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.

Thank you, Royce. Let me now take a moment to address the potential impact of the current microeconomic climate on our operations. Of course, Many of our clients are facing a very challenging situation due to uncertainty on tariffs, rising inflation, and a geopolitical context that is more volatile than ever. This tough environment has not materialized in our number, with March being the strongest month of the quarter. But like everyone else, we could experience cuts from several clients across many industries for the rest of the year. This raises one very legitimate question. Is our strong performance sustainable in today's environment? The answer is yes. We have never been so strong, despite such an uncertain context, for one main reason. We have built the products and the services that our clients need to drive profitable growth in good times and particularly in more challenging times. With Epsilon and now Lutame, we have the best identity graphs, bar none, of the industry to help them grow. Today, every client has realized that the danger of relying on cookies or third parties' data and the urgency to build direct relationships, not only with their existing customers, but also with prospects. We can uniquely help them to see and directly engage with 91% of all adults on the Internet globally in a safe, secure, and compliant way. We have built the industry's strongest and most connected media ecosystem from paid, earned, shared, and owned media, driving efficiency for our clients and optimizing their marketing spend, linking it directly to business outcomes. We have created a unique production backbone, linking our identity capability to our 50 end-to-end content studios around the globe to minimize waste and maximize creative asset reuse. And thanks to our 25,000 engineers, we bring this new marketing model to life within our own client environments to make them future-proof at the edge of AI. Those four unique competitive advantages are not only accelerating our client goals, but also ours. Leading in identity gives us a unique competitive advantage in new business, but also in client retention. Being able to connect the entire media ecosystem at an individual level opens up opportunities to accelerate in fast-growing markets. Shifting to intelligent creativity reignites growth for our creative agencies. And being able to help our clients radically transform their business model to adapt to this new marketing paradigm will bring Publicity Sapiens back to accurate growth for the group when they resume CapExpense. We now have the most diversified revenue mix in the industry, making us more resilient than ever to every business cycle. Our advanced capabilities in our connecting media operation, representing 60% of our revenue, have considerably increased our addressable markets in fast-growing segments like advanced TV, retail media, influencer, commerce, and CRM. These new sources of revenue are compensating the cuts in traditional advertising that we, like all our peers, are experiencing. Over the past five years, this unique revenue mix has allowed us to significantly outperform our industry on all KPIs and grow twice as fast as them. 2025 will be another demonstration of that, with a strong performance, well ahead of competition, proving the strength of our model. Despite increasing microeconomic turmoil, Publicis is already off to a very strong start, posting plus 4.9% in Q1 and very confident in delivering our guidance of 4% to 5% for the free year. One more very encouraging thing. We are ideally positioned to seize the opportunities of a shrinking competitive landscape in what is a growing sector. The marketing service industry we belong to is undervalued, despite the resilience showed during COVID and its ability to grow faster than GDP in the last year. Now, with Omnicom takeover of IPG, we will move from four main players winning more than 90% of the global pitches in 2024 to three. This 25% reduction of the competitive landscape is already having a material impact on our client decision on partners and will mechanically benefit us once the deal is completed. Voilà. We had a very strong start to the year, with organic growth at plus 4.9% in an increasingly uncertain environment. Our record new business performance in Q1 will offset the potential effects of a deteriorating microenvironment and makes us very confident in our ability to deliver on our 4% to 5% organic growth guidance. Our continued and disciplined investment in Bolton Acquisition to strengthen our category of one model is truly differentiating us from competitors and bringing the kind of innovation our clients need. As we enter our sixth year of strong performance, our capabilities, our model, and the incredible talent and dedication of our people mean we expect to be able to sustain this level of outperformance in 2025 and beyond. At the moment where our competitors are busy looking inward, we have only one focus, helping our clients navigate this complex marketing landscape and grow in this changing time. I would actually like to thank our clients for their trust and also sincerely thank our people for their outstanding work in this particularly busy time. Thank you all for listening now. With Doris, we will be ready to take all of your questions.

Thank you, sir. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove your question, please press star and two. The first question comes from Nicola Langley of BNP Paribas.

