Atos SE

PAR:ATO

Earnings Call Transcript

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Atos Q3 2020 Revenue Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, 22nd of October 2020. And I would now like to hand the conference over to your first speaker today, Elie Girard, CEO of Atos company. Thank you. Please go ahead.

[Elie Girard, CEO & Director]

Hello, everyone, and thank you for being with us this morning for our conference call on the third quarter of 2020. Of course, first of all, I hope you and your closest ones are doing well and keeping safe in those times.I will first go through the highlights and the key figures of Q3. Then Uwe will develop the financial performance of the quarter. After my conclusion, we will open the floor to your questions. Eric Grall, our COO and Head of Manufacturing; and Adrian Gregory, our Head of Financial Services and Insurance and Head of Atos Syntel, are with us this morning to answer your questions.On my first slide, what were the main highlights of the quarter? First and foremost, in our commercial activity in Q3 was very strong and, I should say, reached record high levels, both in terms of order entry, and in terms of pipeline. But equally important to me is that the content of what we sell is progressively pivoting towards more digital, more cloud, more cybersecurity and also now more decarbonization.As a first result, our top line started to recover in Q3 from the trough of Q2 and will continue in the next quarters. I am sure we'll come back to this later on. This commercial activity is obviously the first result of the Spring program implementation. As a reminder, in Q3, we launched the step 2 of the transformation, including vertical expertise, and we are now preparing for the last step, step 3, early next year with the implementation of our practices.Next highlight, in Q3, we intensified our actions on cost and cash launched in H1, on track towards our objectives of operating margin and free cash flow for the year that we confirm today. Uwe will give you more details on this in his presentation. While we are delivering our quarters, I also want to underline that the group pays a very high attention on pioneering on more structural matters, reinforcing our strength on all dimensions in corporate social responsibility, in our decarbonization business, decarbonization for our customers and in key technology areas.Finally, I am glad to announce today 3 new important acquisitions, fully in line with our M&A strategy that I had the opportunity to explain to you earlier this year: Eagle Creek in Salesforce in the U.S., Edifixio in Amazon Web Services, Azure and Salesforce in France; and SEC Consult, a cybersecurity consulting player with positions worldwide. As a reminder, we also closed 4 transactions announced in previous quarters, EcoAct, Paladion, digital.security and Alia Consulting.Let's move to the next slide, where you can see the main figures of Q3. Revenue at constant currency was down minus 2.5% at EUR 2.644 billion, an organic decrease contained at minus 3.5% after a second quarter at minus 4.8%, which, as announced earlier in the year, we presented indeed the trough of the year's revenue profile. The very balanced group mix across industries, geographies as well as businesses has played once more an amortizing role.But more importantly, to prepare the future, the commercial activity was really strong, as bookings increased by 20% year-on-year at EUR 3.3 billion, representing a 124% book-to-bill. This ratio was particularly high in Financial Services & Insurance and in Healthcare & Life Sciences. Important to note as well that the backlog reached a record level of EUR 23 billion and above all, that the pipeline was up 25% year-on-year in spite of strong signatures in Q3. All these commercial KPIs are, therefore, pointing into the right direction to generate the revenue growth to come and to give visibility in those uncertain times.On the next slide, let's focus on some examples of representative deals signed in Q3. Globally, we saw an acceleration in signatures in cloud migration, such as with Willis Towers Watson in Financial Services & Insurance, which was actually a client of Syntel on a much smaller scope and therefore, a great example of revenue synergies between Atos and Syntel. Another one is PwC in Telecom, Media & Technology. This PwC contract also includes on top of business-critical application migration to a secure hybrid cloud and digital workplace management, a Decarbonization Level Agreement, a DLA clause, committing on reducing the carbon footprint of PwC digital services.Still in this vein and as said before, Atos is ideally positioned to capture the emerging demand coming from decarbonization needs. As another example, Atos will help innocent to create a digital factory by providing a carbon-neutral facility, with a suite of state-of-the-art solutions, including active LAN and WiFi networking through advanced technology, compute and storage, supported by a professional services package and maintenance support.As a last example, in Public Sector & Defense, we signed a contract with Linköping University to build Sweden's fastest supercomputer for machine learning and artificial intelligence. Very interestingly, it will deliver a 300 petaflops performance dedicated to AI.On the next slide, let me now turn to the pipe of commercial offers we are currently working on with our customers. What are the offerings which are interesting our customers the most often at the moment?Starting by manufacturing, we see, of course, a significant acceleration with COVID on digital workplace and cloud migrations, but also more and more on cybersecurity, SAP HANA operations and more vertical needs aiming at fostering efficiency, automation and process excellence.In Financial Services & Insurance, digitization comes first with moving to a real digital business by investing in FinTechs as a move from build to buy, by moving workloads and applications to the cloud and by using automation and machine learning to optimize B2B transactions to drive personalization. Financial institutions are also working hard on optimization programs, such as working from home with significant investments in the digital workplace as well as data insight, including improving the quality of that data using AI. Finally, cybersecurity has been an accelerating trend in the financial sector to support workload and applications being moved to the cloud.In Public