Capgemini Se Ord

Good day and thank you for standing by. Welcome to the CAP Gemini Q3 2025 Revenues Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automatic message advising your hand is raised. To answer your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Ayman Esad, CEO. Sir, please go ahead.

Thank you, good morning, and thank you for joining us for this Q3 2025 revenue call. Today I'm joined by our CFO, Miri Bagat. So let's go straight to it. Q3 was a strong quarter. for the group better than expected, and this performance is a result of our team's mobilization, the targeted actions initiated end of last year, and the relevance of our AI-powered business and technology partner positioning. Even in a demanding environment that remains largely unchanged, our performance increased steadily in 2025. The group generated revenues of $5,393,000,000, up 2.9%, year-on-year at constant currency. This is 2.2 points improvement compared to the second quarter of 2025 growth rate of 0.7%. And this improvement has been pretty broad-based. Booking total is $5,161,000,000 in Q3 2025, an increase of 1.5% at constant exchange rate. Now, this represents a book-to-bill ratio of 0.96 for the period in line with traditional seasonality. So the content currency growth rate improved across most regions, businesses, and sectors. By geography, North America recorded the strongest acceleration, reaching 7% year-on-year at constant currency. Growth rates also improved in the UK and Ireland and Asia Pacific and Latin America. And the gradual improvement in continental Europe exists, including in France. It has continued to improve a little bit in the third quarter. From a sector perspective, the strongest growth are in financial services and TMT, which is still showing a high single digit. Manufacturing sector continues to improve, but it's still slightly declining year on year. And finally, by business application and technology services, posted a solid growth of 5.7%. Operation and engineering total revenue also increased by 1.3%, with a very strong growth in business services, while strategy and transformation services are slightly up by 0.7% year-on-year. Qualitatively, clients continue to invest selectively. They prioritize initiatives that support operational efficiency and strategic transformation over growth-oriented projects. This continues to define the demand environment in our industry. So in this context, we continue to see strong interest in technology-led solutions that deliver tangible business value. This translates into sustained demand for cloud, digital core, data estate modernization, and AI and Gen AI solutions. So let me highlight a few deals booked this quarter to illustrate this. For Telia, we are delivering a unified and future-ready digital commerce experience solution, enabling personalized journey, journey dynamic pricing and seamless system integration this will enhance customer experience accelerate product launches and ensure consistency across all digital touch points and this also lays the foundation for agentic solution development for the netherlands police capgemini will carry out a major digital core upgrade this project replaces the current legacy system with a modern integrated and future proof scp platform that enhances service delivery, reduces complexity and cost, and ensures data quality, compliance, and agility across the organization. This project will enable the Netherlands police to modernize and streamline their business operations. And finally, CAD-GNI will deliver and manage the sovereign cloud infrastructure for European public sector clients. This involves transitioning all client IT systems and applications to the sovereign cloud, and safeguarding dedicated hardware in regional data centers. As a strategic partner, Capgemini takes end-to-end responsibility for the operation of the client's critical IT infrastructure and applications. Now, our positioning as a business and technology transformation part of our clients is well-recognized. Leading industry analyst firms consistently rank Capgemini as the leader across the key capabilities of the digital economy. Let me just cite a few over the past few months. In cloud, both Forrester and IDC rank us as the leader in areas such as application modernization and multi-cloud managed services. They are both critical to clients seeking to accelerate their digital transformation. In data and AI, both IDC and Everest have praised our leadership in application development services for AI and AI-enabled transformation and industry-specific AI capabilities. And this underscores our ability to deliver tangible business value for our client by leveraging AI technologies. We are also recognized for our strong foundation in business process services. This position is now further strengthened with the acquisition of WNS, which expands our skill and unlocks new value with agentic AI-enabled intelligent operations. Finally, we continue to lead an intelligent industry where our expertise in connected products, IoT, and engineering services positions us at the forefront of industrial innovation. Now, this recognition validates our strategy and confirms that Capgemini is uniquely positioned to help clients navigate and thrive in an AI-driven world. So speaking of AI, we are accelerating the integration of AI across all our service portfolios in every industry we serve. It enables clients to deliver tangible business value. Our end-to-end AI transformation approach for clients is composed of three main elements. The compass, the Capgemini Resonance AI framework, which helps clients set the right priorities and lay the groundwork for successful AI adoption. Our