ATOSS Software SE (AOF) Q2 2026 Earnings Call Transcript

Welcome to our Q2 Earnings Call, where we will be discussing our results for Q2 in the first half of 2026. We are pleased to have you here with us today. I am joined by our Chief Financial Officer, Christoph Leiber, and we are glad to have the opportunity to walk you through our performance and outlook. We will be referring to the Earnings Call Q2 2026 presentation, which was published earlier this morning and is available for download on our Investor Relations website, as well as via the link provided in the webcast. The detailed investor relations presentation was also published this morning, which we encourage you to review for further insights, but will not discuss during this call. Please note that today's call is being recorded, and the recording will be made available on our investor relations website after the call. Before we begin, I would like to start with a disclaimer. Please note that the presentation contains forward-looking statements based on the beliefs of ARTOL Software SE. These statements reflect the current use of ARTOL Software SE with respect to future events and results and are subject to risks and uncertainties. Actual results may differ materially from those projected here due to factors including, but not limited to, changes in general economic and business conditions, the introduction of computing products, lack of market acceptance of new products, services or technology, and changes in business strategy. Art of Software SE does not intend or assume any obligation to update these forward-looking statements. With that, I will now hand over to Christoph Leiber, who will walk you through the key developments of the second quarter of 2026, including our business and financial performance, an update on artificial intelligence and our outlook for the year ahead. We will then conclude with a Q&A session. Christoph, over to you.

