Earnings Transcript for AEXAF - Q3 Fiscal Year 2021

Operator: Good day. And thank you for standing by. Welcome to the Atos Q3 2021 Revenue Conference Call with Elie Girard, Atos CEO; and Uwe Stelter, CFO. At this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your moderator today, Elie Girard, CEO. Please go ahead.

Elie Girard: Thank you very much, and good morning, everyone, and thank you for being with us this morning for our conference call on the Q3 2021 revenue. As you know, this is my last call with you this morning. Indeed, I decided to submit my resignation to the Board of Directors after a very intense period of transformation of the company. After and only after having solved the many issues the group has gone through, I considered in responsibility, it was in the best interest of the company and its shareholders to leave the floor to a new leader for the next phase of the group. I would like to thank every Board member and in particular, the Chairman of the Board, Bertrand Meunier, for their unwavering support to the group's strategy and transformation during this period. The group is now on the right track, and I am especially delighted that the Board chose Rodolphe Belmer [ph] as my successor. He is a great leader and will bring Atos to new heights. By the time he joins no later than January 2022, Pierre Barnabe, Adrian Gregory will be acting CEOs. Finally and above all, I would like to thank very warmly my leadership team and my 107,000 colleagues for their incredible dedication to make this group the leader of secure and decarbonized digital. I will forever be grateful to them all. But for now, let's go back to Q3 results. I will start with the Q3 highlights, then I would on the groups transformation. And after that, Uwe will go through the financial performance of the third quarter before I conclude and open the floor to your questions. Let's move first to the key figures of Q3. Revenue growth at constant currency was stable as it was already the case in Q2. In Q3, the key segments to which the group direct is transformation, Digital, Cloud, Security & Decarbonization performed a strong growth, while revenue was still impacted in classic infrastructure. Headcount reached circa 107,000 staff, an increase of 1,900 staff in Q3, of which 1,500 organically. This is a clear net increase of talents that we never experienced before and a strong signal that our transformation started to deliver. Order entry reached €2.4 billion, representing a book-to-bill at 90%, which is in line with a usual level for Q3, except that there was only a few renewals in this Q3 and that we are winning more and more small and middle sized digital deals progressively moving away from risky, lower-margin outsourcing contracts. As a result, the backlog remained strong with more than 2 years of revenue and up €700 million year-on-year. Finally, the pipeline remained stable at €7.4 billion. Let's move to the next slide on the main new contract signed over the period, which includes some very interesting ones by industry. I will comment here only two of them. In Financial Services & Insurance, we won a contract with the U.S. global insurer for a migration to public cloud, combining Atos, Syntel and Madenwave capabilities. This is only the first step of a larger contract that we expect to sign in Q4. In Telecom Media & Technology, we signed a digital transformation contract involving all our portfolio, Cloud, Security, Decarbonization with a European high-tech leader. This included a portion developed with Siemens. The next slide presents a follow-up on the evolution of our business mix. The group is continuing to make good progress towards its mid-term target to generate more than 70% of its revenue in Digital, Cloud Security & Decarbonization. In Q3, we reached 52% of group revenue generated in those areas. About 70% of the sales pipeline at the end of Q3 was already in these pillars. This remains a good sign that the shift of the business is accelerating with industry-specific and innovative solutions. In Q3, Big Data and Cybersecurity generated plus 25% revenue growth at constant currency. This was achieved despite some shortage in components, which are necessary to manufacture high performance computers. Another key accelerator of our transformation relies on our partnerships in Digital and Cloud where a lot has happened in the last month. This is what you see on the next slide. I cannot mention them all, but I would like to underline a few. With Google Cloud, we have just signed a partnership step up, and we will go massively to the market together, while we will strengthen our position of technology provider to Google Cloud. We also expanded our partnership with OVH through our BullSequana servers in their data centers, the migration of private cloud solutions to the cloud platform and finally, with a new joint go-to-market in the public sector and in health care. With SAP, we completed in Q3 our own SAP migration to RISE as the first large instance worldwide. This is a key achievement to showcase to customers with our RISE pipe growing tremendously. In the next two slides, I want to share with you some great achievements in Security & Decarbonization. Security generated once more a strong growth with revenue increasing by plus 36% year-on-year at constant currency. And looking forward, a solid pipeline for decisions in Q4 should fuel the growth in the coming quarters. During Q3, several interesting deals were signed