portfolio of AI first offerings to turn the promise of AI into reality. And RAISE, our platform that makes large-scale deployments possible. So today, I want to focus on RAISE. Moving AI proof of concept to AI in production and operated is complex for large-scale organizations. To get the benefits from AI transformation, enterprises need AI for business. AI agents that can move to production and be operated is what we call enterprise-grade AI agents, as opposed to what we could call toy agents. To make it real, we have developed the first enterprise-grade AI agent engineering platform, RAISE Builder. The Builder enables to design agents that are reliable, adaptable, and secure through the entire lifecycle. It also avoids vendor lock-in. It's compatible with the three main hyperscalers and enables seamless integration and interoperability with other AI agents. On top of the RAISE Builder, We also have a gallery of 350 pre-built enterprise-grade AI agents. We are also leveraging AI for our own operations. We have recently launched our proprietary and AI-powered data and knowledge management platform to empower our people. It's cost-effective, secure, compliant, and ready for agentic AI at scale, and available across the whole group with an innovative data structure that we are showcasing to our clients. So our investment in proprietary platform delivery frameworks and talent combined with strategic partnerships positioned us as a recognized leader in AI. This is reflected in robust deal wins, bringing generative AI and authentic AI to over 8% of group bookings. Our clients trust us, and we are delivering value for them. Let me take a couple of examples. We recently signed a strategic partnership with Bank of Queensland to entail AI-powered business process and technology transformation. We will completely transform some of the process, such as collections or financial crime, leveraging AI. We will not only simplify and hyper-automate operation, but also deliver best-in-class and innovative experience for customers and bankers. This strategic partnership also helps DOQ access skilled AI operations and equip their teams with an AI academy. Also, in our collaboration with Orano, we are deploying autonomous humanoid robots to replace manual intervention in nuclear radiation zones, directly improving worker safety and operational resilience. This is physical AI, the convergence of AI and robotics into intelligent machines that navigate and act like human-like dexterity. It's a breakthrough that transformed our cutting-edge lab research into real business value today. Now with the acquisition of WNS now complete, we lead on the intelligence operation market, addressing a new and fast-growing demand for agentic AI-powered business operations. Since the advent of Gen AI, enterprises have focused significant attention and increasing investment on Gen AI, and more broadly, AI. Today, clients are gaining maturity around how to best leverage Gen AI and understand the limitation of an approach solely based on developing use cases and trying to scale them. Over the past 12 months, this has led to the emergence of new, sizable business opportunities. Clients now consider large transformation contracts with a much broader scope to cover a significant part of their operations. They are looking for a partner who can not only run their business processes, but who can fundamentally transform their operation, leveraging data, AI, and technology. The objective is not just about efficiency and cost reduction, but a significant improvement in business outcomes. This is why transformation of business processes will be the showcase of Gen AI and Gen TKI. It's about delivering business value, shifting to outcome-based pricing for next-gen IP-led services. And to achieve this, intelligent operation must combine consulting-led process-free engineering, industry-specific solution and platform, domain knowledge, DPI expertise, technology, of course, and digital operations at scale. And with the acquisition of WNS, we are uniquely positioned to capture the demand for intelligent operation and lead in this far-growing market opportunity. Going to the outlook, we had another, after another good progression in terms of growth, we updated the outlook for the year. We raised again our growth objective and our operating margin target and keep our organic free cash flow target unchanged. So let's be clear, now we expect demand environment is going to remain unchanged for the coming quarter. So we don't see really any improvement in the demand environment as such. So after the solid improvement we delivered in Q3, we're not counting on an organic growth that will continue to accelerate in Q4. But it also clearly implies that the second half is shaping up to be stronger than we initially expected. And with this, we are now targeting 2025 organic growth to be slightly positive versus slightly negative to flat previously. With the WNS acquisition complete, we are also updating the scope impact on revenue growth. WNS will contribute around four points to Q4 growth and one point to full-year growth. All in, this brings our constant currency growth target for 2025 to be between 2% and 2.5%. up from previously minus one to plus one and this is above the high end of our initial guidance given in february the top end of this range assumes stable demand environment while the bottom end accounts for some unforeseen headwinds our margin and cash we aim to demonstrate again the resilience of our model despite the challenging environment we target an operating margin of 13.3 to 13.4 and an organic free cash flow of around 1.9 billion Thank you for your attention and now hand over to Nidhi.

