Publicis Group Sa S/Adr

Good morning, this is the conference operator. Welcome, and thank you for joining the Publicist Group First Quarter 2025 Revenues 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 and one at any time. Should anyone need assistance during a conference call, they may signal an operator by pressing star and zero. At this time, I would like to turn the conference over to Mr. Arthur Sadun, Chairman and CEO of Publicis Group. Please go ahead, sir.

Thank you, Sherry. Bonjour, and welcome to Publicis Group's first quarter 2025 earnings call. I am Arthur Sadoun, and I am in Chicago. Well, it's pretty early, but as you know at Publicis, clients always come first, particularly in those uncertain times. Laurie Snow, our CFO, is in Paris. Jean-Michel Bonamy is also there and will be available to take all of your questions offline after this session. I will start with our Q1 highlights. Loris will then provide more details on our numbers. I will conclude by sharing with you why we are confident that our strong performance is sustainable, despite what is a deteriorating microeconomic environment. As usual, we will take all of your questions with Louris after the presentation, crossing fingers that the connection between Chicago and Paris will work seamlessly. But before we start, please take the time to read the disclaimer, which is an important legal matter. Okay, let's dive into the presentation. There are three highlights to take out of our results. we posted a very strong Q1 at plus 4.9% despite increased microeconomic tensions. Second, our record new business wins over these periods make us extremely confident to deliver on our 2025 guidance. Last but not least, we are further accelerating on our differentiation thanks to disciplines strategic bolt-on acquisitions, investing close to 500 million euros year-to-date to reinforce what we call a category of one. Let me take you through the detail of our highlights. With 4.9% organic growth in net revenue, which is the industry reference, we delivered a very strong Q1, despite a tough comparable basis and are actually accelerating versus a five-year CAGR of 4.5%. This performance stands out, especially considering the uncertain and deteriorating microeconomic context leading companies across many industries to adopt a more cautious growth outlook. And the significant expected slowdown of our peers this quarter, with consensus pointing to a negative organic growth average in Q1. If you look at our organic growth performance by practice, Connecting Media delivered high single-digit organic growth this quarter thanks to the unique combination of Epsilon leading proprietary data assets and Publicis MediaScale. These highly intertwined and complementary activities represent 60% of our net revenue. Intelligent Creativity, representing 25% of net revenue, posted a very solid quarter with high single-digit organic growth, driven by momentum in production and new business wins, including scope expansion. Finally, the only area impacted by the deteriorating microeconomic context is technology, at PBC Sapiens, representing 15% of our net revenue. The wait and see attitude from clients on cap expense that we have seen for several quarters now is actually worsening due to increased lack of visibility. This is reflected in the results of all IT consulting firms, including Sapiens, which is down mid-single digits. Looking now at our geographical performance, the U.S., representing 61% of our net revenue, posted solid organic growth at plus 4.1% in the quarter, plus 6%, excluding sapience, on the top of plus 5% last year. Europe delivered plus 2.7% organic growth after 6% in Q1 2024. It is actually important to note that this would have been plus 5.2% excluding saplings. Asia-Pac was up plus 4.8% on an organic growth basis, with China up 9.3%. Second highlight, our new business momentum sharply accelerated over Q1, as we topped the new business charts for the six years in a row. For the quarter, we ranked first on new business, with net media billings 10 times higher than the second-place competitor, while the rest of our peers are negative, according to JP Morgan. To cut a long story short, we had a dozen of material wins while not losing any significant clients. Thanks to that, we offset the potential impact of the deteriorating environment and are well on track to reach our 4% to 5% organic growth guidance for the full year. 4% is still a rock-solid draw. It factors in the current deteriorating economic landscape, including cuts in marketing spend, as a result of the reduced client visibility in the context of U.S. tariffs. but also a negative performance at PBC Sapient throughout the year in line with peers' expectations. Organic growth could reach 5% if clients regain visibility, leading to fewer cuts in traditional ad spend and resumption of capex spend, translating into an improvement of PBC Sapient performance. With a Q2 expected within our full year organic growth guidance, our performance will be reassuringly balanced between the first and the second half of the year. We are also confirming a slight increase in margin for 2025 compared to our industry high level of 18% in 2024, along with a free cash flow projection of 1.9 to 2 billion euros. Third highlight, we invested circa 500 million in Bolton acquisition since the beginning of the year, maintaining the fast pace of H2 2024. We have announced a number of strategic acquisitions, including Atomic 212 for digital media in Australia, BR Media for influencer marketing in LATAM, and of course, Lotame, to reinforce our identity graphs, particularly outside of the U.S., These investments further differentiate from our competition, allowing us to deliver the innovative capabilities and products that help our clients grow and increase our addressable markets. Our disciplined Bolton acquisition strategy has been a key pillar of our capital allocation and has delivered remarkable financial results. Since the beginning of last year, We have invested 1.7 billion euros in acquisitions, which combined deliver circa 15% organic growth in 2024, are expected to accelerate with more than 20% organic growth in 2025, and we add more than 200 basis points to this year's reported growth. Looking at the rest of the year, we are on track with our envelope of 800 to 900 million euros. This acquisition strategy allows us to reinforce what we call a category of one, as we explained in our Connect Online video last month. If you haven't seen it, it is easy to find and give real insight into the strengths of our capabilities, the uniqueness of our model, and how we are truly leveraging AI where it matters most for our clients. I will now leave the floor to Loris. We'll take you through the detail of our members. I will then share the reasons why we are confident to deliver a strong performance on a sustainable basis this year and beyond.

