Earnings Transcript for AEXAF - Q4 Fiscal Year 2023

Paul Saleh: Thank you for joining us this morning to discuss our full year 2023 results. On the call with me today is Carlo d’Asaro Biondo, our Group COO; and Jacques-François de Prest, our Group CFO. And for the agenda today, I will share some key messages related to our accomplishments in 2023 as well as current strategic initiatives underway. Carlo will cover in more detail our performance by lines of business and regions, and then Jacques-François will go over our financial statement for the year. I’ll come back too with closing remarks, and then we’ll take your Q&As. Before we get started, I want to draw your attention to the disclaimer that you’ll find on Slide 3. And then you see the agenda. So let me move on to review the year-end. And you can see from the slide, we delivered group revenue and operating margin results that were in line with our full year guidance. This is my key messages. Our Eviden business reported continued growth and increased profitability in an environment where we saw a market softness in the Americas and in Northern Europe, particularly during the second half of the year. For the fiscal ‘23, Tech Foundations executed on its transformation plan, which was based, if you recall, on 3 pillars

Carlo d’Asaro Biondo: Thank you, Paul, and greetings to everyone. I’d like to go into more details about operational results for fiscal ‘23. Revenue at Eviden was €5.1 billion last year with a 2.9% organic growth. BDS revenue growth reached mid-single digits driven by digital security and by significant contracts in high-performance computing, in particular, in Europe and in India. With 2 of the highest-performance computers in the top 10 globally, Cineca and Barcelona, Eviden is now the #1 provider of HPC in Europe, India and South America and #2 worldwide in high-end critical and in-memory computing on premises or in the cloud. This technology is absolutely key at a time where GenAI opportunities are arising everywhere. Our digital business line showed growth -- strong revenue growth in Europe, driven by demand for specialized application development, application management and next-generation products and services. However, America has shown softness in H2 in big complex projects due to a general market slowdown in the U.S. as clients take longer to award new business. Turning now to profitability. Our operating margin in Eviden was €294 million last year, representing 5.8% of revenue and a plus 110 basis points improvement over 2022. There was also a sequential improvement through 2023, with operating margin reaching 6.3% in the second half. We are benefiting from cost takeout actions, better utilization of billable resources and higher absorption of fixed cost in advanced computing. While driving growth and profitability, we have continued to invest in our product design, in particular in GenAI-related AI solutions and cloud frameworks. As an example, we are embedding GenAI in our solutions, which is allowing us to deliver greater savings to our clients. And our centers in India are continuing the developments of that solution with success. To go now to book-to-bill in Eviden. Our book-to-bill was 94% for the year with the Q4 lending just at 100%. On the pipeline development in Eviden, I want to call out a couple of elements. First one, we are increasing our focus on smaller projects in order to translate into faster time to revenue. We have been very careful in qualifying opportunities better and solutioning large complex project to reduce the risk of execution. Having said that, our win rate for large deals has gone up by 10%. Let me now comment 2 of our recent wins in Q4. In Spain, we will implement for Canal de Isabel a new commercial system in SaaS mode as well as the associated support and maintenance. This is a €51 million contract over 4 years for the water distribution and the 6.5 million people living in the Madrid community. All building repair service requests will be handled by this platform, which will be based on SAP S/4HANA in Microsoft Azure. The other one I would like to bring -- and to highlight and then to bring to your attention is the very first exascale supercomputer that will be delivered in Europe by Eviden BDS to the Jülich Supercomputing Centre in Germany. This is a €500 million project, where Eviden will build the first European system able to surpass the threshold of 1 trillion calculations per second. This is a key milestone to ensure Europe’s scientific excellence and industrial independence. JUPITER, which is the name of the supercomputer, is designed to tackle the most demanding simulations and compute-intensive application in science and industry. For instance, human brain digital twins, most critical hematology research and large AI model training for scientific community. This system is indeed one of the largest AI training machines in the world, with more than 23,000 GPU interconnected. And very important, we will also provide the dedicated data center through our innovative modular data center architecture and DC to deliver exascale machine through eco-friendly containers. Let me now turn out to Tech Foundations. Our revenue was €5.6 billion, decreasing organically by 1% -- sorry, by 1.7%, reflecting the deliberate reduction in noncore activities, including the decrease of hardware and software resales that are low margin, which were down by 19%. We have also reshaped our portfolio by disposing of our UCC business in H2. BPO activities were up year-on-year, but this was due to a one-off favorable comparison effect. Growth in Digital Workplace and Technological Services helped to partially offset the structural decline in the on-prem outsourcing. Tech Foundations operating margin reached €172 million in 2023, representing 3.1% of revenue. This is a strong improvement of 210 basis points compared to ‘22, reflecting the quality of the execution of the transformation program, including the shift of the business portfolio toward higher-margin new offerings. There was also a positive impact from the accelerated reduction in underperforming contracts via renegotiation and improved delivery, better pricing of new business and continued reduction of low-margin noncore activities such as resale. Our operating margin also benefited from the delivery of our workforce adaptation plans, especially