Sector & Defense, there is a continued strong momentum on high-performance computer deals, driven by the progress of the European exascale program to come, but also by a growing concern in European and South Asian R&D and government organizations regarding the digital sovereignty in the Big Data area. There is as well a growing awareness in cybersecurity and in digital public safety as European countries build their digital defenses. Finally, technology independence is now at stake for many governments, starting with Europe and the creation of GAIA-X, of which Atos was a founding member to foster data portability across cloud.In Telecom, Media & Technology, a strong demand comes from BSS, OSS, business and operations support systems for telcos, which need a deep transformation in preparation for 5G. On another note, we started to get tower company RFPs, where we're using our Digital Twin solution along with third-party solutions. We work as well on several deals with applications moving to the cloud, DevSecOps, data center consolidation, hybrid cloud and finally, bare metal services for applications requesting SLA.In Resources & Services, we see 3 rising trends. First, decentralization, which clearly comes together with renewable energy that is causing a distributed production network. There is also, by the way, a significant acceleration of this trend in retail due to COVID impact and need to secure the value chain. We are here strongly positioned, thanks to our edge computing offering. Second, decarbonization. This is a clear trend in industries like oil and gas, with clear strategy in renewables and circular economy. And of course, third, digitization. On this, I just would like to mention hyperautomation and multisided platforms, especially in transportation.Finally, in Healthcare & Life Sciences, a strong trend relates to the acceleration of first-generation outsourcing and end-to-end infra and app deals in the provider space in the U.S. in response to the financial impact of the pandemic. Another trend is the acceleration of all kinds of remote care services, such as telehealth, remote monitoring, virtual clinical trials and digital displays in pharmacies.On the next slide, you see that once again, we have been very active on the CSR front over the quarter. In Q3, we have once more accelerated further the skilling of our staff, increasing by 74% year-on-year the number of certifications obtained by our people globally, including in cyber, SAP and cloud. We prioritize our internal people when filling positions as part of our retention HR policy. In Q3, we have also issued a new flexible working charter, which will materialize into a new balance between work from home and work from office in the new normal. In the environmental dimension, we introduced our internal carbon pricing mechanism which will drive, for all managers, the right business decision supporting our decarbonization strategy.And finally, we are going to hold a general meeting next week with the vote by shareholders on Atos ambition, strategy and mid-term targets, as presented at our Analyst Day in June this year. Obviously, as a result of all CSR actions and the ones from previous quarters and years, I would like to mention that Atos has been rewarded the platinum medal by EcoVadis for its outstanding performance, the best result ever, and that Atos also rated a top score of AAA for the fourth consecutive year in MSCI ESG ranking as a leader in the software and services industry out of 139 companies.We are also pioneering in decarbonization for our customers. On the next slide, indeed, you can see a few of our commercial successes in Q3 in that area. I talked already about some of them. So let me just point out a few more examples.We have delivered and continue to support Scottish Water in their decarbonization road map to provide energy efficiency and leakage reduction. Concretely, we provide 6% to 8% energy efficiencies across their 1,700 pumping stations.For our client Transnet, we developed a data exchange and re-dispatch platform that brings 10,000 renewable energy sources into the grid control system of the German state of Baden-Württemberg. But there is much more to come with already more than EUR 50 million pipeline just for Q4. Our decarbonization assessment offering opening doors to implementation contract is delivering well across our accounts, with 13 won and a further 43 in our pipe for Q4. Our decarbonization level agreement, which is our contractual commitment to carbon reduction, has also been proving very popular and is developing very well in our pipe. Of course, the acquisition of EcoAct that we have just closed represents a significant boost in our ambition for our customers.We are also definitely pioneering on some key technology areas, which is on the next slide. There is one in particular that I want to highlight today, as a lot is happening as we speak in many countries, especially in Europe, and Atos is ideally positioned to lead the pack here. I am talking about high-performance computing, HPC, and quantum computing. In HPC, Atos has become #1 in Europe but also in Brazil and India, for example. Mastering these technologies is essential in the battle around simulation, artificial intelligence and virtual reality. And then, Atos is also leading in quantum, the next frontier of computing, for which we offer the most powerful simulators on the market already adopted by nearly 30 of the most prestigious research laboratories in the world, including in the U.S., of course. We expect first quantum industrial and financial use cases and applications by the end of the year, and we will build a quantum accelerator by 2023. Stay tuned on those matters. Very large governmental plans are being prepared in which Atos will be ideally positioned to lead the effort. I will not go deeper here, but the same goes with GAIA-X initiative to promote data portability across cloud in Europe, where Atos has been a founding member and is playing a leading role.Now on my last slide, I simply want to confirm today all the objectives disclosed as early as in April for the full year 2020 based on the same macroeconomic scenario of a progressive recovery of H2 2020 and of 2021. A revenue organic evolution between minus 2% and minus 4% and operating margin rate between 9% and 9.5% of the revenue, a free cash flow between EUR 500 million and EUR 600 million.Thank you for your attention, and I now hand over to you, Uwe. Thank you.