Thank you, Carla, and a very warm welcome to everyone out there. I'm happy to walk you through our Q2 and H1 2026 results, current developments, and our outlook. So let's get started on slide four with key takeaways. Following a particularly strong second quarter, we closed H1 26 with solid double-digit revenue growth, continued strong profitability and positive order momentum. Revenues grew by 12% year-on-year in H1 and by 13% in Q2 year-on-year. Both driven by cloud business growth of 26%. EBIT margin reached 35% above our full-year guidance. order development was very positive despite geopolitical and macroeconomic headwinds with strong arr growth overall driven by our continued impressive momentum on the cloud and subscription side overall new acv development significantly above our prior year level supported by a resilient demand, strong sales execution, new customers, existing customer expansion, and cloud migrations. Importantly, Q2 was so strong that it lifted the entire H1 order development significantly above H1 year on year. And momentum was broad-based across SMB, enterprise and international with particular strength in enterprise in the German speaking countries healthcare manufacturing within manufacturing some semiconductor companies and retail migration and expansion projects international business improved versus the prior year driven also by a new logo from coming from the semiconductor sector and expansion with existing customers. Prumeister continued in its strong trajectory. More than 2,000 net new customers were added, taking the base of customers now over and above 20,000 as of July 1st. AR increased to 10 million and above at the end of June, up around 30 percent year on year and crewmeister was profitable in h1 and every month since march while maintaining its strong growth momentum cloud migrations remain encouraging with large customers such as rossmann bottles and langness and the menarini group with berlin chimie progressing their cloud transitions as well as their international expansion. This success was driven by Atos' unparalleled mode with customers in workforce management and confidence of our customers into our innovation capabilities, including our AI roadmap. Let me highlight the Atos mode with a customer example. HALA, one of European's leading port logistics providers at the Hamburg port, HALA has deployed ATOS workforce management across all their container terminals, replacing SAP HCMPT while remaining fully integrated into its broader SAP landscape. The project demonstrates ATOS ability to support highly complex operational and regulatory environments, including hundreds of collective agreements with highly specialized workforce planning requirements. This combination, all this is based on one standard software solution in the cloud, the ATOS staff efficiency suite. Now, this mode in workforce management is combined with our outstanding track record for innovation. And this creates confidence with customers, including in our AI roadmap, which we are successfully executing on track with the milestones we have communicated. Now, finally, let me briefly turn to our outlook for 26. For 26, we continue to expect double-digit revenue growth in line with our guidance, leading ATOS Revenue for 26 between 210 million and 215 million. The revenue guidance for 26 is built on very predictable and high-quality recurring revenue streams, and the bandwidth is only reflecting the lesser visibility for one-off perpetual licenses. Given the development in perpetual licenses, we currently see ourselves in the middle of the given bandwidth, as already mentioned during the previous earnings calls, so no change on this end. Importantly, our profitability outlook remains unchanged after the uplift that we have given there in April. We continue to expect an EBIT margin of at least 34% for the full year. And I have to say this, it would not surprise me if we continue to see the current level at age 1 to continue or even improve by the end of this year. For 27, we already gave a bandwidth for revenues of 245 million and the possibility to come in 3% lower, again based on effects on perpetual licenses. This we put now in numbers, meaning a bandwidth of 235 million to 245 million, reflecting the continued macroeconomic uncertainty, geopolitical risks, et cetera, as well as our current positive development of the order momentum. So if you ask me today, I see RTOS revenue for 27 right in the middle of this bandwidth. now let's move on to the income statement on slide 5 comparing h1 26 with h125 as i mentioned our total revenue increased in h1 by 12 percent year on year this growth continues to be driven by our software business which grew by 14 year on year and accounted for 75 percent of total revenue Within software, cloud and subscription revenue remain the key growth driver. This line of revenue increased by 26% year-on-year and now represents 54% of total revenue, compared to 48% in the prior year quarter. Maintenance revenue declined by around 3%, which is fully in line with our expectation, given our ongoing shift towards cloud. cloud and subscription is the key driver of our growth this is visible by the growth trend in revenue and it's supported by the strong demand visible in existing customer expansion new logo AR and the migration movement against this background the reduction for perpetual licenses needs to be reflected with the top line growing we achieved an EBIT margin of 35 percent up one full percentage point compared to the prior year quarter now let's talk take a closer look at the development of our recurring revenue and how strong order development of cloud and subscription has been on slide six. Total AR, which includes cloud and subscriptions and maintenance, increased by 17% year-on-year to 152.2 million at the end of the first half in 26. Looking specifically at cloud and subscription AR, we once again saw a very strong growth. Cloud and subscription AR increased by 25% year-on-year to 113.8 million. Turning to our order backlog, which provides extremely good visibility into the future of our recurring revenues, total ARR backlog increased by 17% year-on-year to 157.9 million. Finally, and I think actually most importantly, cloud and subscription backlog growth year-on-year as the key indicator for order development in the last period. Here we recorded an increase of 14% year-on-year to 23.8 million. This strong growth in cloud and subscription backlog driven in particular by the development in Q2 26 highlights the ongoing shift towards cloud confidence in our product innovation including the ai roadmap and excellent execution of our sales motion now let me briefly walk you through the development of our cloud and subscription recurring revenue base over the last 12 months net retention rate of 111 percent in the first half of 26 overall very strong with others with an NR at an even higher level at 115 percent demonstrating continued strong growth with existing customers in addition to this additional AR was generated through both new customer acquisitions and cloud migrations the The breakdown illustrates that of the total of cloud ARR, the increase of roughly 23 million year on year, about 45% came from expansion of the install. Just above 40% from new logo ARR and nearly 15% from migrations. Given the current order development for migrations, we expect the migration part to slightly increase in the next quarter. Together, these drivers contributed to the continued expansion of our recurring revenue base. Let me now turn to our cash flow and liquidity on slide 8. Operational cash flow in H1 with 37.1 million came in significantly above last year. Overall cash flow amounted to minus 1.5 million at the end of H1 26. This was primarily driven by the dividend payment of approximately 36 million during this period. Looking ahead, however, we anticipate a strong positive operational cash flow for the full year of 26, increasing thereby our liquidity at the end of this year. Turning to liquidity at H1 our overall liquidity position remained very solid at the end of the first half in 26 liquidity stood approximately at 121 million broadly in line with the level of last year's end at the end of 25 and significantly above what we have recorded as liquidity at the end of H1 2025 and that despite the dividend payment of around 36 million as I mentioned. Overall this highlights the strength of our cash generation and balance sheet and leaves us with solid a very solid liquidity position. With that let me now turn to AI and to share a few observations on the role of AI already playing in our business on slide 9. First, AI roadmap execution. We continue to execute consistently our AI roadmap and remain on track with the initiatives we have outlined. Our first ATC agent is already live with selected customers. and we plan a broader rollout during the third quarter. In parallel, the development of additional agentic use cases is progressing according to plan, including both our ASIS expert center agents as well as our staff center agents that we will bring out by the end of this year in Q4. Second, ATOS innovation, credibility, including execution on the AI roadmap, is proven by the strong order intake in the first half, in particular in Q2 of this year. Customers trust ATOS to continue creating value in the age of AI and to remain the relevant long-term partner for workforce management last earnings call i mentioned the excitement with prospects and customers on the workforce management day now this has translated into action as we see by the order development in q2 thirdly monetization of agentic ai as you recall our first ai features in forecasting have been embedded in our existing modules i.e. no separate pricing for token usage etc. However only limited token usage is necessary for these functionalities. Our agentic AI services start with the freemium packages in order to create excitement and adoption which lead then to subscription plans with an included usage volume per month. Customers with higher usage requirements will then going forward be able to purchase additional user packages on the monthly basis. The concept, if you will, is comparable to well-known mobile data plans. It offers customers a transparent and predictable pricing model. To sum up, based on our strong ATOS mode in workforce management we are executing our AI and innovation roadmap. This already positively impacts our order development, and we will stay with a transparent and fair subscription model to underpin customer centricity. Beyond customer-facing innovation, we are also leveraging AI increasingly across RTOS itself, that is shown on slide 10. As shown on this slide, we've started our internal AI transformation across four key value creation areas. build in our software development, attract in marketing, convert in sales, and serve in our customer service and support area. Importantly, our focus is not on isolated use cases, but on transforming end-to-end value change across the organization. In the end, we will enhance efficiency, productivity, and velocity. Ultimately, this will show in improved customer centricity, growth opportunities and higher margins. As for margins, already in 26, we increased our initial guidance by two full percentage points to at least 34%. For the next year, 27, we now increased the former projection equally by two full percentage points to at least 35%. And there is more room either for investment opportunities, investments in customer centricity, or and actual margin expansion. Before we move to Q&A, let me briefly summarize the key messages from today from my perspective. We delivered a strong first half in 26, supported particularly by a strong second quarter. Double-digit revenue growth and profitability above our guidance. Strong sales execution across new customer wins, expansion with the existing customer base, and cloud migrations drove a significant increase in new ACV. And this is clearly visible in our cloud and subscription growth year-on-year of 14%. This puts us in an excellent spot to keep the momentum despite the higher comparables in Q3. As last year's Q3 was particularly strong, we believe that new ACV year-to-date at the end of Q3 should be in the range of slightly above or above. In the end, we are aiming for class and subscription growth year on year to be at the end of 26 at a similar growth level as shown in the end of H1, i.e. above 10%, as this builds the case for recurring revenue growth in 2027. For the full year, we have the pipeline and the capacity to close the year successful. But of course, as in Q2, execution must be on its highest level and the macro and geopolitics, etc. are having an impact. Overall, we believe ATOS is well positioned to continue benefiting from the structural shift towards cloud, recurring revenues and the AI transformation. Now that concludes the presentation part of today's call. We now like to open the floor for questions and are happy to dive deeper into any topics you would like to discuss.

Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from the webcast while asking a question. Anyone who has a question may press star and one at this time. One moment for the first question, please. And the first question comes from Nikolas Herms from Deutsche Bank. Please go ahead.

Yeah, hi. Good morning, Christoph and Carla. Congrats on the quarter, and thank you for taking my question. I've got two, actually. My first one would be on the strong order momentum in Q2. Appreciate the color you gave.

I was just wondering, in the press release, you also mentioned that order intake for licensed products price was particularly strong in key two is there any any reason for that and maybe related to that could you give us an update on where you are in the cloud migration and if you are seeing any acceleration now yeah good morning Niklas and thanks for the question well maybe some additional color on the strong order momentum that was really if you read out of the license sentence that we put in there, I think in the German version in particular of the press release, that this would relate to perpetual licenses, that is actually not the case. The strong momentum that we've seen, we've seen it entirely and really absolutely entirely on the cloud and subscription side. I think 90% to 95% of all new ACVs that we generated was on the cloud and subscription side, on the customer expansion side, as well as on the new logo side, and of course with some additional ACV generated on the migration side as well. So, if that was a misinterpretation, then hopefully, I'm glad that I was able to clarify this. The second question, maybe you're going to repeat it again because I forgot it. The cloud migration, I was just, yeah. Okay, so cloud migration here, we actually have seen some momentum. and momentum, how shall I put it, not necessarily in number of customers moving, but in substantial number, substantial customers moving. And I named a few, like Rossmann, for example, like Barthes and Langnes, the family supermarket chain in the northern part of Germany is run by them. and by Berlin Chemie, part of the Menorini group, that's an Italian group. All three of those have in common that they are quite substantial. Secondly, they are not just moving to the cloud from on-prem. They also make a point of expanding international. In some cases, it's Switzerland plus Spain. In other cases, it's Poland. et cetera well formula is not expanding international because they are only active in germany that i have to add okay so there's good momentum and for all three that i just named it is a momentum that was driven by on the one hand a move to the cloud and secondly a move or adding functionalities with AI capabilities, partly those that we have already in the store, like forecasting, like workforce intelligence, and obviously with a view as well on getting access to the AI agents that we are about to deliver for the ATOS Staff Efficiency Suite in Q4. Hopefully that added some color.