in Germany. While delivering and probably overachieving on our transformation, we have also improved customer satisfaction and delivery quality parameters and developed full next-gen infrastructure offering, allowing to propose multi-cloud and AI-based services to customers who are looking to outsource to innovate. On book-to-bill, while we have successfully managed our top line evolution, the book-to-bill has improved sequentially quarter-on-quarter, reaching more than 117% in the fourth quarter, the highest recorded in the last 3 years, mostly due to a contribution of new service or new logos. On the full year, book-to-bill is 94% versus 75% in 2022, so a significant improvement. The renewal rate higher than 90% testifies to the quality of service the company provides while the wins of important new contracts in all our geographies demonstrate the validity of our multi-cloud and integration bridge approach. Regarding the Q4 contract wins, I would like to comment specifically HSS in Australia and LCH in the U.K. and Ireland. We were able to win these opportunities, thanks to our hybrid cloud infrastructure offering displaying our latest service orchestration layer. This demonstrates how our teams are smoothly integrating new offerings while leveraging strong client intimacy to close larger transactions. I want to take the opportunity to thank them. Also, our Digital Workplace division remains very active with strong wins, including large global new logos. Let me now quickly turn to geographies, starting with Southern Europe. Southern Europe revenue was €2.284 billion, up 3.9% organically. High single-digit growth in Eviden was driven by strong performance in Big Data & Cybersecurity and HPC. Digital also grew, benefiting from new customers’ contracts as well as demand for application modernization and decarbonization solutions. Tech Foundations reported a low single-digit decline. The solid performance with public sector clients was offset by volume reduction in the aerospace and transport and logistics sectors. In the Americas, though, revenues was €2.441 billion, down 7.1% organically, reflecting the general slowdown in market conditions, delay in contract awards and tougher comparison with the prior year. Both Eviden and Tech Foundations business were down year-over-year in Americas. In advanced computing, the delivery of HPC in South America in 2022 could not be compensated by another HPC delivery in 2023, while softer market conditions led to volume reduction in digital, particularly in finance, transportation and health care. That condition was impacted by contract scope reductions, notably in pharmaceutical and finance verticals. In Central Europe, revenue was €2.506 billion, increasing by 2.2% organically. Solid double-digit growth in digital and BDS was driven by strong demand in the public and automotive sectors. Revenue decline in Tech Foundations was due to lower activity in manufacturing and banking. Lastly, Northern Europe and Asia Pacific revenue was €3.163 billion, up 1.3% organically, reflecting solid demand from the public sector across Northern Europe and good performance in the financial vertical in Asia Pacific. Digital activities were up single digits on solid demand from application modernization and cloud transformation, partially offset by reduction in lower-margin Lab-as-a-Service business and lower HPC revenue compared with the previous year, which had benefited from several supercomputer deliveries. In Tech Foundations, growth came mostly from stronger public sector business in the United Kingdom and in the financial sector in Asia Pacific. Let me now very quickly talk about headcount evolution. The total headcount was 95,140 people at the end of December 2023, a decrease by 14.1% compared with 110,797 at the end of December 2022. This was due largely to scope effects linked with the asset divestment program. Excluding the scope impact, the decrease would have been 5.7% over the period. During the year 2023, the group hired 14,839 staff. 70% of hirings were in offshore and nearshore countries, showing the resilience and adaptivity of our group in 2023. Attrition rate, this is important, declined from 21.6% in ‘22 to 14.5% in ‘23. By the way, those positive trends continued in January, with the lowest attrition rate recorded in the last 25 years at 12.5%. Let me now conclude with the operational takeaways. In managing Tech Foundations and Eviden, we have decided to manage Tech Foundations and Eviden as a separate entities within the group. However, we will adopt a coordinated sales approach to lever synergies and maximize opportunities, with Clay Van Doren in leading sales for the group. On delivery excellence, and I really want to say that in my few months with the company, I was really happily surprised that -- by the clients recognize delivery excellence of the activities of the group. We remain committed to our focus on delivering excellence as it is recognized by our clients. Their dedication to exceptional service will continue to be the cornerstone of our operation in 2024. Investing in new offerings. We are dedicated to expanding our offerings, particularly by integrating AI into our digital and cloud automation tools. And India is the cornerstone to achieve that through our development centers there. This investment reflects our commitment to staying at the forefront of technological innovation and meeting the evolution needed by our clients, and it is deeply appreciated. Investing in our people. Our people are our greatest asset, and we will continue to invest in their development. We highly value our training initiatives, and we’ll further enhance them to ensure our team members have the skills they need to excel. On reinforcing leadership, we do understand the importance of strong leadership in driving operational execution and supporting the sets of new offerings. As such, we will continue to invest in leadership development to ensure we have the necessary skills to effectively lead in 2024 and beyond. On Tech Foundations, I will take the operational responsibility of Tech Foundations as already [indiscernible] levers. And we have new managers which joined the group recently to help manage the company at the standards we need. Thank you. I will now turn the call to Jacques-François, who will comment in more details our financial results.

