Executives: Thierry Breton - Chairman and CEO Elie Girard - Group CFO Eric Grall - Head of Global

Operations
Analysts: Mohammed Moawalla - Goldman Sachs Laurent Daure - Kepler Cheuvreux John King - Bank of America Merrill Lynch Michael Briest - UBS Alex Schütz - Deutsche

Bank
Operator: Good morning ladies and gentlemen, Thierry Breton speaking. Thank you for attending our conference call today on the third quarter of the year. I'm going to share this presentation together with Elie Girard, our group CFO; and Eric Grall, In-Charge of the Operation. You know well both of them. I will start with the highlights and key figures of Q3, 2018.

Then, Elie will comment on the operational performance for each of our division and geography. Eric will then develop on our activities in IBM and of course on integration of Syntel and on our continuous actions on the TOP transformation program and I will conclude the presentation after leave the floor for Q&A. So, I will start this presentation by going straight to the point. We had a performance during the third quarter which was obviously mixed. Three divisions performed very well either at the level anticipated or above with Business & Platform Solutions growing at +4.5%, Big Data and Cybersecurity at +11.7% and Worldline at +6.3%.

But at the same time, Infrastructure & Data Management underperformed in North America. We did not record the improvement that I expected yet, and also in Germany. This will be commented by Elie in his presentation. But the slack of commercial execution and specific contract issue with a large scale corporate in Germany had an impact on the overall revenue evolution of the division and on the group as revenue finally remained stable at +0.1% in Q3. So, yes, I am disappointed with this figure recorded in these two geographies for Infrastructure & Data Management, but I can tell you that we are market leader and that we have put in place the right recovery plans.

I am fully convinced by that and we have the right positioning in this business segment where there are a lot of such opportunities and possibilities to sell our innovative services to our customers. We simply did not capture enough commercial opportunities offered by the market this quarter. In North America, I told you last time in July that we hired Simon Walsh coming from Dell Services, with his outstanding experience in our industry. I am extremely satisfied with the way and the speed that Simon took over the North American operation. I have no doubt that the area's operation will recover and we will be back to growth by the end of H1 supported by a strong recovery plan with six months more of implementation and obviously before taking into account the positive impact from Syntel.

In Q3, revenue evolution in Germany was disappointing. Elie will give you more inputs. In this geography, I remain confident as the commercial activity is dynamic with 100% book-to-bill in Q3 and more than 15 material new contracts in the pipe for signature in 2019. H1 next year should remain challenging, but with the higher backlog coverage for H2 revenue next year together with an improved commercial activity, our plan is to return to growth by mid 2019. Before moving to the key figures, I would like to mention that I am extremely pleased with the progress made on the global partnership with Google.

Remember that we create global secure solution in hybrid cloud with Google cloud as a preferred platform enabling adoption of artificial intelligence for our plans. We are building a strong pipeline of 1 million for new contract before yearend. Finally, we closed the Syntel acquisition ahead of schedule. It was a tender or U.S. public company that we completed in two months and a half, allowing us to start very quickly integration.

And we will come back on that. On to next slide, you have the key figure of the third quarter 2018. Revenue reached 9.9 million stable organically. Research dynamic remained strong with an order entry at 2.5 million. The book-to-bill ratio of 80% does not reflect the true performance of the quarter due to some slippages.

Indeed we plan a very strong book-to-bill ratio about 170% in Q4 leading to a total year around 115% and therefore well above last year. As anticipated, the total headcount was almost stable. On one side, we continued to attract talent and increased staff in the growing areas and more particularly in Big Data and Cybersecurity and in Worldline. On the other side, we pursued a decrease due to automation in Infrastructure & Data Management and robotization program in Business & Platform Solutions. Next slide now, we just had another dynamic quarter in terms of new wins and our Group Digital pillars, and they are increasingly at the heart of our customer business outcome.

On top of several wins in hybrid cloud of orchestration and digital workplace, let me briefly give you two examples of the two digital pillars. On Codex, we have transformed SNCF scheduled data management and governance to accelerate data based digital transformation leveraging all sort of technologies from IoT to drones to mobility and making a real difference in priority areas such as corrective maintenance or traffic scheduling. On SAP HANA, we have just completed a world leading chemical company in Europe, one of the largest migration to SAP HANA as key pillar of the transformation to full IoT industry [indiscernible] company. I expect the flexibility and ability to deploy dozens of key SY experts, where key ingredients in the success of the digital transformation. We continue to attach Cybersecurity product and services on almost all strategic deals.