Yeah, that's very helpful. I have another question on the strong cash position. You also see by year end, but also as of the first half. What are you planning to do with the cash? And in case you're planning capital returns, would that be a special dividend again? Or are you maybe considering share buybacks this time?

Yeah, obviously. I mean, we do have a history of a high liquidity position and that's a high cash generating business model that to start off with is not the worst position to be in. And we like this positioning, actually. We will continue to keep our dividend policy with a payout ratio of 75 percent on EPS on the group level. As we are looking at 27, which is the 40th anniversary of RTOS as well, there may be an option for a special dividend, but nothing has been decided yet. And on share buybacks, we stay a bit reluctant in this respect because we feel that instead of share buybacks, we would rather pay special or higher dividends because this is actually contributing or it's a contribution to the shareholders who are sticking with the share from our perspective. And on top of that, obviously, we are still following our buy, build and partner strategy, which we certainly see as one part for our strategy going into 2030 to make our ambition of the nearly or roughly 400 million. in revenue possible, that would include also some M&A activities.

And the next question comes from Gustav Frohberg from Bernberg. Please go ahead.

Good morning, everyone. Thank you for taking my questions as well.

A couple from my side also.

I noted the net new ACV development, which trended very positively in Q2. And I also wanted to ask, with reference to Q1, when we said that some deals had slipped into the second quarter, is the strong Q2 a reflection of closing those slipped deals? Or was there genuine extra underlying demand as well that came to help that new XEV development? second could you remind me again the amount of migrated customers you had or migrated revenues rather that you had in the second quarter and then lastly just on business climate like you referenced macro has not been entirely favorable could you give us an update on what your clients are saying and what you're hearing boots on the ground in terms of macro people's willingness and ability to invest in software solutions etc that would be great thank you

okay thank you Gustav and well let's start with the first question on Q1 and whether some deals from Q1 had slipped into Q2 I think there were like two minor deals that are some two deals not necessarily minor but not substantial as well that have slipped from our perspective into q2 but fundamentally it really changed in terms of our ability to execute our ability to to win customers on the new logo side i think that was particularly particularly strong As I mentioned in the call, we have one customer on the health care side, I think two larger hospitals. We have one in manufacturing, semiconductors in Germany opening up branches or production facilities. We have one on the international side, one semiconductor in the Netherlands, a smaller, not the largest one maybe, but a good one. And we have a good portion of customers in the healthcare, as I said. So this is very much broad based. And I would like to stress as well, it's not just in one particular segment like SMB or international. it is really the main driver was enterprise I have to say SMB and international however were equally in our terminology above or significantly above and enterprise was very strong in Q2 this so far has been yeah really a mixture of a bit of maybe easing of the of the highest uncertainty that customers felt in our markets after the beginning of the Middle East conflict like at the end of February or in March and then in maybe in some point in May it kind of eased a bit and there was confidence coming back that's my interpretation to some extent and that on the notion of still a good value proposition that we are holding for our customers now on the migration side we do have in total nearly a bit below 40 migrations and in the enterprise that we have signed and as I said the number is slightly above the last year's number in enterprise however the size of the vibrations is substantially above meaning the larger ones with have been shifting to the to the to the cloud this year and this is visible as well in this cloud and subscription growth year on year which we formally called incremental cloud and subscription order backlog added we changed this terminology and somehow color on the boots for the for the for the sentiment in the in the market I would still say yes it has loosened of as I said a bit lighter and for a better investment climate in the course of Q2 and I think everybody can kind of relate to this the oil price went down energy costs went down this is changing right now and we have to see how this pans out in the in the next quarters obviously or in this quarter and the next quarter all I can see say here really is three things maybe one is that we do have the pipeline and we do have the capacity for safe personnel in order to execute on this execute execution in Q2 has been super good and this has to do with our customers but it also has to do with our own performance. The second thing that from my point of view comes to mind is that obviously we have to sell on value. We are very much investing in education of our people that in times like this, you do have to make the point that we actually can provide value. You have to be very clear and very knowledgeable about processes of examples like this Hamburg port or HALA example that I gave and the same you can do with medical with hospitals there's tremendous regulatory complexity out there and at the same time there's structural demand for optimization of workforce scheduling in line with demand levels that are vastly changing and this to be really explained in the details and value being created that is i would say an art that is coming back and makes the the decision between winning or losing a project or not winning it yet let's say in one particular quarter so making ourselves knowledgeable is important and thirdly I want to stress that our AI roadmap, the track record of innovation that we've shown to customers has been very positive. I mean, our customers, they see technology, they see this as a long-term topic and not something they are hopping on this product and that product because it simply doesn't work for a large hospital, for any hospital or for a retail chain, etc. so they want to be partnering with a company who has a track record of delivering what they're promising and that is what other stands for and stood for for a long time and we have to make this this this clear and visible for our customers okay hopefully the question maybe some

