Atos firing on all cylinders as it overcomes COVID-19 headwinds and expands in North America

Building industry-specialized expertise increases Atos’ value proposition around delivering business outcomes to clients

While Atos’ (Nasdaq: ATOS) revenue growth and profitability in 2020 were negatively affected by the pandemic, the crisis pushed the company to strengthen its focus on clients and industries. Atos is working with clients to enable business continuity, such as by facilitating work-from-home environments, providing agile infrastructures and tackling cybersecurity challenges, and to address client priorities, such as cost optimization, deployment of digital workplaces, and acceleration of digital transformation. The company’s pivot to an industry-aligned go-to-market approach to better address clients’ specific business challenges and its consistent acquisition strategy over the past year to gain niche capabilities in segments such as digital security, cloud and applications consulting, systems integration, AI and big data consulting, and decarbonization services improve the company’s ability to alleviate external revenue growth pressures due to tight spending.

Atos reached its financial targets during 2020 despite the challenging pandemic environment

Market uncertainty and volatility brought on by the COVID-19 pandemic forced multiple IT services vendors to forgo setting financial objectives for 2020. However, Atos was confident about its performance and, in April, established its 2020 revenue, operating margin and free cash flow objectives, which the company achieved by the end of the year. Atos estimated that revenue would decline between 2% and 4% organically for 2020 due to the negative effects of COVID-19 and reported a 2.3% year-to-year organic revenue decline, in line with the company’s projection. Operating margin before other expenses decreased to 9% of revenue in 2020 from 10.3% in 2019, an anticipated contraction due to pandemic-driven revenue declines; however, the metric was within the targeted range between 9% and 9.5% of revenue for the year.

The company’s efforts to reshape its portfolio, including by expanding its offerings around digital, cloud, security and decarbonization, and align its go-to-market approach to six industry groups positively affected commercial activity. Atos’ highest quarterly bookings level since 1Q19, continual emphasis on digitally certifying its employees, and investment in 12 bolt-on acquisitions since February 2020 will support revenue growth improvement in 2021. Atos’ goal is to grow revenue between 3.5% and 4% year-to-year in constant currency in 2021, and TBR expects Atos to meet its revenue growth goal as the company expands its portfolio, such as through the OneCloud initiative; continues it active acquisition pace; and maintains a strong deal pipeline.

2021 Atos North America Analyst and Sourcing Advisor Event: Social distancing, country lockdowns and travel bans due to the pandemic pushed Atos to continue hosting the virtual analyst event series the company initiated in June 2020 with its first global Atos Analyst Days event. Focusing on Atos’ North America regional business, the March 2021 event provided analysts with rich content through prerecorded executive presentations on topics such as strategic priorities, sales and business development, talent advancement, and Atos|Syntel business updates as well as deep dives on six regional industries: the media, the public sector and defense, retail, manufacturing, healthcare and life sciences, and financial services. The sessions were augmented by live one-on-one meetings with Atos’ executives, which enabled TBR to gain a deeper understanding of the topics and valuable insights from Atos’ executives as well as provide our own view and assessment on the covered topics. Having access to prerecorded presentations several days prior to the one-on-one meetings allowed TBR analysts to watch the videos at our own pace.