As example, we will provide security operation center and incidence response team for AIC a leading Israeli manufacture company and we will manage the full access control and protection of a very large U.S. Hospital process. Let's move now on the Syntel slide. Eric will detail where we are in integration and what is planned. But I would like to say that we already met a many, many customers representing more than 70% revenue of Syntel and personally met most of the large one in the U.S.

The team working on integration have confirmed the level and the timing of the synergies we had identified before signing. And I obviously expect this program to be completed faster. Last but not least, you remember that for the financing of Syntel acquisition we had the objective to be rated by one of the top rating agencies. And I am glad to announce that Atos has been assigned triple B+ by Standard & Poor's with stable outlook which should have a positive impact on our EPS. Let's move to the next slide on the objective of 2018.

On revenue organic growth, since I consider there is a negative effect impacting our Q3 revenue will be overcome in H1. I want to be cautious at this stage in the current context of an international economic environment that I anticipate to become more uncertain and more challenging. We therefore update the full-year objective at c. +1% organic growth. Therefore, taking this into account objective on operating margin rate is expected to be more on the low end of the 10.5% to 11% range including two months of Syntel expected for 10 to 20 bp.

On free cash flow, our ambition remain unchanged at c. 60% commission rate of operating margin. Taking into account all this, the updated target of 2019 are then as follows; on revenue organic goal we ambition to be in the low end of the 2% to 3% CAGR range of our three years plan. Our target on operating margin rate is expected between 11.5% and 12% of revenue. On free cash flow, we target to be around 60% conversion rate to take into account the impact of loss of our cost of debt of acquisition.

Now, I leave the floor to Elie.

Elie Girard: Thank you, Thierry. Good morning everyone, Elie speaking. I am going to cover the operational performance of Q3. Let's start with the reconciliation between statutory and organic figures for revenue.

From statutory 2/3/2017 revenue I have had 16 adjustments we presented a restatement of Q3 2017 accounts of -162 million for revenue in line with the 5% impact we estimated for the full year. Exchange rate impact was not material and amounted to -6 million. Corporate tax amounted to 47 million. This was mostly related to the acquisitions of CVC, healthcare consulting firm in North America, Imakumo, and payment companies by Worldline. Next slide presents the performance by division.

I am going to comment in the next four slides each of them. But in a nutshell, the growth strategy is focused on digital transformation factory drove growth acceleration in business and platform solution with an organic growth at +4.5%. Big Data and Cybersecurity as well as Worldline pursued healthy trends at respectively 11.7% and +6.3%. Nevertheless, the group showed a disappointing performance in Infrastructure & Data Management. Let's move to the next slide precisely to focus on Infrastructure & Data Management.

In this division, revenue was 1 billion 526 million, -4.6% organically. Majority of the decrease came from manufacturing and retail market more particularly in North America still impacted by the termination of the Marriott International contract and the decline of unified communication and collaboration activities both in North America and Germany. The division was also impacted by telecom and media with the basis effects from the BBC contract in the U.K. by contract issues with a large scale cooperator in Germany and with a Standard & Poor's contract ramping down in North America. The division was positively impacted by the ramp up of the Aviva contract and the strong activity in the public sector in the U.K.

On the next slide, business and platform solutions revenue was $767 million up plus 4.5% at constant scope and exchange rates. The Division pursued the solid trend recorded since the beginning of the year. Thanks to the sales dynamic to capture the strong demand for digital projects related to SAP HANA, Codex, and Hybrid Cloud solutions. The growth was primarily led by Manufacturing Retail and Transportation market, particularly in France pulled by the ramp-up of PSA contract and in Benelux and the Nordics with deliveries to DSM and by the public sector in Germany as well as new customers in healthcare in North America. Finally, financial services grew.

Thanks to increasing volumes in Benelux and the Nordics and Iberia while Telcos and Media & Utilities was stable. The number of direct staff was stable as new hiring, notably in low countries to sustain growth was compensated by a decrease linked to robotization programs that are currently running. On the next slide, revenue in Big Data and Cybersecurity recorded a high organic growth of plus 11.7%, leading $291 million in the third quarter. This performance was primarily led by manufacturing, retail, and transportation in North America, as well as by Telecom Media & Utilities; thanks to high performance computing activities in South America. In Public and Health, the activity in Cybersecurity was thrown through various customers in Benelux and the Nordics, France and Central and Eastern Europe as well as in Big Data and billion sales in North America.