Hello, Arthur and Loris. I've got three questions, please. So first of all, on the current trading, what's the sentiment among the top clients at the moment? Have you seen any change in recent weeks? So March was very strong, but what about April so far? And curious what you embedded in terms of U.S. macro in the low end of the guidance, the ROC 30 plus 4%. Second question on Bolton M&A. So it has been roughly six months since you acquired influential and mass-united commerce. Curious how the integration of those assets went, what was the response of clients, and whatever you already see tangible revenue synergies from those things. And finally on data, so WPP recently acquired InfoSun. So curious, how do you think this acquisition could change the competitive dynamic on data services at home? Thank you.

Wow. Thank you, Nicolas. A lot of strategic questions here. Maybe I'm going to start with number one. Laurie, feel free to jump on any of them if you want to add something, but I'm definitely going to start with the mood of our clients globally and in the U.S., by the way. I just think it is a very important question. I mean, when you look at the mood of our clients, I think it is important that you actually distinguish how they behave, I would say until now, and of Q1, and how they could behave for the rest of the year. I mean, what we try to demonstrate in our presentation is that you have to separate on Q1 and see the beginning of the year, which is CapEx from OPEX, okay? When you look at CapEx, meaning all the long-term investment they can make on transformation, you know for a while now that clients have been having this kind of wait-and-see attitude, and it has been reflected in every IT consulting firm, including Sapient, and this has only accelerated it. And to be clear, our clients are going to wait to see if there is more visibility before starting to invest. Now, I think that one of the good news of our result is when you look at OPEX, which is really the spend on marketing budgets, clients continue to invest because they need to sustain and win market share. So actually, when you look at the quarter, our best month is actually March. we saw that there is still a momentum. It's, of course, too early to talk about April now, but you can see that the momentum on OPEX has been there. So that's what we have seen so far. Now, let's be clear. You look at the last weeks, and the least we can say is that the macroeconomic uncertainties are actually rising by the day. So, of course, there could, and I say could for the moment, be some reduction across some industries through the rest of the year. Honestly, with the strong Q1 we had and the material new business win we had, we feel very, very confident that we're going to be able to offset all of those potential cuts and definitely deliver on our guidance. I will make one final comment that is more on the general mood that hopefully can be helpful for you. I mean, our clients and ourselves, by the way, we are used to manage uncertainty. We went through COVID, we went through war, we went through inflation. So I think that everyone knows that at the moment, if you stop to invest, you lose market share that are very difficult to take back. And so what I would say about the mood is that our clients are definitely cautious but they are also very competitive, and they are looking for opportunities to go despite the uncertainty. It's all about being more targeted, and I come back to the question on data. It's all about being more connected within the media to be more efficient, and it's all about measurements, which makes, again, the role of data so important. When it comes to the acquisition, maybe, Loïs, you want to say a word about our performance on influential and VR media, and then I'll say a word and come on the last question.

Sure. Hi, Nicolas. So just on acquisition, as Arthur explained earlier, obviously, we have a very clear strategy when it comes to Bolton M&A. As we said, we've invested roughly $500 million since the beginning of the year. And if you take a further step back, $1.7 billion. since the beginning of 2024. And so, look at it from a few perspectives. First, we are well on track with the allocated envelope that we guided you around. Second, the performance has been very strong. If you look at the 2024 acquisition, it delivered 15% top line. We're looking at up to 20% top line in 2025. What is important is to understand also where we stand. We have a good pipeline, but we remain very cautious when it comes to our acquisition. That's answering your question on integration and synergies. As you know, we have very strict financial discipline for each one of them, which essentially means three things. One, they have to be immediately accretive, and that's true for both the top line and the bottom line. Two, we are very thorough when it comes to our integration plan. And last, we are also extremely strict when it comes to valuation. So we will continue looking at acquisition. We are on track to deliver our envelope, but we will stay very, very cautious.