Thank you Ayman and good morning everyone. Let's kick off with our quarterly revenue growth. As Ayman has just highlighted, we've seen our activity trends improve further in Q3 thanks to the targeted actions we've put in place over the past year. This progress is showing up across most regions, sectors and businesses and I will get into those details in just a moment. At constant currency, Q3 revenues grew by 2.9% year-on-year. That's a 220 basis point improvement over Q2. For the first nine months of the year, our constant currency growth stands at plus 1%. Like in the first half, M&A contributed about one point in Q3. As recently announced, WNS will be consolidated from October 17, 2025, which will lead to a total scope impact of around five points in Q4 and around two points for the full year. Now let's talk about SX. Currency headwinds have picked up, with a negative impact of 2.6 points in Q3, largely driven by the USD depreciation against the Euro. This led to a reported growth of plus 0.3% in Q3. For the first nine months, the SX impact was minus 1.1 points, and the reported growth minus 0.1%. Looking ahead, we expect the FX to represent a 3.5 to 4-point headwind in Q4, which means the full-year negative impact should be within the minus 1.5 to minus 2-point range as shared in July this year. Let's start by looking at our revenues by sector. At constant currency, financial services and TMT delivered strong year-on-year growth in Q3 at plus 8.5% and plus 7.2% respectively, building on their solid momentum from Q2. Consumer goods and retail also picked up, returning to slight growth at plus 1.8% in Q3. Public sector and energy utilities maintained solid momentum at plus 3.4% and plus 2.3% respectively. Manufacturing and services improved in Q3 versus Q2, with declines limited to minus 2.6% and minus 0.5% respectively. To summarize, The strongest acceleration between Q2 and Q3 came from financial services and consumer goods and retail, complemented by a visible improvement in public sector and manufacturing sector, which benefited from growth in life sciences. When looking at the revenues by region, this acceleration between Q2 and Q3 is visible in all the regions of the group. Advanced in currency, North America saw revenues rise plus 7% year-on-year driven by financial services, P&T, and manufacturing, especially in life sciences. UK and Ireland grew by plus 9% with robust broad-based growth led by financial services and TMT. France declined by minus 4.7%, which is a slight improvement over the previous quarter. Revenues in the rest of Europe are down by minus 1.5% compared with minus 2.3% in Q2. Solid growth in public, consumer goods and retail, and financial services was offset by softness in manufacturing. Asia-Pacific and Latin America grew by plus 13.6%, with particularly strong growth in financial services, manufacturing, energy utilities, and TNT. Now looking at our revenues by business. At constant currency, total revenues of strategy and transformation services were slightly up, plus 0.7% year-on-year. Applications and technology services, our core business, posted solid growth of plus 5.7%. This represents a 250 basis point acceleration when compared to Q2. Lastly, operations and engineering is back to growth in Q3 at plus 1.3%. We are particularly pleased with the performance of our business services, which delivered another quarter of strong growth. Turning to bookings. Q3 bookings totaled $5,161 million, up 1.5% at constant currency rates. The book-to-bill ratio for the quarter reached a solid 0.96, in line with our traditional seasonal pattern at this time of year. Our sales pipeline is also up year-on-year, and we continue to see a good funnel of large deal opportunities. Now let's talk about headcount. Total headcount stands at 354,700 employees at the end of September 2025, up by 4.7% year-on-year. Our onshore headcount decreased by about 1% year-on-year, while offshore increased by 9%. Consequently, offshore leverage is now 60%, up by three points compared with September 2024. This is mainly driven by strong traction in segments with higher offshore leverage, such as financial services, North America, and the UK. Finally, attrition remained stable over the past quarter. This brings our last 12-month attrition rate to 15.6% at the end of September 2025, essentially stable year-on-year. Let me now take a moment to highlight a milestone that reflects the confidence of the debt capital market on our strategy. In September, we successfully completed a €4 billion bond issuance to finance the WNS acquisition. The response was remarkable. The offering was oversubscribed more than three times and this allowed us to secure very attractive pricing. With the acquisition of WNS, we uniquely positioned to lead the intelligent operations market and generate profitable growth by serving the fast-growing demand for agentic AI-powered business operations. On that note, Ayman, I hand back to you for the Q&A session.