Publicis Group Sa S/Adr

Good morning. This is the conference operator. Welcome and thank you for joining the Publicis Group third quarter 2024 revenue conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions by pressing star 1 at any time. Should anyone need assistance during the conference call, they may signal an operator by pressing star and 0 on their telephone. At this time, I would like to turn the conference over to Mr. Arthur Sadoun, Chairman and CEO of Publicis. Please go ahead, sir.

Thank you, Alicia. Bonjour and welcome to Publicis Group Third Quarter 2024 Revenue Call. I am Arthur Sadoun and I'm here in Paris with our CFO, Laurie Snod. Jean-Michel Bonamy is also here and will be available to take your questions offline after this session. I will begin by sharing the main financial highlights of our Q3 and our outlook for the rest of the year. Loris will then provide more details on our numbers. I will conclude with the ambition we have behind our latest acquisitions. As usual, we will take your questions together after the presentation. But before we start, please take the time to read the disclaimer, which is an important legal matter. Let's dive into our presentation. There are three highlights to take out of what has been a strong but also quite busy quarter for us. First, we continue to win market share and delivered plus 5.8% organic growth in Q3, outperforming the industry again this quarter by more than 300 basis points on average. Second, we are upgrading the floor of our 2024 organic growth guidance to 5.5% versus 5%. In Q4, we expect to be able to sustain our momentum once again, even in an environment that has become increasingly challenging since the last quarter. Third, we have consolidated our leadership in influence and commerce, investing $1 billion in the acquisition of Influential and Mars United Commerce. Let me get into the details of our numbers and our guidance upgrades. We posted plus 5.8% organic growth on the quarter. Despite the macroeconomic context, which has not been doing any better, we are accelerating on growth compared to our four-year CAGR of 5.1% in Q3. We continue to win market share for two main reasons. Number one, our new business track record that has been particularly strong this summer and year-to-date as confirmed by JP Morgan rankings, and number two, our ability to capture a disproportionate share of our clients' spend on personalization at scale. Thanks to the unique combination of Epsilon leading proprietary data assets and Publicis MediaScale, These highly intertwined but complementary activities, representing 50% of our revenue, continue to grow this quarter at almost 10% together. In the context of continued client consciousness toward capex spend, as reflected in the result of all IT consulting firms, Publicis Sapient saw sequential improvement despite an anticipated slight decline. Creative accelerated in Q3, delivering mid-single-digit growth, driven by solid momentum on production and new business wins, including scope expansions. We performed well in all regions, thanks to the strength of our offer. The US, our largest geography, once again delivered strong growth this quarter at plus 4%, affirming our number one position in the market. Europe delivered plus 4.9%, accelerating versus Q2 2024. Asia-Pac recorded plus 6.4% organic growth, with a very strong China at plus 12.4%, fueled by our continued new business win, particularly thanks to our best-in-class and transparent media operation there. Second highlight, we are upgrading the flow of our guidance. In Q2, we said that if the microeconomic environment remained challenging for the rest of the year, we would deliver 5%. I think we can all agree that the global context is still very challenging, even more so than in July. But despite this, we are in position to confidently raise the floor of our guidance to plus 5.5% organic growth for 2024, particularly thanks to our new business tailwind. Not only does the new flow of our guidance represent an even stronger acceleration compared with our four-year CAGRs at 4.7%, it also means that we will deliver another year of our district outperformance. These guidance take into account the current macro uncertainties that affect client spend, that still weigh on publicist sapient like other IT consulting firms, and that would impact client end-of-year adjustments. Achieving our previous floor of 5% would have been a strong performance. Now, delivering 5.5% would be an even greater accomplishment. Going beyond that would require an improvement in the macro in Q4, which I think we can all agree no one sees today. When it comes to 2024, not only should we outperform on growth, but we should also continue to deliver our industry-leading financial ratios. We confirm our operating margin guidance of 18% as well as our free cash flow expectation of 1.8 to 1.9 billion euros while sustaining our industry high bonus pool and investing 100 million euros in our AI plan. I will now leave the floor to Loris who will take you through the detail of our numbers. I will then come back to share with you the ambition behind our latest acquisitions.