In this market mission critical systems benefited from the ramp-up of the Swiss National Police contract while this activity was more challenging in France and in Germany. The direct staff of the division increased by 3%, reflecting the hiring program mainly on critical skills. Let's turn toward line on the next slide. From a conservative perspective to others, revenue was $399 million, improving by plus 6.3% organically. The growth was strong and well balanced across the business lines.

Merchant Services was up by plus 4.8% organically; thanks to commercial acquiring in continental Europe and a double-digit growth in India. Financial processing was up plus 7.7%. Thanks to issuing processing with an increasing volume of transactions as well as from acquiring processing with a higher number of authorizations in France and in Germany. Finally, the account payments benefited from the growing SEPA payment transactions as well as some non-recurring activities in instant payments and swift payments, mobility and e-transactional services was up plus 5.9%. Thanks to contact and consumer cloud, contracts in France and by connected living business in Germany, interested digitization, growth benefited from project with French government agencies, as well as in Latin-America with increasing fare and tax collection services.

We will align, continue to attract talents. And thanks to a low attrition rate, the number of direct staff increased by plus 2% during the quarter in line with growth expectations. I move now to the next slide. If we look at the revenue evolution by geography during the third quarter, the performance was contrasted. Indeed, there was in North America a lack of transition services with Standard and Poor's further to the non-renewal of the contract and less sales in unified communication and collaboration.

These two items accounted for $17 million explaining the unexpected further decrease that is Q2. in Germany, contract issues with the larger Telco operator, the decline of Unified Communication and less revenue than expected in Big Data and Cybersecurity amounted to circle $30 million explaining this unexpected outcome; now several business units generating a strong performance. The U.K. thanks to its sales dynamic both in public and private sectors allow to generate plus 2.6% organic growth and more than compensated the best effect from the partial re-insourcing of the BBC contract. The dynamic remains strong in a complex economic environment.

And once more thanks to a solid management and sales team in this geographic. Other business units grew by plus 6.0% year-on-year. Thanks to a strong performance in Central and Eastern Europe with a ramp-up of Swiss National Police contract in Big Data and Cybersecurity in South America with high performance computing activities and to a lesser extent in Iberia and in Asia Pacific. We align as I already explained pursuit, it's well above 6%. France grew both in business and platform solutions and infrastructure and data management.

While during the third quarter Big Data and Cybersecurity did not compensate the activity in Q3 last year. Benelux & The Nordics returned to a slight growth. Thanks to the ramp-up of projects in Big Data and Cybersecurity for Dutch Government Institutions and the European Union. On the next slide, the total headcount of the group was 97,000 at the end of September 2018, compared to 96,000 at the end of June 2018. At Constant scope, the number of staff was almost stable over the quarter.

Indeed, hiring has been mostly operating in low cost countries such as India, Poland, Romania, and Philippines, as well as in the U.K., the U.S. and France to attract key competencies. The Group continued to decrease the number of staff in order to accompany and anticipate the effects from automation and robotization both in infrastructure and data management and in business and veterans' solutions. Now on the next slide, I really would like two minutes of your attention, as I would like to make some clarifications related to our DSO and our customer financial agreements. First of all, as you can see on this graph representing the underlying DSO letters in blue and the underlying DSO of a sample of nine competitors in gray.

Atos has been running for years with a lower underlying DSO than competition. This is the result of some large customer conditions and acquisitions. With the increase of the group size and its diversification across markets and customers, the underlying DSO battles has been natural increasing towards the peer. During this period, the group has decided to implement customer financial agreements which are sales of receivables without recourse -- without recourse to mitigate this increase of the underlying DSO and therefore neutralize, it's impact on the working capital requirement. As a result, which you can observe on the orange curve, the effective DSO taking into account those customer financial agreements have remained broadly stable.

I repeat here that those customer financial agreements have been implemented only to compensate the increase of the underlying DSO and to maintain broadly stable the effective DSO. As a consequence, this does not affect the quality of our free cash flow. And this is consistent as a reminder with our objectives of free cash flow which were built with no contribution neither positive nor negative from changing working capital. One final point, I want to clarify that these customer financial agreements are implemented only on billed receivables not on unbilled receivables and at a very low financial cost. Now what to expect for the next year? I will be very straight here.

