• Revenue: EUR9.6 billion, down 5.4% organically compared with 2023.
• Operating Margin: EUR199 million, representing 2.1% of revenue, down 200 basis points organically from 2023.
• Free Cash Flow: Minus EUR2.2 billion, impacted by the end of working capital optimization and higher CapEx.
• Net Debt: EUR1.2 billion nominal value post-financial restructuring.
• Net Income Group Share: EUR0.2 billion, influenced by financial restructuring gains and impairments.
• Book-to-Bill Ratio: Q4 at 110%, with Eviden at 111% and Tech Foundation at 122%.
• Regional Revenue Performance: North America down 12%, UK with double-digit decline, Benelux and Nordics up 5%, Central Europe down 2%.
• Attrition Rate: 15%, with key employee retention at 92%.

• Warning! GuruFocus has detected 9 Warning Signs with AEXAF.

Release Date: March 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Atos SE (AEXAF) reported a strong Q4 book-to-bill ratio above 110%, indicating robust commercial activity and successful contract renewals and wins.
• The company finalized the sale of Worldgrid, receiving cash before the end of 2024, which positively impacted their financial position.
• Atos SE (AEXAF) successfully completed its financial restructuring in December 2024, improving its credit rating to B- with a stable outlook.
• The company has launched a transformation plan and strategic review, aiming to improve operations and financial performance in the coming years.
• Atos SE (AEXAF) maintained a stable attrition rate of around 15%, with a high retention rate of key employees at 92%, indicating workforce stability.

Negative Points

• The company's 2024 revenue was down 5.4% organically compared to 2023, with Eviden and Tech Foundations both experiencing declines.
• Atos SE (AEXAF) reported a negative free cash flow of EUR2.2 billion, largely due to the end of working capital optimization actions and higher CapEx.
• The operating margin decreased to 2.1% of revenue, down 200 basis points from the previous year, indicating profitability challenges.
• The company faced a goodwill and other non-current asset impairment charge of EUR2.4 billion, impacting its financial results.
• Atos SE (AEXAF) experienced a revenue decline in key regions such as North America and the UK, with challenges in contract renewals and market softness.

Q & A Highlights

Q: Can you provide insights into the impact of contract terminations on the organic revenue decline for Eviden and Tech Foundations in Q4? Additionally, could you quantify the positive impact of HPC deliveries in Denmark and Germany? A: The revenue decline in Q4 was primarily due to contract terminations and scope reductions, more so in Eviden than Tech Foundations. However, there was a significant rebound in commercial activity, with a book-to-bill ratio of 117% for Q4, indicating regained momentum. The HPC deliveries in Denmark and Germany, particularly the Julich Project, contributed positively, with high CapEx in 2024 and continued developments expected in 2025. - Jacques Francois De Prest, Group CFO

Q: What are your expectations for free cash flow and leverage targets for 2025, considering the previous restructuring plan? A: While specific guidance for 2025 will be provided in May, we anticipate improved operating margins and profitability compared to 2024. The lowest point in terms of margin was reached in 2024, and we expect better performance in 2025. The focus remains on achieving positive free cash flow starting in 2026, aligning with the business plan outlined in September. - Philippe Salle, CEO

Q: Could you elaborate on the impact of contract terminations on 2025 revenues and the potential risk of losing further business with large customers? A: We anticipate minimal contract losses in 2025, with only one client in the US potentially reducing scope but not terminating the contract. The situation has stabilized, and we expect more positive news compared to 2024. Our focus is on maintaining and growing our client base. - Philippe Salle, CEO

Q: How do the one-off items in the free cash flow compare to the safeguard plan, and are there any timing differences? A: The business plan for 2025 anticipates restructuring costs around EUR400 million, with potential acceleration to ensure targets for 2026. The underlying cash flow generation in 2024 was better than expected, with no significant items pushed to 2025. The focus remains on sustainable cash flow management. - Jacques Francois De Prest, Group CFO

Q: Can you provide details on the average contract length within the Q4 book-to-bill for Eviden, and how is this calculated? A: Large deals, typically above EUR30 million per year, have a contract length of four to five years, with an average of five to six years for Eviden. The book-to-bill ratio is calculated on an annualized basis, reflecting the annualized booking number compared to quarterly revenues. - Philippe Salle, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.