Atos (Euronext:ATO) Q2 2026 Earnings Call

0:00 Good day, and thank you for standing by. Welcome to the Atos Group H1 twenty twenty six Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 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

0:30 over to your speaker today, Philippe Sal, 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. And Jacques Francois 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, 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.

1:18 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 will say, confidence with customers. And last point, increasing momentum around our three year 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, we saw a build, we saw a Latin America and also the smaller dealership that we have done in Northern Europe, The revenues were $1,661,000,000 which is roughly minus 6% versus last year. It was in line with what we have guided, in fact, at the end of Q1.

2:05 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 €190,000,000 as we are close to six points of EBIT. And in fact, we are you will see that above Foratos and flat roughly at zero with dividend. In fact, in dividend, we have also invested heavily in the commercial activities, and we have been impacted slightly, I would say, The Middle East. Order end state is at 91 at €1,500,000,000 It's also, I would say, getting some momentum. And you will see also that the qualified pipeline also has increased. Net change in cash that was done in fact in mid of July, so it's still minus €120,000,000 And just for information, the restructuring cost was minus 130,000,000 We are still contemplating a total cash out around, let's say, we say between 150,000,000 and €200,000,000 in fact in Q1, it will be probably between 190,000,000 to €200,000,000 this year. So it means that probably in the second half, it's maximum 70,000,000 Net debt is roughly at 2,000,000,000, but it's normal also that the net debt is higher in H1 because we're going to have a positive cash flow.

3:26 We will have also a client 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 €1,000,000,000 It's far more than we need, in fact, as we have lowered, I would say, the cash trap close to roughly 100,000,000 Okay, next slide. You can see the momentum. So you can see the, I would say, different number 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 stock of contracts and also, let's say, of clients, unfortunately, from their wheel in 2024 and early twenty twenty five.

4:21 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. We found 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 so Genesis GENESIS. We launched it in fact early twenty five. I have commented in fact in the CMD in May. The Genesis, the first program, the $650,000,000 gains in fact has been done in Q1.

5:12 So we have done the Genesis in one year. I have launched in fact the second phase of Genesis to ensure that the profitability will continue to increase of course in 2027 and 2028. So we are now at €800,000,000 or above. But the Genelis will be finished by the end of the year. So the restructuring will be really 25,000,026 million euros 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 all the divestiture, the genesis, we are back roughly to 54,000 people. We are probably at the right level.

5:58 It would 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 have we suffer, I would say, lot of 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.

6:52 Just because, for example, the framework agreements, we don't come 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, I would say, contract that we have signed, 180,000,000 for four years, but this is not in the book to bill. And the different framework agreement that you can see, with the Dutch police, one with the European Patent Police office, this is typically, I would say, that we don't book in fact in the portfolio. Good news is that the France, UK and EBITDA are above 100% in Q2. So it means that there is traction in these countries. And I will say bit by bit, there will be traction in fact in the different geos.

7:37 The second good news is the qualified pipeline. It continues to increase by €800,000,000 It was already up 900,000,000 in Q1. So it's roughly €1,700,000,000 more, I would say, in the H1, which I think it's for me a sign that there is hope 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 pace in the coming quarters. Renewal rates is not 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 now 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 challenge in the future.

8:30 You can see some major contracts with BO And for example, in The UK, on the left, it's a new logo, very interesting client, where we start with CMNI and G2 workplace, and we will continue with application in the future. Just for the different pillars, remember that the three different pillars that we have launched and where we are now focusing the group, which is AgenTik, so identification of the company, cybersecurity and sovereignty. This is a typical, I would say, wins that we had during H1. So Eurocontrol, it's a big client of us. We are now modernizing, I would say, their applications. You can see this far, CNA, the big contract we have signed with The U. S.

9:17 And it's a TCV of close to 500,000,000 And we're going to put also identification in the contract. You have also examples with Primatas and Cominidad. I think what is important to understand is that AI is embedded in the different projects that we do. So we have, of course, I would say, projects fully on Data AI, data for example, Data Lake, or making sure I would say that the company has the right data momentum, let's say. And we have also some identification, but we have also AI in the different contracts that we signed in cyber and CMNI and digital workplace. Now for the different pillars, remember, we also have signed different, I would say, we have, let's say, some other companies also that are accompanying us, I would say, in this journey.