additional questions if you want thank you very much ladies and gentlemen as a reminder anyone who wishes to ask a question may press star and one at this time and we do have another question coming from oliver frey from bank house metzler please go ahead hi everybody thank you for taking my question um maybe just a breakdown on ar growth i think you explained how existing customers new customers are playing into it how is pricing playing into this formula yeah

Excellent question, obviously. Pricing is part of the NRR, of course. So the NRR expansion for others, let's say, of the 115 that we have seen there, 2.5 to 3% would relate to pricing. The rest is really pure expansion. And obviously, with a churn starting this bridge in the ballpark of 5%, so we start with a 5% churn and reduction. Then there's a price increase of 2.5% to 3%. Let's make it 3%. Then we are minus 2%. And we have then an expansion, a real expansion of 17% for the ARTOS Staff Efficiency Suite. That would be the bridge and the pricing effect in this bridge. On the new logo side, we do have limited pricing expansion, really, and mostly made up in this macro environment by discounts etc so there's no really a pricing price increase effect on the new logo side this year thank you and maybe on ebit just want to make sure that i understood correctly um you said that it could be possible that you continue to see your margin levels as of h1 also on h2 so approximately 35 as a maybe optimistic scenario yeah excellent question um lucky to point this out this is actually what i what i said and we are just really in the process of transforming um into an first bionic company meaning AI and humans really working together on all processes and then ultimately into an AI first company eventually and this will bring with it lots of opportunities on the velocity side on the growth opportunities etc and this already puts us in the position to uplift this year the margins by two full percentage points in our always conservative projection which we did and for next year we did the same thing so we moved it up to at least 35% EBIT margin for next year and as as i said for this year we are more likely to operate on the ballpark in the ballpark of 35 but we are not yet uplifting our guidance for this full year for next year we still have to find out the fine print of our planning perfect thank you ladies and gentlemen

And this was already the last question. I would now like to turn the conference back over to Christoph Leiber for any closing remarks.

Well, thanks a lot for your continued interest in ATOS. And finally, let me just again point out how confident and how happy we are really with this second quarter. It was an extremely positive momentum, in particular on the order side. We have seen impeccable sales execution across all areas. And it makes me quite proud that we don't only show this in the Enterprise Germany or DACH region, but also on the SMB and on the international side. If you drill down in our presentation that has been published this morning, you will find a nice slide as well illustrating the international growth revenue growth there which we have not really focused on this time that is showing nicely as well our international revenue share is now standing at eight percent which is at least two full percentage points up from the 6% that we had at the end of year 2025. So lots of things are going in the right direction. Our product roadmap is gearing up to hopefully a big or bigger bang for AI agents being released at the end of Q4. And then we are moving into a very interesting and promising 2027 going forward. Okay, with this I'll conclude and thanks again for your attention and your contributions to ARTOS.