Jacques-François de Prest: Thank you, Carlo, and good morning to you all. I joined less than 2 months ago, so as you can imagine, it feels slightly more. Before I start, let me first tell you that our consolidated financial statements were established as usual on a going concern basis. All numbers I will comment today are in euros. I will now give you a snapshot of our key financial numbers for ‘23. Group revenue was €10.7 billion in ‘23, up 0.4% organically compared with ‘22, with Eviden up 2.9% and Tech Foundations declining by 1.7%. Order entry reached €10.1 billion during the year, representing a book-to-bill ratio of 94%, up 4 points compared with ‘22. Group operating margin was €467 million, representing 4.4% of revenue, up 170 basis points organically compared with ‘22, with both businesses contributing to this improvement. Free cash flow was minus €1.1 billion for the full year, of which €660 million restructuring and separation costs and €502 million lower working capital actions at year-end compared with December ‘22. Net debt was €2.230 billion by the end of ‘23, within our bank covenant. Net loss group share was €3.4 billion, mainly impacted by goodwill and intangible impairment charge of €2.5 billion and reorganization expense for €696 million. Total headcount of the group was 95,000 at the end of December ‘23, a decrease of 14% due to the divestitures that occurred during the year and workforce optimization, as we just commented. This is a 5.7% organic decrease of total headcount. Let me now guide you through our revenue evolution in ‘23. 2022 revenue was adjusted by €71 million -- minus €71 million. This represents a 0.6% decrease versus the revenue that was published last year. This is due to the review of the accounting treatment of certain software resale transactions following the decision published by ESMA in October ‘23. During the year, scope impact was minus 3.9%, consisting mainly in the divestitures of Atos Italy, UCC and our stake in the State Street joint venture. Currency effects negatively contributed to revenue for minus 1.6%, mostly due to the depreciation against the euro of the USD, the GBP, the Argentinian peso and the Turkish lira. Organic growth was plus 0.4%, leading to a full year revenue of €10.693 billion. Group operating margin was €467 million, representing 4.4% of revenue. Eviden’s operating margin was €294 million or 5.8% of revenue, up 110 basis points. And Tech Foundations’ operating margin was €172 million or 3.1%, up 210 basis points, all organic percentages. You can see on the slide a reminder of the key levels that led to these profitability improvements. Let me now comment on the financial elements of the rest of the P&L. Nonrecurring items were a net expense of €3.6 billion, and I will comment upon the key elements there. Firstly, reorganization costs amounted to €696 million consisting in €343 million in workforce adaptation, of which €147 million for the extension of the German restructuring plan launched in ‘22 and €353 million in separation and transformation costs. Secondly, goodwill and other noncurrent asset impairments amounted to €2.5 billion. Full annual goodwill impairment tests was performed at year-end in compliance with IAS 36 and in the context of the contemplated disposals of assets. Fair values were determined based on multi-criteria approach, including discounted cash flows, discount rates, reflecting estimated execution risks and adjusted trading multiples consistent with the methodology applied in prior years. Thirdly, in 2023, other items were a net expense of €169 million. Those exceptional items mainly included litigation costs and vendor contract renegotiations for €65 million; net capital loss arising from disposals for €46 million, mainly due to the disposal of UCC; reassessment of onerous contracts that were accounted for in other items in ‘21 for €36 million. As a result, 2023 operating loss stood at minus €3.1 billion. Net financial expense was €227 million and was composed of a net cost of financial debt of €102 million, which increased by €73 million due to the higher interest rates, coupled with additional drawdowns on bank borrowings and other net financial expense of €125 million, which include in particular the interest component on pension and lease. The tax charge for ‘23 was €112 million. Consequently, net loss group share was €3.4 billion, mainly impacted by goodwill and intangible asset impairment charges of €2.5 billion and reorganization expense for €0.7 billion. Turning to our free cash flow statement. Let me guide you through the key items. CapEx and lease payments totaled €562 million, down €94 million from the prior year as the group further optimized lease and capital expenditure and moves to less capital-intensive activities. The negative contribution from change in working capital requirement was €391 million. We have taken lower working capital actions compared with prior year. At year-end, working capital actions amounted to €1.8 billion. This compares with €2.3 billion in prior year, of which €862 million was factoring. Let me give you full clarity on these numbers on the next slide. Our working capital requirement at year-end was negative €390 million. The group indeed carried out specific actions to optimize its working capital. These actions are of 3 different natures