If I can add two points on that. First of all, our MMS strategy is definitely accurate to a shareholder return. When you look at the growth we are able to deliver, so small and big acquisition, I know that now I think we have a savoir-faire that makes it happen immediately, as I said. But I would say even more importantly, With every of those acquisitions, we are directly addressing a client need. And to come back about influential and VR media, the world of influencer and creator is just booming at the moment. And those acquisitions have been welcomed and received by our clients in an incredible way because, again, they understand that it's all about identity and how do you connect this identity with the overall media landscape. from publisher to CRM to retailer and to influencer. And we have taken a leading position there that makes a huge difference. Now, on your last question about WPP acquisition on InfoSum. You know what InfoSum is. It's a clean room. And by the way, it's great to have a clean room, don't get me wrong. But it is a commodity. Epsilon is using the clean room since we bought them. There are many, many clean rooms on the market. And, by the way, we use them also because sometimes clients are ready to take our own clean rooms. Sometimes they want to use a third party. And, by the way, every of those clean rooms are available to any of the peers in the market on an open mode. So, again, it is a commodity. What is even more important, and it comes back to what I was saying about the role of data and why data is such a differentiator that has made a big difference for publicists. is that clean rooms alone is an empty shell. I mean, if you don't power clean rooms with identity, you can't find new source of growth. If you don't add proprietary data that will bring to your client something that they don't have, they won't find new source of growth. They won't be able to connect every individual to the entire media ecosystem, which is what I talked about with influencer. Today we are in a unique position to go from one individual to several influencer and drive directly to commerce. And I will say maybe the most important thing is that you can't truly measure performance because you have to measure it in every environment instead in one. So you definitely need this connected identity graph. And as you know, through the acquisition we have made, we are definitely number one in that. We have spent the last four or five years when everyone was debating, do you need data or is cookie enough to connect this identity to the entire media ecosystem? And thanks to AI, and particularly the one that we have built through Buddy and Sapiens, we are now able to measure any business outcome. And by the way, we can do it in any clean room because once again, it's a community. And just to close on that, as you are asking the question, I think that Coming back to WDP, I would just make one comment, which is we have a very different strategy. It's clear. We have invested in Epsilon while they have been divested in Qatar, and it has led to very different business outcomes. Now, let's see what happens in the future.

Thank you, Arturo.

The next question is from Adam Berlin of UBS.

Hi, good morning, everyone. Thanks for taking the questions. It's a very early morning for you, Arturo. Can you break down your implied H2 guide for 4% to 5% growth? What is the impact from the Q1 wins inside that 4% to 5% for H2? And are you making any assumptions about new wins that are on the cards over the next few months that could also help with H2 growth? And that's my main question. But I just also want to understand why you're so confident, you know, Can you just say a bit more about why you're not worried about spending just falling off a cliff, particularly around creative in the second half of the year? I mean, you talked a little bit about the need to invest, and I can understand why media spend would remain strong, but why are you not more worried that creative could come under a lot of pressure as we've seen in previous cycles? Thanks.

I'll start maybe by the second question, which is our level of confidence. We are very confident. for a couple of reasons. First, we didn't wait for what has happened in the last weeks to factor in our guidance some difficulties because we knew it was coming even outside of what has been announced by the administration recently. So it's not like we were not preparing our guidance for that. And by the way, we said it very clearly during Q4. We said we have to be cautious on a certain number of items. This is why we're going to 425 and this is where we are. Now, we are not expecting things to fall out of place for a couple of reasons. Number one, our clients, as I said, know that they can't just stop spending in terms of capex again. We don't know how long it will take for capex to come back. This is why we have taken an idea for 4% immediately second. But when it comes to capex, we know that clients are going to continue to spend because they have to sustain and maintain their market share. Now, the other reason why it's not a client reason is our reason, is that what we bring to the market today is perfectly done for this kind of challenging time. You need identity to find new source of goals. And our clients are not going to stop looking for source of goals. You need connecting media to make your media more efficient and being measurable. And this is, of course, something that they look a lot in detail as they go to their board to ask for the money to invest. And then you need to make sure that you can leverage AI reinvent your model even on the short term and this is what we bring with sapiens so again we don't expect revenue to fall anywhere from the cliff as you said we are confident that our clients will be cautious but will continue to invest and that our model will allow us to win the market share okay and by the way let's be clear either our dynamic goes way beyond new business new business is what make us very confident to offset potential cuts that we could not have seen at the beginning of the year. So if I want to cut the long story short, what has happened in Q1 is we had very good news with new business, an incredible track record, and on the other, we had the bad news of the kind of lack of visibility created by those talents that could lead to cuts. So this is upsetting. But the rest is, you see the dynamic. Look at our number. I mean, high single digits in media, but also high single digits in creative. So let's be clear. This could slow down a bit, but it would be upset by new business and put us in a very good position for next year. Now, when you look at the impact of new business, I mean, obviously, It is too early in the year to truly determine exactly what will be the impact of new business this year. We are only in Q1. However, I mean, thanks to the win we just had, we are, and you know we gave a number, we are largely on track to deliver the 200 basis point of contribution to organic growth of 2025. And actually compensate, as I said, for every cut we can see. I will make two comments on that. When you look at a year in our industry, what you have not done in Q1 in terms of new business, the time you win it and trump up doesn't have a big impact on the year. So we should not expect future additional win to have a real impact for this year. The good news is this is the same thing for losses. Whatever we could lose within the year won't have an impact before next year. So again, we are pretty set here. And this is why we put the JP Morgan chart here. What we love about the dynamic we're having at the moment is, yes, we're number one in the business, and that's right. But more importantly, and I'm touching wood, we are not losing clients. Because this, for me, is the best demonstration that the model we have is actually bringing what our clients need for the future. if clients are staying, despite the fact that sometimes we have very long relationships that could lead to a pitch, it's because they know that what we bring is unique. This is why we call ourselves a category of one today.