10:13 So for Agencik, we use AI. We have signed also a big contract with Microsoft. We have digital sovereignty and cybersecurity, you can see SAP, IBM, and for example, Stripe and Salesforce. Now let's go on the operational performance of the first semester. So if we look at the top line revenues, so last year, it was roughly EUR 1,900,000,000. Then, of course, we need to restate from good Latin America and Northern Europe, some foreign exchange. So in fact, I would say on a like for like, the turnover was roughly EUR 1,800,000,000, and we show EUR 1,700,000,000, so minus EUR 6,300,000,000 in Q2 in terms of inorganic growth.

11:05 Now 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, disappointing 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 $96,000,000 of revenue per month. I would say it's roughly flat, flat plus. But as I said, there is no major loss, I would say, in America. Of course, if you look at, for example, the revenues of North America in December last year, was 92,000,000 It means that we will restart growing probably in the course of the Q4 this year. For the rest, France is easing also at minus EUR million, probably close to zero in Q3.

11:50 Germany also probably trying to be close to zero in Q3, we'll see. And UK and Ireland continue, I would say, close at plus 9%. And international markets, it's because of a large client, in fact, I decided, I would say, to internalize, I would say, CMI business lines, in fact, it has a very big impact because it's by far the biggest customer in this market. And NBNN roughly minus 5%. The news of course is that dividend of course is growing at plus 14%. We definitely see that in the defense area, there are a lot of opportunities for dividend and of course for Atos. Now if we look at the operating margin, as I said last year, we were at 113,000,000 Then of course, we restate with the loss of BUILD because BUILD was losing money in H1. It's always, I would say, a negative EBIT in H1 and a positive EBIT in H2.

12:49 Latin America also and then you have the foreign exchange, which means that on the same perimeter, we are at EUR 133,000,000, so 3.7% margin. And we have increased the EBIT roughly by 43% on a decreasing turnover. So it means that, of course, generating 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 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 BUIL, because as I said, bill is always negative in H1.

13:34 But on the current perimeter, it's on the left at 190, and you can see the different number of the different geos and then I will go down geo by geo, let's say, in the coming slides. So if I start with Germany, revenues organic was roughly minus nine. We still in fact get a lot of contracts on 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, then can produce, I would say, 30,000,000, 29,000,000 exactly.

14:23 And we estimate we will be probably close to €90,000,000 this year. Then if we go to North America, as I say, that's the country where we decreased the most. It's still difficult. Remember that we decided not to renew a very big contract, $100,000,000 plus. This contract was in force until Q4 last year. So it has a 10% impact on, I would say, 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 of this year. So definitely, what we are doing right now is just to make sure, I would say, profitability stays around 10%. And of course, now we're pushing hard to make the rebound in The U. S.

15:09 France, minus 5% in organic growth, just also because the public sector was again weak in Q1, but it was the case also in 2025. We have roughly stabilized, I would say, the margin, and we have done a lot of actions where we think we can increase the EBIT. It will be probably in 2027, different actions will be taking place with Genesis. Unfortunately, France takes more time than the rest of the different geos. If we go to The UK, this is a country I would say that has done is a turnaround in the course of 2025 with a new CEO in fact in the beginning of last year. So we have a 9% organic growth.

15:55 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 the 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 geos, 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 to, I would say, support the 6% margin. Last, Benelux, also minus 5% in terms of top line.

16:42 We have also with Genesis, we have, I would say, 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, Belgium and Edouard and France that where we're going to do, I would say more in the course of H2, the rest is almost done.

17:05 Vidane, our project brand, so there is a good traction in fact with Vidane. 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 and in fact the revenue is almost close to zero, but we definitely think that there will be a catch up in H2. But there is, of course, work in the defense industry, there is a lot of opportunities there. The margin is roughly at zero, but it's also a change of the global cost allocation, so probably I would say in comparison with last year 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 Q2.