[Uwe Stelter, Chief Financial Officer]

Thank you, Elie, and good morning from my side as well. Let's start with the reconciliation between statutory figures and pro forma for our Q3 revenue. Currency exchange rates effects came mostly from the depreciation of both the U.S. dollar and the Brazilian real. This leads to a Q3 revenue development of minus 2.5% versus Q3 2019 at constant exchange rates.Second element, our scope effect is mainly related to the acquisition of Maven Wave and the disposal of some specific unified communication and collaboration activities, resulting all together in a revenue decline of minus 3.5% versus Q3 2019 at constant scope and exchange rate.I continue with the revenue development by industry. Manufacturing reported a decrease of minus 12.8% compared to Q3 2019 organically, which is an improvement of circa 2% versus Q2 organic growth rate. Manufacturing was still impacted by project reductions with aerospace and automotive clients.Financial Service & Insurance considerably improved in Q3 to minus 2.6% organic decline, an improvement of more than 3% versus Q2 organic growth rate. The industry generated a good performance in Southern and Central Europe, partly offsetting reductions in other geographies.Public Sector & Defense is the largest industry of the group, representing 23% of the overall revenue. It grew organically by 13% in Q3 compared to Q3 2019. This growth was driven by North America, thanks to the ramp-up of new projects, and in Europe, based on the activities with the European Union institutions and large big data projects in multiple countries.Telecom, Media & Technology is decreasing by minus 4.8% organically. After a challenging second quarter, the industry showed first signs of improvement, while trends are still very contrasted between the different components. The high-tech engineering and media parts grew organically thanks to increased cloud demand in North America and Northern Europe and the partnership with Google Cloud, which led to multiple projects in several countries. This did not compensate the decline in the telco area.Revenue generated by Resources & Services in the third quarter 2020 is down by minus 16.3%. The industry was mainly impacted by ramp down and delay of projects in the retail and transportation space across the geography and especially in North America.Healthcare & Life Sciences is growing by 2.2% organically and recorded a solid performance for the second consecutive quarter in most geographies, especially in pharma.Let's move now to the performance by geography. In North America, the organic decline in Q3 was minus 7.2%. At constant currency, minus 2.8%, due to the ramp down and delay of retail and transportation projects and to a lesser degree, in manufacturing and financial services. At the same time, North America reported strong growth in cloud projects.Northern Europe grew compared to last year, thanks to a strong performance in Telecom, Media & Technology and Public Sector & Defense.Central Europe reported a decline mainly in manufacturing, which could not be compensated by the strong performance in other industries.In Southern Europe, the good performance in Healthcare & Life Sciences and Financial Services & Insurance would not fully offset the decline in other industries. Growing Markets was stable at 0.2% organic growth.On the next slide, I'd like to talk about the performance by division. Infrastructure & Data Management recorded, in Q3, an organic decline of minus 2.9% in comparison to Q3 2019 after minus 4.4% in Q2. At constant currency, Q3 was at minus 1.6%. The improvement is due to the ramp-up of new cloud and digital workplace projects across the geography.Business & Platform Solutions declined by minus 8.9% organically versus Q3 2019 after minus 10.6% in Q2. The business is still impacted by COVID, as several discretionary application projects were either postponed or reduced across most of the geographies and industries.Big Data & Cybersecurity continued to perform on a consistently high growth, both in Big Data projects and cybersecurity services.On the next slide, I'd like to cover the evolution of the company profile in terms of the share of cloud, digital security and decarbonization revenue. As the strong commercial activity in order entry and pipeline contain an increasing share in those segments, the revenue profile of the