Thank you, Arthur, and good morning, everyone. Let me go into the details of our Q3 net revenue. In Q3 2024, net revenue was 3 billion and 423 million euros, up 5.6% on a reported basis. This includes plus 5.8% organic growth, which comes on top of plus 5.3% organic growth in Q3 2023. A net negative impact of currency of 1.2 percentage points due to the depreciation of USD and the Argentinian peso, partly mitigated by the increase of the pound sterling versus euro. Finally, a contribution from acquisitions, net of disposals of 1 percentage points, mostly reflecting the revenue of Spinnaker and AKA Asia, but also influential EnMars. Let's move on to the next slide, which shows our Q3 net revenue by region. North America remained strong this quarter, up 5.3%, including plus 4.7% organic growth. There was a negative impact of USD versus Euro, more than offset by the contribution of acquisitions. Europe recorded 5.6% reported growth. Organic growth was robust at plus 4.9%. There was also a small positive impact of the pound sterling versus Euro. Asia Pacific posted a very strong plus 6.4% organic growth fueled by China at double digits. Middle East and Africa and Latin America continue to perform very well with plus 13.6% and plus 30.3% organic growth respectively, the latter being impacted by the depreciation of the Argentine peso versus Euro. Let's get into more details for each region starting with North America. The region was up 4.7% in Q3. In the U.S., the group's largest geography, all activities continued to perform well, delivering 4% organic growth, with the combination of media and epsilon growing high single-digit. Creative activities were up mid-single-digit, driven by new business wins and scope expansion. Publicity Sapiens posted a slight organic decline, due to the continued wait and see attitude from clients. Let's turn to the performance in Europe on the next slide. Europe recorded plus 4.9% organic growth in Q3. The UK, which is 9% of group net revenue, was down 2.6%. Media and creative together were up low single digit after three years at double digit, accumulating plus 42% in organic growth since Q3 2020. while Publicity Sapient remained impacted by delayed DBT capex and a challenging comparable, particularly when it comes to retail. France, which represents 5% of net revenue, posted a plus 7.3% organic growth in Q3. Media was a double digit on top of double digit growth in 2023. Creative was a low single digit, while Publicity Sapient was softer on the back of double digit organic growth last year. Germany, which represents 3% of our net revenue, posted plus 7.6% organic growth, driven mostly by media. Lastly, our operation in Central and Eastern Europe continued to grow strongly, posting a plus 19.1% organic growth on top of plus 15.9% last year, fueled by Poland, Romania, and Hungary. Turning to the next slide for our performance in the rest of the world. Asia-Pacific, which represents 9% of group net revenue, delivered plus 6.4% organic growth, driven by media activities which were up double digits. Importantly, China remained very strong at plus 12.4% organic growth in Q3, sequentially accelerating plus 7% in Q1 and plus 11% in Q2, still largely driven by market share gains and despite macro uncertainties. Middle East and Africa posted a strong plus 13.6 organic growth, largely driven by media activities and publicity sapiens growing double digit. Latin America posted a plus 30.3% organic growth, driven by both creative and media activities, in particular in Brazil, Mexico, and Colombia, as well as Argentina, partly due to inflation. On the next slide, you will find the group's performance by client industry for Q3. Again this quarter, seven sectors out of our top 10 posted positive growth. The tech media telecom sector, which represents 13% of our net revenue, continued to perform very well at plus 9% in Q3 2024, after plus 11% both in Q1 and Q2. healthcare recorded double-digit growth on top of double-digits in Q3 2023, thanks to new business wins across different activities and scope expansion with a number of existing clients. Retail was slightly down due to the lower contribution from publicity section this quarter, being impacted by delays in DBT projects in Europe and a top comparable, particularly in the UK. And finally, auto posted positive growth despite a challenging context. Moving to my last slide, net financial debt. Net debt was 1 billion, 710 million euros at the end of September, up 1.6 billion euros in Q3. The increase is due to dividend paid in cash to our shareholders for 0.9 billion euros, acquisition for circa 1 billion euros, and all partly offset by free cash flow generation, including change in working capital. Change in working capital improved versus Q3 2023, in line with our objective to deliver an outflow of circa 200 million for the full year of 2024. Average net debt on the last 12 months is 406 million euros, down 45 million euros versus average net debt at the end of September 2023. This concludes my financial presentation, and I now give the floor back to you, Arthur.