17:59 With that, I hand over to Jacques Francois 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 and 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 twenty twenty six, 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 remains strong and the first step of refinancing materially improved our debt profile.

18:55 So let me start with the bridge from operating margin to net income. In H1 twenty twenty six, reported operating margin amounted to €169,000,000 including the negative contribution of divested businesses. This compared with EUR 113,000,000 in H1 twenty twenty five. 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 EUR $314,000,000 compared with minus EUR $566,000,000 in H1 twenty twenty five.

19:42 The main components were Genesis related reorganization costs of EUR 113,000,000, rationalization and associated costs of EUR 8,000,000, amortization of intangible assets for EUR 17,000,000,

19:56 equity based compensation of EUR 18,000,000 and other items for 157,000,000. These other items mainly included onerous contracts and customer losses for EUR 44,000,000 and litigation for EUR94 million. As a result, operating loss stood at EUR145 million in H1 twenty twenty six compared with EUR452 million in H1 twenty twenty five. Below operating loss, net cost of financial debt amounted to €294,000,000 compared with €162,000,000 last year. This increase mainly reflects the impact of the refinancing completed during the period, including accelerated depreciation of fair value adjustment for EUR 47,000,000 according to IFRS nine and the anticipated first lien bond early repayment call premium for EUR 63,000,000.

20:55 Other financial expenses net amounted to €27,000,000 including debt lease related charges and pension related charges. After a tax charge of €37,000,000 net income amounted to minus EUR $5.00 4,000,000 compared with minus EUR $695,000,000 in H1 twenty twenty five. The important takeaway is that the net loss has reduced by EUR 190,000,000 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 EUR 120,000,000 in H1 twenty twenty six.

21:43 This figure starts with O and Dia at EUR $315,000,000 after reintegration of CapEx and leases amortization. From there, CapEx represented EUR 33,000,000, lease payments amounted to EUR 118,000,000 and the change in working capital requirements, excluding working capital actions, was minus EUR 14,000,000. It was impacted by the unwinding of bonus payments for the fiscal year 2025 in the first half of twenty twenty six.

22:13 Restructuring cash out amounted to EUR 127,000,000 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 €21,000,000 net cost of financial debt paid to €82,000,000 and cash outflows related to onerous contracts and litigation amounted to EUR39 million. As a result, net change in cash at current perimeter, excluding change in working capital actions, stood at minus EUR 120,000,000. This performance reflects both the normal first half seasonality and the restructuring cash out and it also confirms that underlying cash discipline remains strong.

23:01 Let me now move to the debt, the net debt. At the end of December twenty five, net debt excluding IFRS nine fair value treatment stood at EUR 1,843,000,000. As of 06/30/2026, it stood at EUR 1,998,000,000.

23:23 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 lien refinancing. It also reflects change in working capital actions that reduced by €146,000,000 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 €153,000,000 because most of the cash in advance takes place at 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 months and we see that as a secure, sustainable and relatively cheaper source of financing.

24:20 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 06/30/2026 and strengthened its financial profile with the December twenty four first lien refinancing, giving us the financial flexibility to continue executing our transformation roadmap. Indeed, during the first half of twenty twenty six, 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 EUR $950,000,000 of senior secured fixed rate notes due May 31 and EUR 300,000,000 senior secured floating rate notes due in May 31 for a total amount of EUR 1,250,000,000.

25:22 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 two twenty basis points, down to 7.4%. Total cost of debt was reduced by $59,000,000 per annum.

25:54 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 point five lien debt is due. The total amount of this tranche has reduced in the semester, thanks to 109,000,000 of bond buyback on the open market as well as $38,000,000 from the early repayment corresponding to the proceeds from the sale of our South American operations in April.

26:45 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 twenty twenty eight. That concludes my presentation, and I'll 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 five.