group is also shifting significantly. As explained during our Analyst Day in June, we target mid-term 65% of revenue being in cloud, digital security and decarbonization. In Q3, the group made already good progress and reached 45% of revenue coming from 40% in 2019 with contributions from all segments.Another important information is the status of our M&A activity. As mentioned by Elie, we announced today, subject to the customary approvals and consultations, the acquisitions of 3 additional businesses in the field of digital, cloud and security: SEC Consult, a worldwide player in security consulting based in Central Europe and Asia with almost 200 employees; Edifixio, a leading player in Salesforce and cloud consulting and integration based in France with circa 370 consultants; and Eagle Creek, a digital technology and management consulting company specialized in Salesforce integration, operating in the U.S. and Canada with almost 250 employees. The closing of these transactions is expected to take place before the end of the year and mark a further step to implement our mid-term strategy. 3 separate press releases were issued this morning.Including the 6 companies already closed this year, we are adding so far a total of 9 acquisitions in 2020 through our portfolio, representing an annual revenue of circa EUR 300 million with 2,400 additional experts.Moving now to a quick update on the Syntel integration. The Syntel synergy pipeline is very active with 46 projects won in Q3 above EUR 1 million and an unweighted pipeline of EUR 1.4 billion. In Q3, we signed several deals, the largest ones being first, as mentioned before, the 5-year contract with annual revenues of circa EUR 100 million per year with Willis Towers Watson for managing the digital transformation.Second, another multiyear, large contract with a major hospital trust to deploy the Atos digital workplace, transform applications for their cloud and deliver cybersecurity services. This is a new customer for us. All the examples at the bottom of the slide demonstrate that the combined offerings are finding very good response by customers in their core business around cloud, digitization, IoT and automation. Cost synergies are continuing to materialize in both G&A and direct costs through a tight management of projects transferred from Atos to Atos Syntel.Let's move to the next slide, which gives the status on the cost and cash actions. The cost containment program that we have initiated in Q3 and Q2 is on track. The number of sub cost have decreased by 13% since the beginning of the second semester. Internal staff costs were down minus 6% year-on-year. Travel costs were 75% down as well as marketing expenses were down, due to events moving to virtual. Rental costs started to decrease, with much more to come as we are reducing our overall real estate footprint in conjunction with maintaining a higher share of remote work compared to precrisis time.At the same time, the cost of purchase components for our big data activities increased in line with the growth in that segment. All in all, we confirm the 9% to 9.5% bracket for full year operating margin.On the cash side, we are on track to catch up from the first semester, and we confirm the free cash flow guidance of EUR 500 million to EUR 600 million for the full year. If we look into the status of the key indicators. First, since the beginning of the second semester, invoicing level is above last year. Second, the large big data project completion are lined up for a cash flow -- inflow in Q4. Third, the overdues at the end of September were minus 15% below last year. And fourth, the payment to suppliers, which peaked in the first semester, was already partly recovered in Q3.Let me close my presentation with a view of the head count development. The total head count was 105,000 at the end of September 2020, down by minus 3.4%, excluding scope effects, compared to 108,000 employees at the end of December 2019. Of that, minus 1.8% were achieved in Q3 compared to end of June 2020. This considers necessary measures coming from the COVID-19 effect as well as materializing the impact of automation.Attrition was 9% at group level, at the same level as in Q2 this year and significantly down compared to 15.8% in Q3 last year. In offshore countries, attrition in Q3 this year was 11.2%.Now back to you, Elie, for the conclusion.