Paul Saleh : Thank you, Jacques-François. I’ll now close with some key takeaways. First, we’re executing on our transformation plans for Eviden and Tech Foundations. Our new operating model gives us greater agility and greater flexibility to serve our clients, deliver on our commitments and be positioned for long-term growth. Our strategy is to leverage the offerings of both businesses through a coordinated go-to-market approach. We are in active discussions, as we stated, with our banks and bondholders for a refinancing plan. And those discussions will now take place in an amicable conciliation process, which should help us reach an agreement with our creditors by July. We’ll provide the parameters of our refinancing work to our financial creditors the week of April 8, and we’ll provide a market update around that time. We ended the year with €2.4 billion in cash and cash equivalents, and we have sufficient liquidity, as we stated, to fund the business until a refinancing agreement is reached. And we’re also working with our financial creditors on an interim financing for additional liquidity cushion. As we look ahead to 2024, we’re focusing on delivering unmatched value and innovation to our clients and position the company for long-term revenue and margin expansion. And with that, I’d like to thank you and turn the call back to the operator for the Q&A session.

Operator: [Operator Instructions] And your first question comes from the line of Frederic Boulan from Bank of America.

Frederic Boulan: Can I ask a question on the liquidity side? So in the press release, you mentioned that your forecast allow you to cover liquidity requirements in the following 12 months. So if you can share a bit your assumptions here on free cash flow generation, is there any factoring in there? What have you assumed from an asset sales standpoint? And I’m struggling to reconcile that statement with the statement that you just made around the liquidity that you have to operate the business until the financing agreement is reached. So it’s a very different time frame. So if we can clarify on that. And then specifically, if I can -- if we can have a follow-up on the working cap. So you said you had €1.8 billion of working cap actions at year-end. So can you explain to us a little bit what that means? I mean is this -- that would be €1.8 billion higher if you were to unwind those factoring actions? And is this also part of the debt restructuring or debt renegotiation that you’re currently doing?