27:37 So we guided between minus one and minus five. In fact, I was waiting, let's say, probably better data from The U. S. I think it's more prudent to say we will be around minus five, if I would say The U. S. Doesn't pick up. So it's, let's say, at $96,000,000 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 happened 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, the Genesis. And then the net change in cash should be positive. Remember that in H1, we paid a bonus, roughly EUR 110,000,000 and we have also €130,000,000 of Genesis. Second quarter, no bonus payments and also Genesis probably max €70,000,000 So just, I would say, the difference between the two, It's roughly €160,000,000 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 a black account and we can continue, of course, to work on the DSOs. 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.

28:57 Remember also that we are launching the factoring. We will see if we can touch several 100,000,000, which is the target for us. And of course, it will help us, I would say, probably to buy back against 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, like 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 far, '28 continued acceleration, growth between 57%.

29:57 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 deleverage because the cash flow, of course, will be highly positive in 2027 and 2028. So we will start, of course, deleveraging 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 a good sign 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,

30:36 I would say, very highly confident that there will be, I would say, signs of restarting, I would say, the top line growth probably this year and if not, of course, in the course of 2027. With that, I hand over to the questions. Thank you. 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 Francois.

31:23 Maybe firstly, Philippe, if you can come back on the demand environment. You flagged 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, etcetera. And then maybe within that,

31:44 what's going on in terms of competitive or pricing dynamics? And I don't know if you want to contrast between The U. S, France and the rest. And then Jacques Francois, would 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. 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 U. S. And Europe, I definitely think that the pace is probably a little bit different.

32:33 But I would say, at board level, for me, two topics are very important, which is cyber and AI. So R and T 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, 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 identification of a process or identification of operations takes some time.

33:16 I think I 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, also, they are talking about sovereignty. But I would say in The U. They have everything let's say, in the country to be, of course, sovereign. Europe is probably a different play.

33:57 But what we see for the moment is that, first, the budget of CIOs are not decreasing. I think they are still at the level or above. There is, of course, a lot of questions on AI because, yes, there is so many articles right now in the press that it's 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 and 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.

34:42 And of course, the modernization of the, let's say, applications. And modernizing, I would say, with Agents is 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. And the market is $700,000,000,000 in The U. S. And Europe. And as I said, the market share in The U. S. 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 they are not that much, I would say, in good shape. They are fighting, I would say, to keep market share, specifically in Europe.

35:34 But I would say we have been able to, I would say, win some contracts in France, in different countries in Europe, and sure, I would say, 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, clients because it takes some time. I would say that 24 events was a shock to a lot of clients. And I see also in The U. S. Because I go there every quarter that the sentiment also is gaining traction. And in fact, some in fact, I have said that we lost a lot of clients and we will finish probably at $1,200,000,000 this year. And at the peak, we had $2,300,000,000 so we lost roughly $1,000,000,000 plus.

36:20 Some of the contracts we're happy to lose, probably several contracts of €100,000,000 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 2027 or in 2028. It depends, I would say, on the length of the contracts that we have lost. Some of them will appear in 2027, and some of them will appear in 2028. 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 sovereignty, definitely we see a lot of actions 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.

37:17 So in Q3, we'll be much better 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 2027. Jean Francois, if you want to? Yes. Hi, Stade. 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 eighteen months since Philippe joined. As you know, the exit of the announced and executed exit of the builder 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 26.

38:09 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 tail of country exits, which were announced at the Capital Market Day with the Genesis, a country with a little perspective of growth or synergy with the rest of the group. That's on the M and A front and not so much in the short term in terms of 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 €109,000,000 of bonds on the open market. We have clearly signaled our intention to do so in the future. Priorities in terms of capital structure, this is to refi. 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, etcetera. But clearly, in the next twelve to eighteen 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.

39:28 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. Hi. Have a question for Jacques Francois, please. So I guess first on the phasing of the factoring program. Can you help us understand the sort of the 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 disappointments in the bond markets.

40:18 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? Sure. Thank you, Sam. Good question to clarify. And actually, 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, is taking some time and it's not something which goes with a finger or clips. It's taking time to ramp up. We have signed already one geography before the end of June.