As you can see on the graph, we are now quite close to the market's DSO. Therefore, while there may still be some limited increase in 2018 accompanying the last mile of the catch up, there will be no further increase in customer financial agreements in 2019 and in the years afterwards. Now that I hope I have answered your questions and customer financial agreements in changing working capital, I would like to remind on the next slide what has been achieved by the teams and the quality of our cash flow in the last years. Firstly, we improved or OMDA from 10.2% of revenue in 2014 to 12.7% in 2017, generating an annual impact of $319 million of additional free cash flow before tax. We maintained our CapEx that check out 3.9% of revenue.

We decreased restructuring and integration costs from 2% to 1% of revenue, increasing free cash flow by $113 million before tax on a yearly basis. We reduce the effective tax rate from 27% to 18%, leading to an increase of annual free cash flow by $80 million. For working capital, as explained, we faced an underlying DSO which progressively increased towards the average of our peers. This effect combined with organic growth acceleration over the period deteriorated the free cash by $299 million, which we partially compensated by selling receivables without recourse for $169 million. All-in-all, our free cash flow moved from $293 million to $714 million based on fully structural levels and in spite of a negative contribution was change in working capital requirement.

My last slide gives you an update on central financing. I said previously, a full bank financing package has been put in place. Further to this, Atos intends to partially refinance this package on the bond market subject to market conditions. To this purpose, Atos has been assigned a BBB plus rating by Standard & Poor's with stable outlook as Thierry said. The resulting average cost of Euro dollar debt should be under market condition and the current market conditions at circa 2%.

Last data point for you, the acquisition and one-time financing costs are estimated at circa €45 million of which circa €30 million for one-time financing cost on €3.3 billion debt. I'm now done with my presentation. And Eric, the floor is yours.

Eric Grall: Thank you, Elie. So let's first, let me start by a few important points on IDM.

As you know, I know very well, we have no doubts that our IDM strategy is the right one. We continue to get positive feedbacks and evolution in quadrants of industry analyst for our digital workplace, hybrid cloud and IoT offerings from IDM. I will renew also in our customer base leveraging these offering states very high. Our customers continue to focus on migrating the applications to hybrid clouds with private cloud as a primary dimension. The trend observed this quarter clearly points to the following conclusions.

Our price range is competitive versus vendors selected by customers. The deals we did not sign were always lost against classic competitors and not related to increase competition from public cloud vendors. We had also lack of optimization in some geographies and specific accounts. I launched personally a new action plan to address these commercial execution issues in some geographies. Leveraging my deep knowledge of our IDM business, I have started to personally drive the execution of the plan and I am fully confident to put IDM back to growth in 2019.

Main actions will land in the following areas, accelerating right skill in some geographies, hiring new talents fast in sales presales, and architects. Adding new growth initiative, leveraging our existing strengths in digital workplace, I breakout and IoT and finally focusing the IDM management teams on pipeline execution. Now talking of Syntel, I am first very pleased with the speed and velocity at which we have driven from signing to closing the Syntel transaction in two and-a-half months. We have as usual well-prepared integration approach and are now in full execution. The integration preparation for day one on October 9 has being perfectly delivered.

Thierry Breton, Sean Narayanan, the Atos head of B&PS and myself have visited and met in person already. All the largest customers are Syntel representing circa 70% of the revenues. These meetings have allowed to confirm the excellent perception of the acquisition, the ongoing growth opportunities and now the incremental opportunities that the larger portfolio of the Atos Group brings in terms of infrastructure and security solutions. Already 27 new opportunities and proposals are being submitted and representing significant new goals opportunities up to $100 million TCV for some of them. Therefore, we are confident in confirming the revenue synergies above $250 million by 2021.

On the cost synergies, we have already secured more than $15 million of real-estate and first procurement savings of 2019, we confirm above $120 billion savings for 2021. Clients are progressing fast to realize these benefits. Also, largely coming from the perimeter Atos B&PS has already started to transfer to Atos Syntel. Finally, a quick update on our top program, we continue to execute on our proven leaders for productivity, productivity improvements in a group, working on real-estate procurement, planning management, span of control and increase of showing. From that perspective, the Syntel acquisition opens clearly new opportunities for acceleration extracting also more value from supply chain in our technology, our technology business for BDS and UCC.

