 2022. It represented 1.9 year of revenue.
The full qualified pipeline amounted to € 7.1 billion at the end of September 2022, stable compared to the end of June 2022, representing 7.5 months of revenue.
Human resources
Total headcount was 112,344 at the end of September 2022, broadly stable compared to the end of June 2022 (112,180).
In Q3 2022, Atos hired 8,367 new employees (gross), of which 64% are located in offshore and nearshore countries.
In September 2022, Atos was listed for the first time by Great Place to Work® as one of ‘Europe’s Best Workplaces’ in the 2022 annual list. It is ranked 21st position in the multinational company category.
2022 full-year objectives confirmed and refined
Based on its robust Q3 performance, Atos refines its revenue growth objective for the full year, while operating margin and free cash flow objectives are unchanged. For the full year, the Group expects:
- Revenue growth at constant currency in the upper half of the -0.5% to +1.5% range;
- Operating margin at the lower end of the 3% to 5% range;
- Free cash flow at the lower end of the €-150 million to €200 million range excluding additional impacts of the envisioned transformation plan. Such additional impacts are estimated around €-250 million, including the cost of financing, in line with information communicated at Atos Capital Markets Day in June.
Marks of interest received
As indicated on September 29, 2022, Atos received, on September 27, an unsolicited letter of intent from Onepoint, in association with private equity firm ICG, related to the potential acquisition of the Evidian perimeter, for an indicative enterprise value of €4.2 billion. Following the thorough examination of this preliminary and non-binding mark of interest, and upon the recommendation of its ad hoc committee, the Board of Directors convened and unanimously concluded that it was not in the interest of the Company and its stakeholders, and therefore decided not to proceed.
In addition, as indicated on October 24, 2022, since the presentation of its separation project at the CMD on June 14, Atos has been approached by several players interested in the Tech Foundations business. The Board of Directors reiterates that it is its duty to examine all marks of interest, and it will do so for the Tech Foundations business with regard to the Company’s corporate interest and value creation for its stakeholders.
Atos is fully mobilized on the progress of the separation project within the planned timetable, which remains the Group's priority.
Analyst and investor conference call
Atos Management invites analysts and investors to a conference call on the Group 2022 third quarter revenue, on Wednesday, October 26, 2022, at 08:00 am (CET – Paris).
You can join the webcast of the conference:
- via the following link: https://edge.media-server.com/mmc/p/nh2xut9f
- by telephone with the dial-in, 10 minutes prior the starting time. Please note that if you want to join the webcast by telephone, you must register in advance of the conferenceusing the following link:
https://register.vevent.com/register/BIcddb3828aa844c69ac846f1b0d03d6f9
Upon registration, you will be provided with Participant Dial-In Numbers, a Direct Event Passcode and a unique Registrant ID.
During the 10 minutes prior to the beginning of the call, you will need to use the conference access information provided in the email received upon registration.
After the conference, a replay of the webcast will be available on atos.net, in the Investors section.
