Ipsos

Good evening, everyone, and welcome to AppSource 2023 first quarter results. This conference call will be hosted by Mr. Ben Page, CEO of the group, and Mr. Dan Levy, CFO of the group. As a reminder, this call is being recorded. During the call, you will be on listen only. However, later on the call, during the Q&A session, you will have the opportunity to ask questions This can be done by pressing star 1 on your telephone keypad to register your questions at any time. I would now like to turn the call over to Mr. Ben Page. Please go ahead, sir.

Thank you very much, Ben. So I'm Ben Page, the CEO, and it's great to be here to talk you through our Q1 results. I think before we get into the detail, I think it's just very important to remember what I said back on the 15th of February when we released the full year 2022 results. And that is that the path of revenue recognition during 2023 at Ipsos will be completely different to 2022. And that is, of course, what we are now seeing. So let's just look at the numbers. We have positive momentum, but negative revenue at this point. So first of all, we have 532 million of revenue. That is the second highest figure that Ipsos has ever achieved. But as my colleague Dan, our CFO, will explain, we are facing a cliff edge comparator. And as a result of that, the revenue is down 2.8% because of this cliff edge effect of the major COVID contracts, which were present in 2022, but of course ended at the end of March 2022. So there's a very, very tough comparison in this quarter, which then gets much easier for the rest of the year. If you put aside the COVID contracts, the organic growth net of those is 0.6. but the order book which is basically the revenue which is visible and confirmed but not yet booked in the system and dan can explain the technicalities on that but it's visible for this year net of the covid contract is currently up 3.3 percent and has been building during this quarter. So March was up 6.4%. So we saw a deceleration at the end of last year with uncertainty. We are seeing an acceleration during Q1. But it is a very volatile situation out there. I thought the fact that the economists talk about the Mona Lisa economy, however you look at it, it looks different, was quite interesting. We'll come back to that during this presentation. But overall, we have good momentum and I'd like Dan now to take us through just some of the underlying factors with the adverse effects on the comparison and some of the other things that are going on. Dan.

Thank you very much, Ben. So obviously, as Ben just explained, the decline in Q1 revenue is first of all due to very strong adverse base effects, which were actually expected as we announced it in February for your results. The first adverse effect is obviously the fact that we had a very strong Q1 last year with an organic growth above 12%. We had more than 20% growth organic in the Americas in Q1. And we had double-digit growth in China before the lockdown that hit China in 2022. And obviously, this is a huge base effect which hits now our revenue in Q1. And the second base effect is actually the cliff-edge effect of the large COVID contract. which, as you will remember, ended at the end of Q1 last year, which were in the revenue of Q1 2022 and which are not anymore in the revenue of Q1 2023. If you strip out the effect of this COVID contract, organic growth would be in Q1 of plus 0.6%. In addition to these two base effects which were expected, we are facing in Q1 two other headwinds. The first one is a kind of wait and see attitude from our major tech clients in the US. These clients are reorganizing, which means that some of the clients of the contact that Ipsos has with them have changed. They are changing their strategy. And all of this means that some of the projects which they forecast were actually delayed. And as you see on this chart, the revenue on the big tech clients in Q1 is down by 7 million euro. Of course, there are a lot of needs that remain from these clients, because we do a lot of things with them. We do trackers, we do mystery shopping, we do corporate reputation, and we are going to keep on doing that. And also, we have new needs from them, particularly on AI, because we are currently working with some of the big tech clients on their private version of generative AI models. a lot of opportunity for growth going forward. But currently in the Q1, we have this cliff edge linked to the reorganization. The second headwind we have seen in Q1 is actually linked to the rebound in China. In China, the rebound of activity is clearly seen in our numbers in the order book. In the order book, as you can see, the order book, as you can see, is growing organically since January by more than 13%. But it is not seen yet in the revenue. The revenue are down by 3.9% because the Q1 revenue are still impacted by the lockdowns. It is important to see that when you have a recovery in the way we recognize the revenue, the recovery is always seen first in the order book and then is transformed into revenue because the recognition of revenue at Ipsos is basically from the start of the work till the end of the project. So there is always a lag between order book and revenue when there is a rebound in activity. And this is actually exactly what we see this quarter in China with a revenue down and a very strong order book. And maybe more generally speaking, I think it's important to note that the Q1 at Ipsos is the smallest quarter in revenue usually, as opposed to the other quarters. And as a consequence, Q1 revenue is not very predictive of the full year performance, whereas order book is a far better indicator because usually at the end of March, we have more than half of the order book of the year which is already booked. Despite the adverse base effect that we described before, as Ben said just before, the first quarter 2023 is the second best ever performance. As you can see on this chart, We have grown by 9% in Q1 as compared to 2021. So to an extent, if you do the bridge above the cliff edge effect of 2022, and we have grown by 25% organically as compared to 2019. I think it is important to show that because it shows the resilience of IPSO's business model. And it is always important to look at a medium and long term performance rather than to focus only on the quarter by quarter results, which can be volatile as we see in our Q1 results. If we now turn to the revenue breakdown by region, obviously we see a decline in EMEA by 6% organically, which is basically linked partly to the war in Ukraine, but more importantly by the end of the COVID contract. If you strip out the effect of this COVID contract, we would have an organic growth of more than 1% in EMEA. Organic growth in America was overall 1%, with quite different situations between Latin America, which grew organically by 9% in Q1, and North America, which was overall stable, impacted, as we said before, by the reorganization in some big tech clients. But again, this kind of stability in revenue in North America has to be put in perspective with the very strong Q1 we had last year because globally, America has grew by 22%, as you can see on the slide, in Q1 2022. And it's important to note as well that our order book in Q1 in the U.S. is positive with a 3.3% organic growth. Asia-Pacific, we have a very good momentum in India, growing by more than 20%. But obviously, Asia-Pacific suffered from the situation in China in the end of the zero COVID policy. China is the biggest country in Asia-Pacific. But I'd explained before, we are seeing a recovery in China. In terms of audience now, our performance in the clients and employees and consumers research activities remain broadly stable in Q1. Again, after a very strong performance in Q1 last year, you can see on this chart that it was respectively 20% organic growth and 70% organic growth. Again, the reorganization in big tech clients waited on the performance, but we have, on the other hand, very good performance on our brand health tracking activities, consumer experience activities, and data analytics. And Ipsos Digital as well is doing very well, and Ben will come to that in a few minutes. Citizens is decreasing by 30%. That's also expected because of the end of the last COVID contract. If you take out the last COVID contract, then the public sector would grow organically by 8%, which I think shows again the need for the governments in a multi-crisis world to inform public policy decisions with reliable data. And finally, our doctors and patients activity is down by 5%. Again, with a strong comparison to last year, which was 11%. And also due to delays in decision making in some pharmaceutical clients. And now over to Ben for some highlights on the business and for the outlook for the year. Thanks, Dan.