across industries and geographies. This is the result of the combination of our large customer base that considers Atos as a trusted partner for security, as well as our talented cybersecurity experts working on enhancing our technology. This allows us to remain at the forefront of innovation and to help all our customers in a new world where cyber attacks are exploding not only in terms of number of events, but more importantly in terms of sophistication. Our talented teams were joined in the last 2 years by colleagues coming from many bolt-on acquisitions. They brought new technologies as well as new capabilities from which our customers started to benefit immediately. One example is Paladion, leveraging managed detection and response technology based on our artificial intelligence, which allowed Atos to secure the Olympics Games successfully last summer with more than 4 billions of cyber events being managed during the Tokyo games. Let's move to Decarbonization where the revenue grew by 31% year-on-year. We won many contracts to accompany customers in their journey to net zero. We continue to set trends and be the number one in this vast and untapped business. As an example, Atos has announced a world's first carbon-neutral detection and response cybersecurity services this month. All these decarbonization activity started last year and we plan to exit 2021 with circa €100 million revenue run rate. The next slide relates to the current active HR environment. In early H1, we anticipated a rapidly changing talent market with a fast return after COVID slowdown. We doubled our recruitment capacity and in Q3, on-boarding 90% staff more compared to 2019 with more than 8,000 staff joining. We changed governance and applied market leading technologies to shorten lead times and improve the quality of hiring. As a result, we generated in Q3 a net organic increase by plus 1.4% of our number of staff, this never happened before. We also fostered employee engagement. Attrition rate for the last 12 months was 16%. We continue to actively manage a focused skilling program with more than 61,000 digital certifications completed year-to-date, plus 66% compared to the same period in 2019. And a new program to ensure that every sales executive and solution architect in the group is trained in Atos OneCloud offering and a hyperscaler partner program. Let's now move to the group transformation plan for an update. Slide 13 relates to the specific plans in North America and in Germany. Starting with North America, we have recovered from the difficult situation in Q1 when we were at almost minus 10% to minus 1% in Q3 with a sequential growth in Q3 versus Q2. Also compared to Q2, order entry increased by 33% in Digital and Cloud. In terms of hiring, in a geography where majority of the business remains in infrastructure, two thirds of the new recruitments were performed in digital, cloud, application and in cybersecurity. Finally, a specific program on cloud certifications is well underway with more than 1100 certifications targeted in 2021. Regarding the German turnaround plan, it is well engaged. Agreements have been signed with more than 200 staff, and we expect more than 400 staff by year end on a total of 1,300 people. You'll remember that the objective of this program is an improvement by 1% of the group operating margin, that this plan will be completed by the end of 2023. On the next slide related to our program to look for partners on circa 20% of group revenue, let me start with the UCC, Unified Communication & Collaboration, for which we are currently in advanced discussions. You will understand I cannot disclose much more today on this hot topic. On the next slide regarding data center hosting, I would like to be more precise on the content of the activities for which we look for partners and those we want to concentrate on in order to accompany our customers in their hybrid multi-cloud journey. So we want to partner on a scope representing commoditized technology and service layers. This includes data centers, legacy compute and storage, networks, infra fulfillment, maintenance and related projects. This scope represents around €1.2 billion with zero operating margin. We launched a formal process, and we received indications of interest from multiple and various parties. On the scope we want to focus on, we are talking about the over orchestration, managing private and public cloud, middleware, databases and applications, as well as data analytics, AI and automation. We will focus on data and application on hybrid multi-cloud, a growing business that will support the group's growth and transformation. To be complete, we also have a third category we are working on where we look for partners on subscale activities. This represents circa €300 million of revenue with a low operating margin. On the next slide, you see that after already 18 bolt-on acquisitions signed since beginning of 2020, we have just signed the acquisition of DataSentics, a leader in data analytics in Europe. Finally, on the next slide, we continue to accelerate through our cultural transformation program, Leap. I am proud that our employees are putting so much energy and dedication into Leap. This will help ensure that our teams transform at the same pace as our company. The program is now focused on four priority areas, and we started to roll out not only at executives, but obviously, also at all levels of the company. Uwe, I leave the floor to you now.