More, we are deploying digital capabilities at scale to create a new reversal productivity. We are implementing a smart combination of lean and automation to cover by end of 2019, 45,000 of our employees work with expected run rate savings in the range of $200 million. We have also largely deployed RPA in both HR and finances and it will be done by mid-2019. Finally, we are launching new cognitive artificial intelligence based projects to further exploit and monetize the data we collect and use from our customers when operating their environments, leveraging our Google partnership and applying machine learning to our own business. All-in-all, we just combined classic and digital top initiatives.

We are executing against our 2018 and 2019 plans to support the group operating margin objectives. Thank you, and back to you Thierry.

Thierry Breton: Thank you, Eric. So to conclude this presentation, I would like to tell you that 2018 is a particularly important year for Atos with two major acquisitions, which are changing the group profile and our profitability for the schedule. Indirect acquisition was closed this month.

Six will be closed in the next week, and before year-end. They changed deeply the profile of our company and I consider it is time and important to present to you to the financial community a new Suez plan to take into account all the positive consequences for our group. Therefore, I decided to organize an Investor Day beginning of next year and I will try to do this before end of January if this fit with everyone's agenda. Of course during this Investor Day we'll cover the 2019, 2020 and 2021. For 2019, of course, you will recognize the target that we updated today.

But for 2020 and for 2021, you will see the strong improvement that we expect both in Atos and in Worldline Swedish acquisition transforming again all our business unit after this transforming acquisition. We will progress every year and we confirm double-digit acquisition in 2019 from the Syntel acquisition which will be very accretive for all our shareholders. Thank you for your attention, and we are now ready to answer your questions.

Operator: Thank you. [Operator Instructions] We will take our first question from Mohammed Moawalla from Goldman Sachs.

Please, go ahead. Your line is open.

Mohammed Moawalla: Great. Thank you very much. Thierry, my first question was really around the infrastructure business.

You indicated that you hope to get this business back to sort of growth in the second half of '19, but as we look at the next few quarters, do you feel that Q3 was very much the trough and it sort of starts to improve, or should we see negative growth persist for quite a few more quarters before things to stabilize? And then secondly, as you sort of look at some of the challenges, to what extent is this in the infrastructure business a market issue versus your own execution and competition and have you sort of rethought about your plans around stepping up perhaps some of your investments in this area to try to sort of restart growth here? Thank you.

Thierry Breton: Well, thank you, Mo, for your questions. So I want to be very clear here. We are a very strong operation in IDM and Eric, I could tell you that with the team that you have built that you have put together over the past few years, we are in the top quadrants delivering the services for all our customers. But Mo, I am very clear, we had two issues in Q3; one in the U.S.

and one in Germany. And these issues have been extremely well-identified. Believe me, we spent and we recognize this a lot of time with Eric and with the team to address it. So, I am very -- first, the good news is that I have decided that Eric will now take directly the operation of IDM like he did in the past. He knows this extremely well, he knows what to do, and we have already walked Eric with the plan.

Through this plan we will continue to see probably some slight improvement in Q4, but expect -- as I said, I want to be cautious, so I am -- and I will deliver what I'm telling you. In H1 it will improve and at the end of H1, we will go back to gross. That's exactly the plan. We know exactly what to do, we can improve by the way some of our operation which was already vastly growing. We will fix -- I mean, we know exactly what to do -- what has to be done in the U.S.

and in Germany. And to answer precisely to your question, it is not at all -- and I'm very precise here. It is not at all a problem of positioning. We have everything. If our customers are willing private cloud we deliver private cloud.

If they're willing hybrid cloud we deliver hybrid cloud, by the way, this is a majority but they're willing. If they're willing to have just public cloud, we have the partners. We have everything in hands. The only thing where I was a little bit frustrated, but that's life -- is that because we missed some opportunities, but Mo, it's important for all of you to understand, it was never against newcomers. It was always with companies like us, which is why I'm very confident that we will recover this.

And this is true, Mo, your question is very relevant, because when -- okay, we have two issues in the U.S. and in Germany and when I take out these issues, the rest of the group grew in Q3 by Mo, almost 4% to 5%, so it means that we know very well that fixing this issue -- and again, I know a lot of companies who would like to be where we are. But I am not satisfied with it. We will -- this is why we are very confident in what we will do in the next year. But we wanted to be very -- of course, it's normal, transparent with you.

Thank you, Mo.