41:14 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 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 data mining factor for 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 €100,000,000 50% of these amounts go in immediate early mandatory repayments, which we will of course implement.

42:00 That leaves 100,000,000 plus 50% of what is above. So we are very seriously contemplating utilizing this money for earlier than December 26 January 27 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. We confirm 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.

42:49 So if there is any grain of salt in the process, which is whatever delaying, preventing, creating issues, etcetera, 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. 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, our scope has moved. We don't have the bill perimeter anyway. So content of the different business units and geographies, etcetera, has evolved a little bit. So that's another reason to be prudent and not completely bank the full amount which we had in prior years, which were between EUR 200 and 300,000,000 at the end of the year of this cash in advance.

43:45 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 Frederic, deleveraging, 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 standby. 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 $700,000,000 for the factoring program ultimately?

44:31 Several, several. Several means Several, okay. It doesn't mean 7. 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? Guess what I'm trying to gauge, like if there's any price deflation when you're renewing these contracts in some of your product lines? So most of the renewals is, I would say, on the same scope.

45:19 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, etcetera. But I would say renewables is free. I would say most of it is 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 are stabilized, I would say, the project margin. So there is no I don't see price pressure right now, in fact, in the P and L.

46:15 Understood. And I guess the second question I had was on the incremental Genesis savings above $650,000,000 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, the fact that we have in fact, when I launched Genesis last year, I was, let's say, expecting probably less of a decrease in the top line in 2025 and 2026, so that's why we tailor the Genesis plan with better top line. Unfortunately, it didn't happen, and also because we lost a lot of customers in The UK and The US.

47:01 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 eight percent and nine percent next year, and of course, above 9% in the course of 2028% between nine and ten in fact. Whatever is the top line, of course. And of course, if we accelerate and we I definitely think it will come, the marginal growth will bring a lot of because I will keep the cost roughly flat plus. So it means that the marginal growth, of course, will bring marginal EBIT. And that's exactly the way I would say after that. So in fact, I have ensured, I would say, that with the decrease of twenty five percent and twenty six we continue to deliver the margin that we have, in fact, put at the CMD last year.

47:49 And that's why I'm quite confident that we can reach, I would say, 10% margin in 2018, it's just because we have increased the shaving of cost and it's mainly personnel cost, yes. In fact, when I say Genesis is be finished, all the actions will be taken by this year. There will be no new action, in fact, in the course of 2027. Of course, some actions we're going to take in September to December, for example, in France and Nederland, they will have some impact in the course of 2027. So that's why it will continue, let's say, say the exits will continue in the course of 2027. But I would say, at the end of the year, my main message to the team is really we finished competitive 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 2026.

48:41 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, 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 $200,000,000 that you expect to spend this year, this will take you to the cumulative $800,000,000 of Genesis savings? Yes, exactly. But in fact, the total cost so we spent roughly €300,000,000 roughly €400,000,000 plus last year in Genesis. This year, to €200,000,000 a little bit below, so we will be probably at €600,000,000 plus.

49:30 And I always say, Genesis is roughly a €700,000,000 envelope, so we will stay in this envelope for Genesis. So it means that there will be still between 50,000,000 and maximum €100,000,000 next year. And with the same envelope, instead of $650,000,000 we're going to have €800,000,000 plus for savings here. Understood. That's very helpful. And just the last one for me. Can you sort of give us a sense of how H1 26 on a constant perimeter, the performance has been across the various sort of product lines you have, so CMI, digital workplace, etcetera? And if you're able to give an indication of the current product mix of the backlog, that'd be helpful as well. So we don't track the profitability per business line, not yet. Probably we need to do that in the future.

50:21 What I see is that, of course, dividend, the product and Data II is double digit growth. We see more and more projects on Data II. But as I said, the Data II business line, we track only projects focusing 100% on Data II, but in fact, we do also Data II in different projects in CMNI, in digital workplace, etcetera, and 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, at AEX, that is growing very fast, except dividend. The rest, roughly, is 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 decreasing top line.