Uwe Stelter: Thank you, Elie. And good morning to everybody. Let's start on the next slide by some general comments on the revenue evolution. Revenue in third quarter of 2021 reached €2.7 billion, stable compared to Q3 2020 and decreasing by minus 2.3% organically. Classic Infra continued to weigh on the group performance, while the growing segments continued on their growth path. Especially, the Syntel, including the reverse integrated accounts, grew double-digit, recovering well and back to strong growth. UCC and Big Data activities faced a shortage of components, which impacted revenue growth by circa 75 basis points in Q3. This effect is expected to lower in Q4. We also reduced the level of hardware resale in order to focus on services with higher margins. This had also a 70 basis point effect on revenue growth in Q3. Looking at the industries. Manufacturing revenue grew by 10.4%, which is an acceleration of its recovery after a second quarter already growing by 1.8%. Every geography contributed to this strong growth, driven by a repositioning of the industry on higher value digital projects and solutions. Financial Services & Insurance saw an increase of its revenue by 2.3%, confirming its performance of the first semester. Business in this industry continued to be led by digital transformation project and a strong demand for cybersecurity expertise. Public Sector & Defense revenue decreased by year-on-year 11.9% after a plus 13% in Q3 2020 due to less high performance computing projects versus last year in Northern and Central Europe, as well as the last quarter of year-on-year base effect from the scope reduction and the Texas DIR contract renewal in North America. Telecom, Media, Technology decreased by 2%. The Media segment grew, whereas the High-Tech and Engineering sector declined slightly. Resources & Services grew by 1.5% after a decrease by minus 2.5% in the second quarter of 2021. The Transportation, Hospitality sector, especially North America and Southern Europe, grew double-digit, while the Retail and Energy & Utility sectors were down. And finally, Healthcare, Life Sciences continued to perform well with a plus 5.1% revenue growth given the ramp-up of a large contracts such as North America hospital chain won in Q3 2020. On the next slide, you can see the quarterly evolution of the growth rates at constant currency by industry for the last quarter. This includes also some indications on how I anticipate Q4 to perform from the current viewpoint. Starting with manufacturing, which we covered well in the last quarter, we expect the industry to continue growing year-on-year, but with a lower growth level. The industry is benefiting from the strong recovery of the Syntel applications business. Financial Services & Insurance will continue on its growth momentum, supported also by some contract ramp-ups in Q4. Public Sector & Defense will improve in Q4 given the end of the Texas DIR base effect in North America and higher level of deal signatures. Next, on Telecom, Media & Technology, we expect higher growth from business with hyperscalers and increased Big Data sales. Resources & Services is expected to continue recovering post-pandemic, notably in Hospitality and Transportation sectors, which are recovering. This industry is also expected to benefit from a better deal flow. Finally, Healthcare & Life Sciences is expected similar to Q3. Now moving to the regional business units. North America grew in all industries, except Public Sector & Defense, again, impacted by the scope reduction of the Texas DIR contract. Northern Europe was impacted by less high performance computing sales in Public Sector & Defense. Central Europe significantly improved its revenue trends compared to minus 10% in Q2, thanks to manufacturing ramp-up of projects and new contracts. In Southern Europe, the activity was strong in most of industries. Growing markets continued on its trend at around 5% growth, led by the ramp-up of projects in Asia and South America. Looking at the expected Q4 trend on the next slide in those geographies, North America expect to continue the improvement, especially given the disappearance of the negative base effect. Northern Europe to turn positive in Q4 based on the ramp up of large contracts already won. Central Europe is impacted in Q4 by lower high performance sales versus last year. While Southern Europe will keep growing, but at a slightly lower pace and growing market should be able accelerate growth based on recent contract wins. In summary, we see, on the next slide, five main leaders making the difference going into Q4 and improving the growth rate in comparison to Q3. First, the business mix is more favorable in Q4 as the growing areas have more weight on the group revenue than in Q3. Second, based on the deals signed, we see a normalizing deal flow of high performance computing platform. Third, Q4 has a comparable base effect from the Texas DIR contract and no negative impact on the growth rate anymore. Fourth, already signed contracts in the previous quarters in Northern Europe are now ramping up. And lastly, the increase in capacity, especially in our growth segments is leading to an acceleration of the growth momentum in Q4. Let's move to my last slide on the headcount development. Total headcount was around 107,000 at the end of the September 2021, an increase of circa 1500 organically or 1.4% versus end of June. More than 100% of that increase happened in our offshore locations. We increased hiring, especially in India, where we have hired more than 3,800 new talents in Q3. In Q3, we also welcomed 372 colleagues coming from the new acquisitions. Back to you, Elie.