Can I just ask one quick follow-up? The 200 bits you just mentioned in terms of potential new business wins helping 2025, how much of that was done when you gave your four-year guidance and how much has come in the last six weeks or so, which have been extraordinary? But can you give us Just asking for the impact of the last six weeks rather than the whole year, because obviously you had great wins going into this year as well, before you gave your full year guidance.

Laurie, do you want to start with this one?

Sure. Maybe one way of looking at it is when we gave our guidance, you remember, Adam, we said 100 to 200 basis points, and now we are obviously saying we're close to 200 basis points, so that creates the difference of where we were and where we're aiming. Perfect. Thank you very much.

But by the way, Adam, now, but if I can build on that, is that what we have won recently could start to have an impact, particularly in the second part of the year. And what makes us very strong on our feet is the well-balanced revenue we have between H1 and H2. You have seen that we gave for Q2. We feel very confident because we are not too back-loaded in the end of the year where we don't know what could happen. We do know that we have those wins that we just had that could upset any kind of cuts we could see in the second part of the year. This is why, again, we're so confident at the moment. Thank you.

The next question is from Laura Metayer of Morgan Stanley.

Bonjour Arthur and Maurice and congrats on a strong quarter. I have a couple of questions on revenue visibility. Can you help us understand how cuts to advertising spend actually affect your revenue? So for example, if you can give us a sense of what percent of your revenue is already contracted for the year, what percent can get impacted by cuts to advertising? I think that'd be really helpful. And if you can touch on how the contracts work generally, what is fixed in advance, what is variable, that would be really helpful. Thank you.

Thank you. Loris, I'm going to let you start on this one.

Yeah, I mean, as you know, Laura, we don't go into specifics when it comes to client contract, but what we can tell you is that If you put aside the publicity sapient that is directly correlated to client capex, and that is very much a time and material business, roughly two-thirds of our business is retainer-based and or with good visibility today. And the second point is the rest being primarily projects, which are a combination of project fees and or time and material. And for those, we have not seen any material cuts.

But Laura, if I can build on that, if I can build on that, as you know, for a while, it has been now, I guess, a bit more than five years that we have missed a guidance and that we have always delivered the number that we promised. And again, the reason why we started the year pretty cautious is because we knew there could be some uncertainty. And the reason why today we are so confident on our guidance, despite whatever can happen, is that the 4% include, to come back to your points, all the risk that could happen due to the impact of tariffs, due to this wait-and-see attitude for Sapiens. As I said, Sapiens is negative in our guideline for the moment at 4%. So we are factoring everything that makes us very comfortable for the floor. hoping that we will gain a bit of clarity in order to try to deliver more. But this is everything has been factoring because we know how important it is, generally speaking, for you to have visibility on our performance, and particularly in this kind of uncertain time.