Mohammed Moawalla: Thanks.

Operator: We will take our next question from Laurent Daure from Kepler Cheuvreux. Please, go ahead. Your line is…

Laurent Daure: Yes, thank you.

Good morning, gentlemen, I have three questions. The first is on Syntel, if you could give us a quick overview on if the business is developing as planned? I think you had a target of roughly 5% organic growth for the coming quarters and also if you're planning some restructuring on the deal. The second question is on Unify you touch briefly that Unify was not performing. If we could have a little bit more color what is happening there. And my final question is back to infra, basically, your -- the business decelerated by three points in terms of growth.

Can you try to break this down between prices and contracts you have missed on certain renewals? So any additional clarification will be helpful and also wondering the loss you had against competitors. Do you have any specific explanation? Is it a question of price or anything else that lead you to lose Kepler deal? Thank you.

Thierry Breton: Thank you, Laurent, for your questions. So I will take the two first questions and Elie will take the last one. That you named infra -- sorry, I don't want to correct you but we don't consist infra which is absolutely not -- there's a lot of more things than infra.

Infra was probably what we were doing five, six, seven years ago, and we are doing in this division, IDM, as you know, much more than this, and this is why again, we have pretty strong opportunities and visibility on the third one. With Syntel, as we said, with Eric, we visited -- Eric, most of all of the customers and I did it myself. I had a 10-days trip in the U.S. visiting almost every customers in many cities. And Laurent, I can tell you that I am extremely pleased with this first discussion that I had with all the customers.

They are -- first, the loyalty is extremely high. This is what I check myself. Certainly, we discussed many new opportunities with very large customers by the way, that's -- because of course, Syntel was delivering one segment. They did this over the past few years for some of these customers, 10 years and we were discussing new opportunities and Eric said that we identified a lot of new opportunities. So I mean I am extremely confident here, very good team, very dedicated.

We put everything in place including your attention, including everything, so today I'm extremely I mean for myself, I spent a lot of time course here and our team. Sean Narayanan is monitoring this overall integration and I can tell you I see monitor here today I give you my roughly evaluation but I didn't monitor anymore upside that I suppose where will see pretty quickly coming from this inter acquisition. Unify, so I'm not worrying, we missed few opportunities beyond from address, we are very large contracting type and hopefully we will be able to in this including in the U.S. extremely large contract, so that's why here of course we have a plan but it will be, it will come shorter of course then what we do with it is a matter of delays in term of commercial – is results and we know that we are pretty strong pipe here so on the last question.

Thierry Breton: Hi, so you asked about the deceleration between Q2 and Q3 of IDM of three points you're right that we present to be precise roughly $45 million and in these $45 million you have mostly three effects more or less the same size one third is coming from the specific contact issues we had with the last telecom operator in Germany.

The second one is the lack of transition services with Standard and Poor's in the U.S. and the third one is as mentioned earlier on unified communication in collaboration with you have to understand that the end of September of the last week of September it's very critical. The most of the volumes of the years are than they are on the main market and on the legacy business of unified has been short by here also between $10 million and $15 million which is the third of the explanation.

Laurent Daure: Competitive this you lost against competitor any…

Thierry Breton: We don't mention the name of the competitors because we obviously they were better than us here. That's me too to make any publicity for them but I could tell you're right maybe Eric could give clues, but no names.

Eric Grill: Yes, they issued right quickly as I said earlier it was not lost due to price because the pricing that we had was competitive this is a vendor selected by the customer. It was more related to poor commercial execution positioning of our freeing, the value add that our feeling was carrying and as I said earlier we are taking the necessary actions to assist poor commercial execution in sales and presales we identified individuals to turn around and make sure that the this is addressed for the upcoming years.

Thierry Breton: But I should tell you at all that you will see that going to not announce we will also extremely large contract that's hopefully we will be able to announce it quickly against competitors in this so, we didn't lose everything we will also and we are in the process of winning very large contract here. It is jupon's done it's true that this quarter it was what it is. Thank you.

Laurent Daure: Okay.

Operator: Our next question comes from the John King from Merrill Lynch. Please go ahead. Your line is open. John King, your line is open.

Please make sure you're not muted.

John King: Alright, can you hear me?

Thierry Breton: Yes.

John King: All right, great. Sorry about that but two questions if that are okay. That's almost on the this balance sheet situation today obviously you're right to Triple B plus is that what you expected and how much capacity do you have for this wild line have at this point of the further cash acquisition that would be the first one how do you see that playing out.