[Elie Girard, CEO & Director]

Thank you, Uwe. And indeed, before moving to your questions, I just want to summarize here our main priorities for Q4 this year. First, we are working on industrializing the conversion of our large pipeline into order entries. Second, we will complete our strong cost saving plan over Q4. And of course, our cash actions are on track across the teams to reach the full year target. Third, it is a top priority to make successful already this year the rollout of Spring in order to get definitely the relevant end-to-end business model matching customers, increasing critical needs in their digital demand. In Q4, we will concentrate on the preparation of step 3, which will be the final step in January.Finally, on M&A, we will pursue our strategy in Q4, which I believe has been delivering very well in the first 9 months of the year already. Same focus on cybersecurity and bolt-on acquisitions to reinforce our portfolio of offerings in specific industries and digital capabilities.All in all, we are on track to reach all our objectives this year, and we are obviously preparing for the return to growth next year, which is clearly an important step towards our mid-term targets.Thank you very much again for your attention, and let's now move to your questions.

[Operator]

[Operator Instructions] Your first question comes from the line of Sven Merkt from Barclays.

[Sven Denis Merkt, Equity Research Analyst]

Book-to-bill was very strong again. Could you provide us a bit more insight what drove this? How much are new contracts versus renewals? It looks like it's more the former, but any comment would be really helpful.And then could you also provide us some more color on what you see from the divisional perspective in Q4? Where do you expect the largest improvements versus Q3?

[Elie Girard, CEO & Director]

On the first question, there is nothing special in this book-to-bill order entry for Q3 between renewals and the new contract. Knowing that, again, the number that we showed with Uwe are excluding Siemens, okay, excluding the renewal of Siemens of EUR 3 billion over 5 years, which by the way, itself includes some new scope, but that's another story. So excluding Siemens, the 124% of book-to-bill is perfectly normal in terms of split between renewals and new contracts.For Q4, look, I don't think we're going to be more precise. We expect actually a progressive improvement across the board, and I would say in all dimensions and in all divisions because that was your question. But I don't think it would be appropriate to go into those details for the next quarter by divisions.

[Sven Denis Merkt, Equity Research Analyst]

Okay. Fair enough. Maybe one follow-up question on the EUR 400 million cost saving program. How should we think about those cost savings into next year? Clearly, some costs might come back, but on the other hand, some of the costs will only annualize next year. So maybe could you comment on the net impact of that for next year?

[Elie Girard, CEO & Director]

Yes. Uwe?

[Uwe Stelter, Chief Financial Officer]

Yes. Thanks for the question. So of the overall EUR 400 million cost program, there's indeed pieces which are more structural and pieces which are more onetime. I expect circa 30% of the overall cost measures also to be with us on the long run, meaning more structural, 30% of the overall.

[Operator]

Next question comes from the line of Michael Briest from UBS.