51:11 Okay, understood. Thank you very much. The only business line where I don't push very hard is the digital workplace. That's the only because I don't like for me, it's not really, let's say, 90 projects. So this is and in fact, that's the business line with the lowest project margin, which is normal. It's more commodity, let's say, product. So that's the one way I don't, let's say, push the team to fight on this one. The rest, definitely think that, of course, it's pure IT, managed services, example, of mainframe, etcetera, or switch to cloud. And if we, let's say, 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 in this one. Okay?

52:05 Got it. Understood. Thank you. Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Laurent D'Arv of Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Great. Good morning, gentlemen. I have a questions, in fact. The first one is going back to the P and 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 and L midterm.

52:58 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 8% to 5% to 7% midterm growth. I think none of your competitor 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 already have clear evidence of that? And then my last question, I want to I would like to have a clear update on the additional P and L savings coming from Genesis '2, 2027 versus 2026.

53:49 And if I got you right, between 2027 and 2028, you are not expecting more savings, right? Thank you for all 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 not 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, are two or three clients at $100,000,000 plus. So if we gain two or three clients like this, and it's $2.300000000 dollars it's already more than 5% growth, in fact, around 5%. So yes, I'm quite confident that we're going to regain this. And then there are traction that we see, I would say that Atos is back, yes. So we are invited in all tenders in the different countries.

54:45 So we see we can regain, I would 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 and 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 will say the competition is difficult, so they are much bigger And if you talk about CAP, so 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 Agentyx.

55:33 So I think we are well positioned for the future. In terms of saving for Genesis, yes, there is 100,000,000 plus going from '27 to '26. So it means that, and of course, again, we have increased our salary, etcetera, so there will be a minus, of course, in 2027 versus 2026. But I would say the savings that we're going to have pro form a and going forward, let's say, for 2027 is around €100,000,000 The question is that, do we are going to have more savings in 2028? It's possible because I'm going to identify also the process, even I would say we 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 of let's say of cost in G and A. In fact, when you look at the G and A 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 2020.

56:36 The first question, Francois probably Yes, yes, yes. Thank you, Philippe. So your question about the P and L, the full clean P and L midterm, etcetera, and as to what how reason does that happen and is that already completely clean. Remember last time we discussed, we explained Genesis is a three year program. Philippe just reminded us a couple of minutes ago about the fact that there is still some cost to come with Genesis, even some cash even if some cash will be out of the door next year. But in terms of P and 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 litigation. So I don't want to give any name, you have noticed that during the second quarter, there were 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.

57:42 That's the first point on litigation. Regarding Onerous 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, cannot because we still have this black account, which is still in project mode, so it's not completely over.

58:28 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 and L, well, it's the target is this year. Yes, remember that it's a four year project, so Genesis, we are here too. So you say meet the project, yes, I think by the end of twenty twenty six, the P and L will be clean. Normally, would say, sorry, the rest for 2027, you should not expect, I would say, big amounts except probably the refinancing cost if we refinance in the 2027 of course. So to be clear, onerous contract is mostly one contract, it's not all over the place, right? Yes, correct. That's 95% is one contract and it is treated as extraordinary because we are consistent with the previous accounting methods applied.

59:20 So in a way we don't have the choice but to book it there, which is abnormal and frequent 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 are only two now. There is one that is using roughly $10,000,000 per year, which is going to be a maximum of years, and we are probably trying to set an upside in the course of 2027, 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 with Tito. Great, thank you. Okay. Thank you. There are no further questions. Speakers, please continue.

1:00:07 Okay. So if there are no more questions, I think as a conclusion, I think as you can imagine, we are quite confident. I think that Genevieve 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 on to work. To accelerate the top line and continue, of course, let's say, restructuring that we have done and the turnaround of this company, but I definitely think after year two, we will be in a different path in the course of 2027. So I'm quite pleased with the work that the team has done in eighteen months. And we are and we will show you in fact in Q3 that it's easing in terms of top line and we are ready for the rebound.

1:00:56 So thank you for your time this morning. I know that there are lots of discussions of publications, so I have free your time. And of course, if there are any other questions or whatever, we remain at your disposal. So 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.