And secondly just following up on the infrastructure business you feel as though you have the right cost base in that business obviously I had a comments around the deal thing last cheering comments rather than in you cause but I guess we do see a trend towards infrastructure becoming more and more to make it in some form or another what we call a cloud Oh, well what we call that, do you feel this time there is a risk or if there are plans for you to restructure that division or what's the plan in terms of taking up country headcount from the IDM start of the House. Thank you.

Thierry Breton: Thank you for all these two questions. First John to your question about what I would expect, when I see the competitor and our main competitors some of them and most of them are biggest goal lot of those competitors are BBB so we are thinking that maybe it could be BBB, so we are very happy that at the end of the day. We are at BBB produced.

And it's true that, it's a good news for us and so good news of course for our financing is winning with a stable our troops, so I want to be very frank and this is what I told you so we are now in the process to integrate 23,000 new colleagues. And it worked extremely well, we are very active here. We under process not too closer with well line our Syntel acquisition. Hopefully and I have good reason to believe that this will be done before year end. Then of course it also a very large integration fall on line, so believe me for the next six months we will be very busy and by the way that's why I think it's very appropriate because of this two major acquisition we will have already some much more understanding of the strong value that we will be able to extract at the end of this year with Syntel.

Mid January for line, so I think that having a invest study between if January 15 and January 30 will be good to give you all this feedback and then to be able to tell you how I see the progresses across the next four years with this new profile but it's true that we are extremely busy doing this, so I don't say that we will not contemplate any potential acquisition by experience. We know that it takes time. I just remind you to give you an example John that I have been targeting Syntel for the past and decide this is just an affair Syntel, to our entire customer which is a reality five years. We went discussion over the past five years it took us five years to finally decide that it was time to do it and a good agreement. For a fixed payment it took to the team of four lines probably more than three years to discuss to be it's a long process believe me to make this acquisition it's a long process at least in our futures.

Again it doesn't mean that we don't look any seeing by the way we will depend we don't know how in this company to do or to do to make acquisition, doing good to integrate them quickly well. We are very, very people-focused, and of course we can be also imaginative like we were for example in one line with the grants. To find ways which will accommodate target the sellers and everything, so that's where we are here but of course we continue to look at everything which is absolutely normal in our industry. But we are not in the integration process, so Elie take the second question.

Elie Girard: Yes, let me take the question regarding the IDM and of course bays and that's an underlying question for some of course based perspective I have to say that on the deals that we did not win for some of them.

I'd like to said the pricing was competitive and it was not done at the margin that was dilutive for our overall business which means that of course based it was it is in line also we was expected it always needed to deliver to these new contacts. On top we are continuing to drive fast and forcefully the automation activities I mentioned the initiative that we have which is which is I consider very smart to first advance a lean posses optimization and then immediately after optimize, advertise and automate the activity associated to the work. That's in full motion largely an idea to say others or 45,000 employees I mentioned being covered by that initiative it is largely affecting our addressing the IDM activities and that will benefit further cost competitiveness of IDM. And I also mention and that's still too early to be sized we are working on the very first pilots, playing machine learning in our IDM environment indeed to replace, in the data center on a breakout operations is going to be launched with the last also early in the year 2019, how much further we can improve and optimize our competitiveness from a cost base perspective. We start showing now as you saw we continue to decrease the total number of employees in the group.

It is first and largely coming from the IDM part because you saw BDS and going so we continue to monitor very closely factoring the automation progress and you to make sure and anticipation we see in our business. We are closely monitoring the evolution of the walk loss is primarily an IDM that the workforce is decreasing and that's normal due to the automation, so at this stage nothing special that would lead to a normal I would say restructuring plan we will stay within the guidance we have given.

Thierry Breton: Thank you. Next question please.

Operator: Our next question comes from Michael Briest.

Please go ahead. Your line is open.

Michael Briest: Thank you. Good morning a couple for me as well. Can you talk about the performance in Germany? I think a lot of this on the infrastructure side we will sort of assume this high degree of visibility you talked about both unify and problems that a German Telco but you've gone from sort of 4% growth to minus 5% in the quarter to pride then you wouldn't anticipated this given you reported at the end of July.