Elie Girard: Thank you very much, Uwe. To conclude on the last page, we remind and confirm our objectives for the year 2021. Thank you very much for your attention. We will now take your questions.

Operator: Thank you. [Operator Instructions] The first question comes from the line from Michael Briest from UBS. Your line is now open.

Michael Briest: Thank you. Good morning. Firstly, Elie, I wish you all the best for the future and hope you get some time off before taking on your next opportunity. Two questions for me. Just in terms of the partnership program, can you give a bit more detail about the nature of the discussions.? Obviously, you are proposing partnerships. I'm wondering if you're seeing from those discussions, perhaps it's a sort of an outright sale or does the counterparties want you to continue to be involved? And related that on the infrastructure side, obviously, your customers have had 3 months to digest the news, how are they reacting to that? And is that having any impact on perhaps bookings or renewals sort of anticipation because they don't know who might owning these assets in the next year or two? And then just a final one, Uwe, just on the hardware component shortages you mentioned. When do you see those sort of easing. I mean do you have visibility on Q4? Other companies are talking about next year or even beyond. And what does that mean for your cash flow and working capital, perhaps for year end? Thank you.

Elie Girard: Hi, Michael. And thank you very much for your words. I take the two first questions, and Uwe will take the last one, of course. So on Unify, I mean you will understand that we are, as I said, in advanced discussions and I can't say much more. The only thing I would say is that the objective of the Group and of the Board of Directors is to be the least involved possible in this type of transactions after the transaction because it's about re-profiling the group, especially on an activity which is non-core and quite far actually from the core of the group and especially from the four areas which are our four strategic areas. I can't say much more on this as we are in advanced discussions. There is some expectation that we'll be able - I mean, the group, not me, but the group will be able to say more hopefully soon. On the infrastructure or data center hosting piece, we of course, received a few calls from customers, the current customers, existing customers. We managed to reassure them all, explaining to them the philosophy behind that, which I tried to explain in my presentation quite precisely. We're talking about partnering or disposing the most commoditized technology and service layers, which means that this does not change by any shape or form our promise to our customers of managing the data whatever it is, including on-premise, if they still have and they all have still some data on-premise on the private cloud and one more on the public cloud. So that promise to the customers not only has not changed, but it's, I think, even stronger because we will have the resources to really concentrate on this. And therefore, the customers who rightfully and legitimately called were totally reassured. And regarding the current commercial activity and the RFPs, we are working on is exactly the same story. So there is no destabilization, let's say, from a commercial point of view towards existing customers or future customers from that point of view. Uwe?