Paul Saleh: All right. I’ll let Jacques-François to start it. I’ll answer the working capital actions, and I’ll also answer a couple of other things you’ve asked about the near-term liquidity. Go ahead.

Jacques-François de Prest: Frederic, thanks for the question. Regarding the liquidity, a couple of points. The first one is that our accounts have been prepared in the principle of the going concern, meaning that management has set forward a liquidity forecast showing that there is enough liquidity for the coming 12 months. That’s one of the basic accounting concepts. And this has been ratified by our Board and being audited as well by the external auditors. Now the second point is that, obviously in this liquidity forecast, we have some assumptions. I will not elaborate on one or the other, but we have multiple scenarios, which Paul said we are currently evaluating or starting to evaluate. And of course, that means that this forecast goes as well with assumptions and risks related to the assumptions.

Paul Saleh: Let’s talk a little bit more about working capital actions and then the liquidity comment about the -- that we have sufficient liquidity until a refinancing agreement is reached. If you recall in the presentation, if I remember it was Slide 36, you’ll see that we mentioned that at the end of the year -- first of all, we started it €2.4 billion in cash, cash equivalents. We had €1.8 billion in working capital actions, and I’ll mention a little bit more all these components in a second. We’ve been unwinding those working capital actions, and we are -- we have sufficient liquidity post the working capital action unwind to see us through the next few months -- several months actually until we reach an agreement, which, as you remember, we’re targeting for July of this year. When you look at that slide, in particular, we have identified all the components that make up for the working capital actions, and those are being unwind as we speak. Year-end, we have basically a factoring -- a nonrecourse factoring. We sell receivables to banks to the tune of €650 million, if I -- yes, excuse me, it’s actually, yes, €650 million in factoring. This is the lowest amount it has been in the last, probably almost 7 to 8 years. We also do cash in advance. This is basically clients. We have invoiced them. And they pay us basically a little bit ahead of the terms that are in our agreements with them. And as Jacques-François mentioned, we do also have payables, supplier management actions. I think they were to the tune of €712 million. Actually, this is the amount that is actually the lowest it’s been in the last 7-plus years. This is actually any supplier payment that is overdue by maybe even a day that is included in that group. And so we’ve been unwinding those things, so basically over the last couple of months. I would say one thing to you that one of the efforts that are underway at the company is to improve our working capital management overall because some of these actions are supposed to continue to be part of core -- sorry, working capital management. For example, if you can get your clients to pay you in advance, that is usually a good thing. If you can manage your payables better than just renegotiate -- we need to renegotiate terms with our key suppliers because, in some cases, those terms are quite favorable to suppliers. And then we have to work also on improving our DSOs. So currently, they’re much higher than the peer groups. And we have opportunities just to continue to address that and reduce the amount of DSOs, which will just really also allow us to generate cash. I would say also to you that factoring is a practice in the industry. Some of them do it on a more permanent basis. We have done it in the past on occasions throughout the year, particularly at midyear and year-end. I hope that answers your question.

Frederic Boulan: And if I may follow up, so -- I mean, actually, 2 follow-ups maybe. So first of all, on the factoring side, is this something in your plan that continues maybe in a slightly smaller extent? And then on the disposals, so you have -- I mean, how you -- is BDS still a consideration considering the position of your larger shareholder? And can you update us on the scope? I mean the €400 million plan, what has already been done and is already in your year-end ‘23 net debt? And what’s the kind of amount of disposal we can consider for ‘24?

Paul Saleh: Yes, you mentioned a couple of things. So in terms of factoring, we -- again, overall, we’re trying to -- our plan is just to continue to reduce our working capital actions and work more fundamentally at improving our working capital management. So that’s the first thing I can tell you. Would factoring be a part of that? We’ll look at it as part of the mix, right, and see if we cannot do something that would be a little bit more consistent and a more permanent basis. Second of all, when it comes down to the disposal, there are 2 different type of disposal. There was the €400 million that was announced sometime in July 28, if I remember. We have identified that we would do €400 million worth of asset disposal. We’ve already done some of it. There’s still more to do. And our plan is to see an amount to get realized this year, somewhere, I would say, over €200 million to €300 million of that €400 million. In terms of other asset disposal, we have not -- we’ve been evaluating strategic alternatives. So we have -- as Jacques-François, just mentioned, we’re just really in the process of working those items, and we’ll update you in due course on that -- on those activities as we go through them.