[Michael Briest]

Elie, I know you don't want to give a lot of detail but just looking at the guidance for the year, it seems perfectly achievable. But what are you sort of factoring in for the current state of lockdowns? And if they get worse, could that sort of put pressure on you, and I mean, you come in more likely at the low end of the range?And then I noticed that the Resources business actually deteriorated quite a lot in Q3 over Q2's growth rate. Maybe some color around that and how you expect the recovery to play through.And then finally, attrition. For you, it's come down. I think many in the industry are reporting quite significant declines in attrition rates. What are you sort of comfortable with? I think there's a natural rate, which is actually quite healthy to have. Are we below that rate now? Or are you still sort of happy at 9% or so?

[Elie Girard, CEO & Director]

Michael, thanks for your questions. I will take the first one and the last one, and Uwe will answer on Resources & Services. On your first question on the macroeconomic scenario or more sanitary or lockdown scenario. We have embedded in this scenario -- or this scenario can afford some significant restrictions. I think we would get out of this scenario should we have other across the board complete lockdowns. But apart from an extreme scenario like this, our guidance is fully valid in a range of scenarios around the current situation, meaning including some restrictions should they increase across our countries in reasonable terms over the next 2, 3 months.On the last question on attrition, I would say the current level of attrition is probably a little low and we would expect it to reincrease progressively. I think we were fine with the level of attrition we used to have before the crisis. I would expect it to get back to this normal in the course of next year, I would say, probably maybe by the end of H1, most probably. But going back to that level, pre-COVID is fine with us and compatible with the turnaround of our business.You take, Uwe, please, the second question.

[Uwe Stelter, Chief Financial Officer]

Yes. Michael, on the Resources & Services side, so there are 2 reasons: one is the transportation side; second, on the retail. I expect this industry to come back very strongly actually at the beginning of next year. The decline in Q3, specifically, is more due to larger rollout projects we had last year, where with the slowdown of retail activities in this year this came to a reduction, but we expect that to ramp up as we see already malls and retail activities to ramp up in the fourth quarter.

[Operator]

Your next question comes from the line of Toby Ogg from Bank of America.

[Toby Ogg, Research Analyst]

Yes. So 2 for me. So firstly, just on the infrastructure and data management side of the business. Q2 obviously saw a significant slowdown, but actually, Q3 saw a bit of a better recovery than I probably would have expected. Perhaps you could just comment on the differences in performance within that business between the infrastructure part and the noninfrastructure part?And then just secondly, coming back on the order entry, perhaps you could just talk a little bit about the relationship between the bookings and the revenues. Is that relationship been lengthening or shortening? When can we expect this sort of growth to start flowing through into the revenues?

[Elie Girard, CEO & Director]

Uwe, would you like to take the first question? Maybe Eric will complement. I will take the second. Thanks, Toby.

[Uwe Stelter, Chief Financial Officer]

I think in essence, Toby, in infrastructure, data management -- the classical data center infrastructure business in the meantime it's very, very small. It's below 10% of the company, right, of the company's revenue numbers. And where we see the positive activity are both in cloud and in digital workplace solutions, which actually in the order entry, have a higher share than before in our overall activity.

[Elie Girard, CEO & Director]

Eric, you want to complement shortly?

[Eric Grall, Head of Manufacturing & COO]

Yes, quickly to complement what Uwe said. We also see very similar to the B&PS activity, rebound, progressive rebound, step by step, Q3 versus Q2 because of fertilization starting to come back also in the account. Remember that our IDM business is a combination of run rates and projects, which we call fertilization, starting to rebound a bit in Q3 versus Q2, which we're expecting, a bit like B&PS. And we expect the same trend to continue in the coming quarters.

[Elie Girard, CEO & Director]

Thanks, Eric. On your second question, Toby. So the -- I guess that was about the conversion and the lag between the order entry booking and the booking of the revenue, materialization of the revenue. So there is nothing materially changed here in the usual cycle. And that supports our scenario for the coming quarters of a progressive recovery, so a better number in Q4 with an overall year around the middle of our range of minus 2% to minus 4%, and the continuing improvement into 2021, definitely, positive organic growth in Q2 next year. This is our scenario. And obviously, a growth in 2021 on a full year basis. So this commercial activity and the numbers that we showed, both order entry and the pipeline, are fully supporting this scenario.

[Operator]

Next question is from the line of Laurent Daure from Kepler.