Uwe Stelter: Hey, Michael. Good morning. Yeah, on the component shortage, as we are talking mainly about components in the premium sector, especially on the high-performance compute platforms, we were able to secure the backlog of contracts which we signed for Q4 to be also delivered with the supplier. So that was an important activity whether at the end of the quarter. So therefore, we have a good visibility to also being able to deliver that with the suppliers at stake. From a working capital, I don't expect any impact as we have factored these kind of effects into it. And the key is to organize the supply chain and being treated as the premium partner and the premium we are with the suppliers.

Michael Briest: Okay. Thanks, again.

Elie Girard: Thank you, Michael. Thank you very much.

Operator: Thank you. The next question comes from the line from Frederic Boulan from Bank of America. Your line is now open.

Frederic Boulan: Hi, good morning. So first of all, Elie, same from me, all the best for the future. I think we all know the last quarters have been very intense. One question for you and maybe for the Board more broadly, but we have a repositioning towards digital business, strategic action plan, which is well defined, well underway in terms of execution. So can you shed some light on the Board thinking on the current strategy, if there is anything you can add to that in terms of their alignment or not? And then two questions maybe more for Uwe. First of all, around thinking on the balance sheet structure, you seem to be quite advanced with Unify at least. Any thinking around best use of cash? Are you still in the mindset to keep firepower for acquisition in new growth areas [ph] as the best way to use this cash versus deleveraging or do share buybacks? And then third question, at this stage, if you can give us some insights on 2022 moving parts from a margin standpoint, and how you see the progression towards your medium term operating margin target. And second, on free cash flow moving part, considering we should have some pretty large cash outlays we had in '21, but repeating in 2022? Thank you very much.

Elie Girard: Thank you very much, Frederic, and thanks for your words. I'll take the first question, and Uwe will take number two, and number three. The answer is very simple, each and every strategic decisions that has been taken in the last years have been taken together with the Board of Directors unanimously. And I'm just stating the obvious here because a strategic decision by construction has to be taken by the Board of Directors. So the strategy to massively reshape the group, re-profile the group to Digital, the Cloud, Cybersecurity and Decarbonization, of course, totally backed by the Board of Directors. The ins and outs, let's say, both the acquisition strategy, the partnering or disposal strategy, I mean, all of this, of course, and the governance in the last 2 years has worked perfectly in terms of dialogue between myself and the Chairman of the Board first and the entire Board on all strategic elements, including through the difficult times of issues that we've gone through. So there is no question about that. You can be absolutely sure. Uwe?

Uwe Stelter: Yeah. Frederic, so on your three questions, so one on the cash utilization, so first, we need to do the deals, point one. But of course, the second item is that the transformation of the group, of course, means we will continue on the bolt-on acquisitions, for sure. Therefore, this is also important, also the transformation itself. And then, of course, I'm sure it will be again discussed and then also being decided how to deal with cash buybacks - sorry, share buybacks or the likes. But of course, this is, I would say, on the Board agenda as it was in the past on a regular basis. On the second point on your margin drivers for next year. So if you remember, we had five of them. One was, of course, the business mix and you see - and I would also say for Q3, we see the trends on the segments, if you want, between the growing segments, the classic infra and classic app being pretty much the same as we saw in H1. So therefore, we see, of course, a big impact from that because this is more margin rich that will improve indeed continuously now the margin for the next year as we added on our bridge in the H1 call. Of course, until disposal, the partnering will do its piece when it's concluded. As you understood that the margin of the pieces which we would try to partner with are, of course, substandard and way below the average of the group. And on the off-shoring, which is one of the largest levers where we expect 1.5% to 2% over the midterm, the good news is that already this year, after 9 months, we have increased the offshore rate by 2.5%. So we made already a good progress in that direction, which, of course, will continue and needs to continue, that helps as well. And as you know, on the fourth lever, the German restructuring is well underway, has started. So we are also very much on track to work on that. So I would say all these profit drivers towards the 11% to 12% mid-term target are intact and should, therefore, progressively deliver over the next year. On the cash side, that was your last question. On the cash side, of course, as you said rightfully, we had some onetime effects, especially on the German restructuring, but also on the reduction of the advance payments this year. So you could expect, of course, these two not to be there anymore. And as we said, on the restructuring to go next year, starting next year to below 1%, which, of course, in itself will create more or less €200 million - more than €200 million free up of cash. You have the advance payments, which are, of course, staying stable. So it's not a repeated impact. And then on top, you have the margin improvement as we discussed before. So these are kind of the main drivers for cash performance next year.