Frederic Boulan: Okay. So BDS is not really on the agenda anymore or what?

Paul Saleh: I wouldn’t really comment. I think, again, all the alternatives are on the table. We’re looking at them. And we’ll, again, mention them – mention to you which way we may go in due course.

Operator: [Operator Instructions] And your next question comes from the line of Laurent Daure from Kepler Cheuvreux.

Laurent Daure: I have three points I would like you to focus on. The first is on the business. It’s probably not the most important today, but still, I understand you don’t want to give us a guidance due to the change in scope. But can you give us a few comments on how the business is trading so far this year? And particularly on the cyber part, I mean, you didn’t comment on last year performance. Does it mean that this business was not growing anymore? So that’s the first point. Second point is on the restructuring side. I would like to know how much restructuring has already been achieved on your TFCo plan that in a couple of months ago you detailed us. And I understand there’s massive restructuring, but you have a €382 million one-off separation and transformation cost. Can we have details about this huge cost and what is put in that item? And my last question is -- sorry to go back on your working capital, but I understand the action that you’re taking at the end of the year. But I would be also interested in working cap swings from peak to trough. In other words, the financing you’re going to need is probably going to be based on the peak of the working cap and how much volatility do you have during the year and especially on the supplier side now that your balance sheet is financially constrained.

Paul Saleh: All right. I’ll let Carlo just mention a little bit how we’re seeing business trends early in the year. And then Jacques-François will pick up a little bit more on the restructuring. And then we’ll talk a little bit more about the average working capital, basically, how you get there.

Carlo D’Asaro Biondo: So on Tech Foundations, we are seeing a continued good performance. We are happy with the performance we are seeing in Q1, which is the continuation of the trends we’ve seen in H2. On Eviden, we see a slight improvement, but the softness in the U.S. is actually present in Q1 as well. On BDS, we had significant new wins. So we are pretty happy of where we see HPC and the movement. Cybersecurity has shown some softness. But at the moment, we think that is something we can recover during the year. We are seeing, of course, customers’ rising concerns on our situation. But I really want to say that every time I speak with customers, they always talk about the quality of service that they see from the company. So we really think that by continuing to invest in quality of service and doing the right things, we can continue to gain their trust and push our activities forward.

Paul Saleh: Jacques-François, you want to mention a little bit more on the restructuring? I think that was asked for TF. Is that the question, Laurent?

Laurent Daure: Yes, it’s how much of the restructuring charge you booked last year was linked to TFCo, and what is the rest then?

Paul Saleh: I think the majority was linked to the TFCo, but go ahead.

Jacques-François de Prest: Yes. So there was a -- there were, how can I say, an outlook over multiple years which was communicated earlier in ‘23 about the TFCo restructuring plan. In ‘23, there was already good progress against this. Actually, they implemented more than the plan for the year ‘23. In terms of overall cash envelope, more than 1/3 has been already dedicated. We’re talking about a few thousand of people actually. We’re talking about in the region of 2,500 people impacted by these changes. So that’s -- I think that’s it.

Laurent Daure: The -- sorry, the €382 million, the one-off separation and transformation costs, what does it represent exactly?

Paul Saleh: That represents a number of factors. We had to just really set up legal entities. We had to just really move people around. We had to also work on migrating contracts. And I mean they’re just literally a combination of, first of all, separation activities, but also, quite a bit of money was spent in transformation activities, just really rebalancing the portfolio for TF and just really separating, consolidating data centers and the like.

Laurent Daure: And do you have the fees of adviser in that number?

Paul Saleh: There is also outside advisers that also are included in those, both legal, tax and business advisers as well.

Laurent Daure: Can we have a feeling on how much this represents out of the total?

Paul Saleh: We don’t have that number. We can follow up if necessary.

Laurent Daure: And the last question was on working cap peak to trough.