[Laurent Daure, Head of IT Software and Services Research]

A couple of questions for me as well. The first one is on your M&A, the 9 acquisitions. Globally, could you give us a sense of the growth profile, margin profile, average price for the EUR 300 million that you have acquired?My second question is on a regional basis, most of the regions are showing some improvement, except for North America. So when do you expect this region to be back to, maybe not to growth, but to show some improvement?And my final question is on the cash collection by the end of the year. I understand all the positive metrics that you're showing here for Q3. But what is your feeling regarding the cash collection with large clients? Do you have any signs that some of the big clients could be tempted to postpone their payment from December to Jan, or nothing to worry at this stage?

[Elie Girard, CEO & Director]

Laurent, so I will answer the first question. Uwe will take the number two and number three. On the M&A, what I can tell you is that on average, the acquisitions we're making, this bolt-on strategy are clearly double-digit growth, very clearly double-digit growth. The margin, I would say, is standard, okay? It's in line with the group's margin. And the price paid is, on average, clearly below 2x revenue, okay?So Uwe, please, on the 2 other questions.

[Uwe Stelter, Chief Financial Officer]

Laurent, yes, on the -- on your second question around North America. So indeed, what you saw at constant currency, of course, the minus 2.6%, of course, showing the inclusion of our acquisition strategy. But to your question around the organic growth, we expect North America to go back to a decline in the -- in decline at Q1 and Q2. So starting with 2021 to improve significantly on the rate and then also get very early to growth in organic growth.To your last question around postponements of customers. So far, we see no pattern in that. Actually, our overdues, as I said, are even better than last year and I expect that also to be continued, no signs of those kind of questions.

[Operator]

Next question comes from the line of Neil Steer from Redburn.

[Neil Steer, Partner of Software and IT Services Research]

Most of mine have been asked, so just a couple of quick ones. Could you give the size of the incremental revenue you get from the Willis deal?

[Elie Girard, CEO & Director]

Uwe, please?

[Uwe Stelter, Chief Financial Officer]

Yes. So the incremental revenue is on a -- once it is ramped up in the next few months, it's about EUR 70 million, EUR 80 million a year more than what we had before. So it's roughly times 5, multiplying the number of what Syntel had before with that customer.

[Neil Steer, Partner of Software and IT Services Research]

Okay. And can I confirm, when we look at the growth market revenues, it's roughly half of that or slightly in excess of half of that Brazil? Or how significant is Brazil within the growth market revenue line that you have?

[Elie Girard, CEO & Director]

No, Brazil is not at all half of our Growing Markets. It's a minimal part of the Growing Market region, okay? But I think we will not give the full breakdown. Thank you, Neil.

[Operator]

[Operator Instructions] Next one comes from the line of Gianmarco Conti.

[Gianmarco Paolo Conti, Research Analyst]

Yes. So just a quick one as most of mine have been also answered. In terms of your M&A strategy, do you foresee continuing the same kind of bolt-on for cyber, digital and cloud coming in the next quarters? Or have you kind of subsided your appetite for M&A so far?

[Elie Girard, CEO & Director]

So on M&A, it's quite clear. I think we've got this what we call self-financed acquisition strategy, which corresponds over the next years, as announced in June as part of our strategic plan. We use the free cash flow of the year after, of course, dividend payment to make self-financed acquisitions in cybersecurity acquisitions and bolt-on acquisitions in industry or vertical expertise and some more transversal cloud digital expertise, okay? This is what we're showing, I think, quarter after quarter and today, again. Then there is another branch of the M&A strategy, which would be -- should there be an opportunity. You have noticed that our balance sheet is quite solid. We have virtually no debt at the moment since we sold our Worldline shares. And we are open for any transformative deal, but we would use our balance sheet only in this type of situation. Thank you.

[Operator]

[Operator Instructions]

[Elie Girard, CEO & Director]

All right. So thank you very much for your attendance and your questions. Have a great day, and talk to you very soon. Thank you. Bye-bye all.

[Operator]

That does conclude our call for today. Thank you for participating. You may all disconnect.