Frederic Boulan: Thank you.

Uwe Stelter: Thank you very much.

Operator: Thank you. Your next question comes from the line from Laurent Daure from Kepler Cheuvreux. Your line is now open.

Laurent Daure: Yes, thank you. Good morning. Thank you, Elie, for having started the transformation of the group. And as everybody else, wishing you the best for the future. So on my side, I have three questions. I'd like to come back on the addition of headcounts. How do we - how should we see this point, is it an investment with no assignment for these people yet? Or is it the demand that is already starting? So basically, where - the question is whether you were feeling comfortable enough on your margin for the year to take a slight hit on the utilization rate? The second question is on the fourth quarter. I understand the drivers, basically to get to the guidance, you need to be flattish on an organic basis. I was also wondering if - we have the positives, but do we have to be worried about any potentially negative drivers from Q3 to Q4? And my final question is on the M&A. I mean, there's an interview from the Chairman in the French press, which is highlighting potentially larger deals in hot areas, does it mean that your pipeline is not only made of bolt-on? Thank you.

Elie Girard: Thank you very much, Laurent. It's been a real pleasure. Maybe I'll answer the last question and the first two will be with Uwe. On the M&A strategies, we have the bolt-on acquisitions and then larger, larger doesn't mean very large, larger means larger than the bolt-on acquisitions. And while we are very fond of adding those bolt-on acquisitions every quarter, these are very small acquisitions. We're talking about groups of 100 and 150 experts. That makes a difference wherever it lands in the group. But of course, if you want to accelerate the transformation, we would better add at once, maybe some acquisitions with a few thousands of new skills. But don't think of this as a very large acquisition. And then in terms of pipe, in the pipe, we can only talk about the pipe, of course, and for what concerns me. The pipe is very active and vivid on the bolt-on acquisitions. The larger you go, the smaller the pipe is, but you know that. But we also have in the pipe, I would say, medium-sized opportunities to which the Chairman referred to.

Uwe Stelter: Laurent, good morning. To your other question, so first, on the - I mean, of course, we didn't only hire 1,500, but 8,000 people. Yes, you always have a mix in there of, let's say, people coming from the universities, campus hires and so on. But the 1,500 net evolution, I would say, is very much immediately into billable roles. So this is really the demand we have, which is, of course, exceeding the supply. That's why we also are, of course, increasing and can put them to work pretty much immediately. To your second question on the Q4 versus Q3. So if you - I mean I didn't give you precise numbers on the five levers. But it is more than the step-up, which is the net-net to what you described. So of course, we cater also for some surprises, some headwinds, which you always have and we factor. So indeed, these things should actually even get to a higher growth, but as you have movement in between as we all know.

Laurent Daure: So basically, you feel confident about having flat organic sales in the fourth quarter even including some potential headwind?

Uwe Stelter: Correct, correct, that we will absolutely get to the guidance, yes.

Laurent Daure: Very clear. Thank you, gentlemen.

Elie Girard: Thank you very much. Laurent.

Operator: Thank you. The next comes from the line from Stacy Pollard from JPMorgan. Your line is open.