Paul Saleh: Yes, I think a good way to go at it, I think if you see the slide that we just provided you, the working capital at year-end was somewhere around minus €300 million, negative €300 million. And we had working capital actions of €1.8 billion. And so you can say that on average, the working capital is about €1.5 billion during the year. Obviously, it fluctuates a little bit, but I would say it stays relatively about €1.5 billion for most of the year.

Laurent Daure: Okay. So you don’t have any period of the year after the payment of bonuses or things like this, during which it gets, I don’t know, €300 million or €500 million higher? This is not happening?

Paul Saleh: I think it does fluctuate a little bit, but not – I would say, on average, it would be around those levels that I just shared with you.

Operator: [Operator Instructions] And your next question comes from the line of Adam Megyeri from Bank of America.

Adam Megyeri: Just a follow-up on the liquidity point. In your statement, a sufficient liquidity on sort of refinancing is reached, so call it, July. Does that specific statement also include the requirement of factoring and the requirement of any asset disposals?

Paul Saleh: Near term, no. There’s no -- right now when we mention that, there’s no factoring in [indiscernible] asset sale within that time frame.

Adam Megyeri: Okay. Great. And sort of with regards to developments so far this year, can you give us any indication as to how much of this working capital reversal has continued over the last 3 months, how much factoring remains outstanding, how much of the other working capital reversals have been completed in the last 2.5 months?

Jacques-François de Prest: Adam, I can confirm that we have unwound 100% of this amount of the working capital actions at year-end.

Adam Megyeri: Including the factoring has been unwound effectively?

Jacques-François de Prest: Absolutely.

Adam Megyeri: Okay. Understood. And just the last point on performance so far this year, your comments have been helpful. I was just wondering, can you give us any guidance with regards to, for instance, bookings now that we’ve already reached almost the end of the first quarter, book-to-bill, attrition rates, something like that, any kind of high-level guidance on some of the KPIs you normally disclose so far this year?

Paul Saleh: Yes, I would say on the book-to-bill, usually the first quarter is a little softer anyway. And I think right now, it will be premature to give you those numbers with a couple of weeks to go, but I think it would be probably more consistent with what we’ve seen historically. I think in terms of attrition, what we had mentioned in the comments that Carlo made is that the last -- particularly January was the lowest it’s ever been in the last 25 years of the company, if you were to exclude the COVID years of 2 years. But this 25 years is just really a remarkable performance overall. But it reflects 2 things from an attrition perspective. One of them is the commitment that we have from our colleagues around the world. Second of all, we do have just a remarkable program of training and development for our staff as well as we do have great certification programs to continue to enhance the skills of our workforce, particularly in all next-generation type of IT offering. So those are compelling reasons for our employees to continue to commit to us. And as you saw from the charts before, we have no issues in continuing to attract talent to the company.

Adam Megyeri: Understood. And just one last one, if I may. You mentioned in the past the independent business review that you were waiting for. Can you confirm whether that’s been completed now? And any high-level information that you can share around that?

Paul Saleh: Yes, the IBR was completed, and it didn’t really impact any of the work that we had done on goodwill impairment. So those results are now reflected in the financials that Jacques-François shared with you. And I think what – now we’re moving on to the next level where we’ll give you an update on where things stand on our refinancing discussions sometime in the April 8 week – the week of April 8.

Operator: And your next question comes from the line of Derric Marcon from Societe Generale.

Derric Marcon : I hope you can hear me well. Two questions on my side. Can you update us or give us more color about what will be the change in working capital requirement for this year? So if we net capital action reduction versus fundamental improvement in the management of working capital, it will be helpful. And the second question, also related to what will happen in 2024 on the reorganization, rationalization and integration cost line. I understand that you have spent only 1/3 of the €800 million ARI that was planned for TFCo. So can you update us on where you believe you can land on this line for 2024?