Thank you, Arthur, and good morning, everyone. Let me go into the details of our Q1 net revenue. In Q1 2025, net revenue was €3,535,000, up 9.4% on the reported basis. This includes plus 4.9% organic growth, which comes on top of plus 5.3% organic growth in Q1 2024. A net positive impact of currency of 200 basis points due to the increase of the USD and Pound Sterling versus Euro, partly mitigated by the depreciation of several LATAM currencies. Finally, a contribution from acquisitions, net of disposals of 240 basis points, reflecting the revenue of Mars, Influential, Spinnaker, AKA Asia, and Atomic 212 in 2025. Let's move to the next slide, which shows our Q1 net revenue by region. North America remained strong in Q1, up 11.3%, including plus 4.8% organic growth. There was a positive impact of the USD versus Euro on top of the contribution of acquisitions. Europe posted plus 4.3% reported growth. Organic growth was at plus 2.7%. There was also a positive impact of the pound sterling versus Euro. Asia-Pacific posted plus 4.8% organic growth, fueled by Greater China at plus 9.3%. Middle Eastern Africa and Latin America continued to perform very well, with plus 11.5% and plus 28.3% organic growth, respectively. Latin America was impacted by the depreciation of the Argentinian peso versus euro in reported growth. Let's get into more details for each region, starting with North America. The region was up 4.8% in Q1. There was a negative contribution from Publicis Sapiens due to the IT consulting sector facing delays in dbt capex. In the US, the group's largest geography, we delivered plus 4.1% organic growth. Connected media grew mid-single digits and intelligent creativity was up close to 10%, driven by new business wins and scope expansions. Publicist Sapient posted a mid-single digit organic decline due to the continued wait-and-see attitude from clients. When excluding Publicist Sapient, organic growth in the U.S. was up 6%. Let's turn to the performance in Europe on the next slide. Europe recorded plus 2.7% organic growth in Q1. When excluding publicity sapient, organic growth was up 5.2%. The UK, which represents 9% of group net revenue, was up 1.9%. Connected media and intelligent creativity together were up mid-single digit, driven by strong new business, while publicity sapient remained impacted by delayed DBT capex. France, which represents 5% of net revenue, posted a 4.5% organic decline. Connected media and intelligent creativity were slightly up year on year, while sapient was down due to a very high comparable at plus 30% in Q1 2024. Germany, which represents 2% of our net revenue, posted a 5.1% organic decline. Excluding Sapient, organic growth was positive at low single digits, fueled by connected media. Lastly, our operation in Central and Eastern Europe continued to grow strongly, posting a plus 14% organic growth on top of plus 21% last year, fueled by global new business wins benefiting the region. Turning to the next slide for our performance in the rest of the world. Asia-Pacific, which represents 8% of group net revenue, delivered plus 4.8% organic growth, driven by connected media activities which were up double digits. Importantly, Greater China remained very strong at plus 9.3% organic growth in Q1, largely driven by market share gains and despite macro uncertainties. Middle East and Africa posted a strong plus 11.5% organic growth, driven by connected media activities and publicist sapience. Latin America posted a plus 28.3% organic growth thanks to the strong performance in Argentina, Mexico, Brazil, all growing double digits. Growth in Argentina partly benefited from inflation. On the next slide, you will find the group's performance by client industry for Q1. Nine sectors out of 10 posted positive growth. And as expected, we are seeing a more balanced growth among sectors. Financial was up double digit, accelerating versus 2024, thanks to new business wins. Healthcare recorded double digit growth on top of double digit in Q1 2024, thanks to new business wins and scope expansions with a number of existing clients. Food and beverage was up 11%, thanks to new business wins and scope expansions. the TMT sector remained positive against a tough comparable of plus 11% last year. Moving to my last slide, net financial debt. Average net debt for the last 12 months is 672 million euros, up 289 million euros versus average net debt at the end of March 2024. This reflects the impact of acquisitions completed since Q3 2024 and is consistent with our full year guidance of 900 million euros. Net debt at the end of March was 728 million euros, up 1.5 billion euros in Q1. The increase is due to the usual change in working capital outflow in Q1, partly upset by free cash flow generation. Acquisitions, including earn-outs, amounted to €130 million in Q1, as payments for the most recent investments are taking place in Q2. This concludes my financial presentation, and I now give the floor back to you, Arthur.