Stacy Pollard: Hi. Thanks very much. And again, just like everyone else, best wishes, Elie, for the future. I hope our paths may cross again at some point. A few quick follow-ups really. A lot of my questions were answered. But just on the margin side, it sounds like you could see steady, almost straight line advancements in margins as you head towards the 11% to 12% target mid term. Is that something we should consider? Or should we think maybe it's a bit more bumpy along the way? And so what factors might influence that as we think over the next 3 years? And then secondly, could you speak just a little bit more about what you are seeing in the hiring environment, wage inflation and attrition rates in your expectations as you go into 2022? I know it's been quite a dynamic market. So curious there?

Elie Girard: Thank you very much, Stacy. Very nice of you. I leave those two to Uwe.

Uwe Stelter: Hey, Stacy, morning. So on your first question, of course, we are not giving guidance for 2022, you understand that. But what we - what I showed as well in the H1 results, I mean, we would see the path and the components to the 11% to 12%. And I would expect, right now, looking at all the levers, more linear development in between. So don't expect any much of whatever delay or early or something. I would indeed see it pretty linear in between. The second question on the attrition rate, of course, number one, we are watching that on a daily basis. My belief is that also what we are seeing is that we have, of course, right now a bit of a catch-up effect from last year where there was nearly no hiring in the industry. Now we have a bit of rally for hiring, therefore we also see both attrition and hiring being on a high level. And I would expect that this goes back more to normal at the beginning of next year. So it's more, I would say, a catch-up from last year's very low attrition, very low hiring. This year heightened on both effects and then a more normalization. But of course, the demand will always be high on those skills.

Stacy Pollard: Thanks very useful.

Operator: Thank you. Next question comes from the line from Mohammed Moawalla from Goldman Sachs. Your line is open.

Mohammed Moawalla: Great, thank you. Morning, gentlemen. And first of all, Elie, best wishes for the future. I had really two questions. Number one, I know that you don't sort of break out the businesses by the kind of service lines anymore. But could you give us a sense around the growth you saw in Q3 in data cybersecurity more specifically, but also on the kind of the NPS side? And what is your kind of visibility around sort of the NPS growth? And tying back to the question earlier from Stacy around environment around hiring and sort of wages. What is your kind of expectation in terms of having sort of sufficient capacity as you move into next year to kind of unlock the growth, particularly on the kind of consulting and system integration side? Do you feel the need to - do you have enough kind of pricing power to kind of offset some of the wage increases that are there, that would be great? Thank you.

Elie Girard: Hi, Mo, thank you very much. I leave those two to Uwe, again.

Uwe Stelter: Yes, Mo, good morning. On the - so by segment, I would say, specifically to your question, the BDS sector is growing at about 25% at constant currency. So it's really, really strong. And as we said before, even stronger with 36% in the security space. So this is continuing to be super hot and growing. On the application side, on what I commented before, when you take the Syntel piece, and again, remember, we added to that the reverse integration scope. So that's about €2 billion or so of scope, which gave to the -- under the Syntel management. This is now back to a double-digit growth, so above 10% in Q3 after minus 7% in Q1, plus 4% in Q2, now really back. So -- and that's also -- well, of course, hiring goes both into the security space and into the digital application space. So it's really growing substantially and absolutely in the right direction. On the hiring side and the limits on capacity, what we see now, and that's why we pointed out also these increases, which might sound low at the beginning with 1,500 people. But for us, this is, number one, the first time for a very long time to add really headcount into growing places. And secondly, it is the momentum. It's the start of the momentum where the hiring engine, where the attractiveness, and so it shows that this is happening, and of course, can now accelerate into next year and therefore, add capacity at an even larger scale. The market is there and the capacity is also there. Your last piece on the pricing side. So what we see, especially in the application, but also in the security space is that, of course, customers are willing to pay more. And of course, we are also driving that with our salespeople in those skills. There's no problem also to ask for higher prices and also quote higher prices in the skill sets which are, of course, in high demand.

Mohammed Moawalla: Okay, great. Thank you.

Operator: Thank you. The next question comes from the line from Neil Steer from Redburn. Your line is open.