Paul Saleh: Okay. Well, let’s just talk about a little bit working capital. I think it’s premature again to tell you -- to give you those numbers, again. We’ll just say we’re not going to -- we were in the process of just really assessing all of these things, except to say that we are going to reduce our dependence on working capital actions. That’s just really the objective and everything that you’ve heard us talk about. In fact, when you look at the numbers for 2023, you saw that operationally, we’ve improved working capital. And the reason why working capital was negative, it was a reflection of lower working capital actions. So working capital management operationally is still high on our list of this year. We’re going to -- you’re going to see us just really focus, under Jacques-François’ leadership, a lot on this area. And we are going to reduce our dependence on working capital actions that are not in the normal course by that, okay? We’re still going to try to get better improvement in our DSOs and improvement in our DPOs as well -- better DPOs. And so that’s the first one. In terms of your second question in terms of the separation costs and the like, I would say a couple of comments. First of all, actually we are far along in our TF restructuring. And most of the restructuring we did last year was primarily driven by TF. It was less restructuring on the Eviden side. And I think maybe the comments that were made, left 1/3 of it, I think you’ll see it from the P&L perspective, most of it was already -- a good chunk of it was already done. I wanted to just really think it was -- maybe we’ll come back to you to just verify the number, but I wanted to say we’re almost 50% plus post the program. I would say also the separation that still needs to be done is that just really continuing to refine the way we run the entities for the business. For example, when we were thinking a little bit about separating the BDS business at one point and potentially selling it to Airbus, there was some work that needed to be done again to parse some of the contracts related to the BDS business, whether it’s digital security or whether it’s the advanced computing, into separate legal entities to give us the maximum flexibility ultimately in separating businesses if we needed to go that route. And so that’s the kind of work that is going to continue to happen within the company so that we have ample flexibility to consider alternative if those alternatives make sense for us.

Derric Marcon : And Paul, can I have 2 follow ups, please? On the working capital management, so you had a benefit of €111 million this year, but what would be the potential from here? Can you help identify that? Because it’s very difficult to understand how much is left. And on the reorganization, rationalization and integration cost line, so the minus €660 million cash-out last year, have you good visibility on what will be cashed out this year and what could be the number range? Would be very helpful.

Paul Saleh: Yes. Probably let’s start with the second one. It will be significantly less than what you saw last year. I think it was just really a high level of spend because we were just really accelerating the separation of the Eviden and the Tech Foundations business, and there was really some significant effort going on in the transformation business itself as well as the workforce optimization. So let’s say that it will be significantly lower. In the first quarter, we’ll give you a little bit more update on that, which in a few -- next few weeks. So let’s wait on that, Derric. In terms of the working capital actions, what -- can you repeat that question one more time?

Derric Marcon : Yes. So you had a benefit of €110 million or €111 million.

Paul Saleh: There’s quite a bit is left. When you look really at our DSOs compared to the industry, I want to say the industry is in the 70 days. Obviously, we’re north of that. Just on that basis, there are a few hundred million of euros of potential improvement on working capital just on the receivable management side. And then if you look at the DPO, I think we are just still fine, I’d say, somewhere slightly over 35 days or around 35 days or so on average. And then the industry is, I think, somewhere closer to the 42, 43 days. And so every day matters quite a bit. So there’s effort underway just to really think with our partners and our suppliers if we cannot just really amend some of these terms to align them a little bit more with when we get paid from our clients.

Operator: I will now hand the call back for closing remarks.

Paul Saleh: In closing, I just want to just take a moment to thank you once again for joining us. We have just really, as I mentioned, executing on our transformation plan for Eviden and Tech Foundations. We’ll update you on the progress that we’re making at the beginning of the year. Importantly, we are in active discussions with our banks and our bondholders on the refinancing plan. And again, the week of April 8 is an important week because not only are we going to provide those framework for the financing – for our refinancing framework – the parameters for our refinancing framework, but we’ll also be able to just provide an overall market update on where things stand. And then in the meantime, just really, we’re just focusing on driving the company to continue to deliver on the delivery excellence that Carlo was really mentioning and continuing to invest in the business and invest in our people. Now I want to just take a closing remark and thank all of our employees around the world. They have just really done a remarkable job this last year. And they’re continuing to do that. Their commitment to our clients just really makes a difference. And so they are the real assets of the company. They’re the ones that generate all the IP that we have and all the innovation that really stands us apart in the marketplace. And kudos also to all of our clients and suppliers who are just really working closely with us to just make sure that we continue to partner for the long run to build a great company. So thank you all. We’ll see you in a few weeks.