And then just in terms of the infrastructure business longer term, the initial plan back in 2016, so this would be a note 1% grower, you were the top end of that range in 2016 year today you're minus 2.7% to what extent do you sort of attribute that to changes in the environment and. Sort of compacted pressures and whether that's something that we should see continuing into 2019 and beyond because clearly they're note 1% would require quite an acceleration next year be still to be in that corridor. Thank you.

Thierry Breton: Thank you, Michael. So first in Germany it's very clear.

In Germany it's came from extremely well identify issue Counting for the euro which little bit below $30 million that's what we are talking about. And this has been explained it's very clear a big part of this is coming from the Telco problem that we have and that we are now in arbitration so we cannot recognize the revenue. And it happens so on seeing is coming for a specific issue that we had been unified and it's extremely well or so identifies and the third one was a small delay in the BDS. That's what we are talking for the West. I was very happy with the performance of the German operation for the right but we know that this is what happened, so now does it mean that we have a change in the environment in ADM.

I'm extremely clear, absolutely note. We have a lot of bit, lot of proposal and no change and of course, and something that we monitor extremely carefully. We have a lot of technology by the way we had a fantastic day two weeks ago together with Siemens on the new Industry that fall zero. Fantastic event we are well presented all our new opportunities and mainly in IDM with everything we do and you would have been managed to see all the technology that we have here. So my answer is extremely clear, no change in the environment.

The positioning again if I want to make it short with private cloud, hybrid cloud, and public cloud, we are answering to all the requirement of our customers but our customers are mainly for queues I repeat mainly for queues on private cloud and I we cloud, cyber security is becoming a major issue and of course we have here everything so no change in the environment. Thank you for the question. Maybe another one or two questions maybe the two last one thank you.

Operator: Yes, our next question comes from Alex Schütz from Deutsche Bank. Please go ahead.

Your line is open.

Alex Schütz: Hi guys. Thanks for taking the question couple for me. Just on the last deals in IDM Marriot were mentioned by name I guess there were others. You said that you lost a similar peers why do you think you lost to those similar peers, I think you've said many times that you have one of the most advanced offerings in the private cloud, hybrid cloud space so why have you lost to combat in those instances.

And then switching to the 2019 guidance that was an uplift to the margin guidance is this completely the result of Syntel or is there any other effect in there and could you tell us what your expectation is for the organic margin development in 2019 and the reduced free cash flow conversion in 2019 if it's purely the result of higher restructuring and or debt at Syntel or is there any other reason for that. Thank you.

Thierry Breton: Thank you. Eric maybe you take the first one.

Eric Grall: Yes, I will take the first one there quickly then let Ellie take the second one.

On the first one the large outsourcing deals in IDM. Another product business, so you don't sell a catalog of things and then people buy and select, you need always to understand the starting point of the customer the endpoint how to best, to best shape your opportunity how to construct the solution, how to Execute and that leads to a complex I would say chemistry that make you win or not win it's not a catalog product business and the full execution on some of these deals led to poor equation being created, led to the loss of.

Thierry Breton: Frankly, there are obviously always you know if we don't fall for a few months be starting to change. We need to change and to adapt ourselves for us and I want to be clear and especially in Germany and the U.S. and all spending all this time and this will be clear.

We need to have a fresh talent here and we know that, and we really -- we will bury that. Second question?

Elie Girard: Yes, so, hi Alex. This is Elie, so on your second question so I just want to completely concern what we said about the Syntel dynamic back two or three months ago with your announcement of the acquisition. We are in terms of margin we said at that time that our assumption was 24% operating margin for Syntel. This is completely supported by the figures of Q3.

Year-to-date operating margin of Syntel are nine months has been roughly at 25% to the contribution. So number one that the Syntel addition to the go and number two the synergies for Syntel is still exactly the same as expected and particularly confirm and supported by the recent events and visit to customers integration et cetera so this impact is fully confirmed on the 2019 operating margin target. Now the rest is coming from what we explained on the top line doing all these call. In 2019 and probably in H1 of 2019, this is the rise of the effect going this time down what -- the target we get for 2019 is a result of those two opposite effects.

Thierry Breton: And of course we remain the top guys, in 2019, versus 2018 everywhere including in Atos without Syntel and of course now within the new Atos.

Thierry Breton: So I don't think we have any more questions. So, thank you very much. We'll come back to you after matching all agendas to give you the date of our Investor Day, early next year, and that being said, I would like to wish you a good year-end. Thank you all.