Neil Steer: Hi. Thanks very much. And can I echo everyone else's thoughts. Best of luck for the future, Elie. Mo has actually it just hit me to ask the question pricing actually in the sort of more classic consulting and systems integration. I think the message there is that you're getting price elasticity. The one final question was on the book-to-bill. Book-to-bill in Q3 at 90% was much more in line with the traditional sort of Q3 ratio. Over the course of the last 12 to 18 months, we've obviously seen some very, very high bookings as we've gone through the pandemic. Do you think that the booking activity has now come back down to a more normalized level? Or are you still seeing some trough in the market in terms of the booking activity? Thank you.

Elie Girard: Hi, Neil, thank you. I will answer to this. The commercial activity is more, I would say, changing structure from a conjunctural point of view and a structural point of view. The conjunctural point of view is that we have less renewals at the moment, which is always good because it carries less risk. But mechanically, it inflates -- or this does not inflate the book-to-bill. So number of renewals in Q3 has been quite low. Second, more structurally, the deals -- as I said in my presentation, as we go along our transformation, we go more and more for very numerous, but much smaller size deals. So for example, if you look public cloud, application migration and development typical deal is a couple of millions. But these deals are high value, better margin, very low risk, so actually much better in terms of profile by any metric as long, of course, as you sign enough to more than compensate in terms of volume, the large outsourcing deals, which are much less numerous on the market and also from which we're moving away as we go along our transformation. I think the first question was answered by Uwe already to Mo. Or do you want to add anything, Uwe?

Uwe Stelter: On the pricing? No. I mean I think this is, as you said, right, there's more elasticity on the - especially on the digital security space versus the commodity skills.

Neil Steer: Okay. Thanks very much.

Operator: Thank you. The next question comes from the line from Nicolas David [ph] Your line is open.

Q – Unidentified Analyst: Yes, hi. Good morning, Elie. Good morning, Uwe. Also best wishes from my side as well, Elie. It has been a pleasure to interact with you during all these actual calls and virtual over the last few years. I have two question from my side. First, going back on the disposal process of the data center hosting business. You mentioned some interest from -- I know that you can't comment very a lot. But do you think that the group could manage to sell these assets to a limited number of buyers? Or you still think that it will be a very scattered number of deals there? The first question. And second is, what was the revenue decline of the most difficult business you have here? I remember in H1, you presented that with a steep decline on classic data center, UCC and so on. Did you see a change in trend in Q3? And what do you see for Q4? Thank you very much.

Elie Girard: Thank you very much, Nicolas, on my side as well. I will answer the first question. Uwe will take the second. So of course, the objective is really to have 1 transaction, maybe two, but to avoid scattered scheme of transactions. That's extremely, extremely clear. And I think, by the way, that scattered transaction doesn't really makes sense because I mean it has to be a package deal because, of course, you've got -- in those data centers, you've got several tiers of data centers. So we're not and it's extremely clear in the way we dialogue with potential partners. It's very clear that we will refuse any cherry picking. The last thing we want to end up with is all the best cutting-edge data centers going away and we would keep the others. So that's absolutely not the idea. So the objective is clear, but also the dialogue and the setting of expectations towards potential partners, including, of course, those who have already sent to us some indications of interest are very clear. Uwe, on the second?

Uwe Stelter: Nicolas, yes, on the trends by the different segments, so if you talk about the one which is declining, what we described in H1 was the classic infra, including UCC at circa minus 20%. So that's still the same. The same is also true for the growing segments between 12% and 15%. So in Q3, the same trend that I expect as well. No change in Q4 for those dynamics. Thank you very much, Nicolas. Thank you, Uwe. And I think we have no more questions. So let me thank you all for all our exchanges and discussions, which I always appreciated in the ups and in the downs, I have to say. So thank you very much. And hopefully, I will meet you again, and you will be around in the next period. Thank you very, and see you soon.

Uwe Stelter: Thank you. Bye-bye.

Operator: That does conclude the conference for today. Thank you all for participating. You may now disconnect.+