That's helpful. Thank you very much.

The next question is from Lisa Yang of Goldman Sachs. Yeah, good morning.

Thanks for taking the question. The first one is on SAPI. Could you maybe come back to the trend you've seen, like, you know, explain maybe the deterioration to the sort of down to the GIN Q1 versus the flat GIN Q4? Maybe when did you start to see the deterioration? Was it more pronounced in, you know, February or March? And how much of that was maybe reflecting some of the government spending cut? Because I think you have SAPI government services within that. So I'm just wondering, you know, when you think about Q2 and the rest of the year, could basically Sapien deteriorate even further? That's the first question. The second one is on new business. Could you confirm what was the contribution from new business in Q1? We said your team was between 100 to 200 basis points, and you would expect a ramp-up, so more mature contribution in H2 to get to the 200 basis points for the full year. That's the second one. And the third one is... If you can also comment on the current environment for marketing pitches. It's fair to assume in an environment of greater uncertainty, there will be fewer pitches this year. So just thinking like how you're thinking about the opportunities for new business wins and potential risk for the rest of the year.

Thank you. Thank you very much. I will leave you the new business question. I will start with the Q1 question, impact on new business on Q1. I will take on pitches, but I'll start with sapience. Again, we have to be very cautious because we know that cap expense won't resume very early. We expect that this could take time. But I want to be clear, we are not expecting sapience to deteriorate further. And by the way, for a factor or reason, But what is important, if you take a bit of a step back, what you realize is that TBC Sapiens has been a growth driver for us when you look at the last five years. We've roughly moved from 1.5 billion to 2 billion. And again, to come back to your point, Lisa, we have seen in Q1 an acceleration of this wait-and-see attitude from our clients that has led to a negative performance for every IT company in terms, including Sapiens. It is reflected in our guidance. As I said, we are not expecting further deterioration, but we don't know yet exactly when it will come back to growth. I will just make a couple of comments that I think also answer your point about the perspective and how we envision Sapiens, I would say, in the midterm. We believe that Sapiens will be a significant growth engine for us in the near future for many, two reasons. First, every one of our clients We need to transform our business model with the help of AI. There is no doubt about that. This is the beauty about Sapiens is that although they are going through a challenging time at every IT consulting company, because again, clients are being cautious on CapEx, there is no way they are not going to transform. And Sapiens possess some of the most advanced capabilities in AI and in business transformation. And by the way, maybe it's not in our member today, but it's definitely also in our new business track record. Because when we pitch for any piece, particularly on media, we don't only go with media people. We go with data, we go with technology, and they are making a difference. The second point that I tried to put in my video, although it was a short one because I didn't want to bother you for too long, is that what is very important is that all of our clients, when they start to resume CapEx, are wanting to do it and to do business transformation in a cheaper and faster way thanks to AI agents. What does it mean? Because I think it's important for you to understand that is that it will be AI agents versus labor intensive solution and thousands of people put onto an account. And that is going to play directly on SAPIET's unique strengths and model, because they are leaner, because they are more agile, and they are organized in a way that is very different from this massive labor-intensive IT consulting peers. So they have the product, they have the model, our client will resume CapEx at one point, and again, we feel very confident for the midterm. I will let you take the new business impact question, and then I'll finish with your pitch here.

Yeah, I'll take the new business question and your question on government cuts when it comes to Sapiens. So, Lisa, just so that you know, government contract is less than 1% of our revenues at group level. And your rights primarily concentrated in sapient. What we've seen is the normal capex cuts that we see across the other industry. And we have not seen any meaningful cancellation of these contracts. So, and our exposure, as I said, is very limited. On Q1, on new business impact when it comes to Q1, you will remember that in our February communication, we talked about going into the year with some good tailwind in new business. And so roughly in Q1, it was around 200 basis points.

Last but not least, on the pitch activity. First, The least we can say is that at the moment there is still a very sustained activity when it comes to new business. We have a lot of pitch going on at the moment. And by the way, there are some that are public and some that are not. And there are even some clients that are deciding to move to publicis without truly doing a pitch, but just a couple of weeks to kick the tires because we are coming at the moment where everyone is coming with a data solution, everyone is claiming that you have the best, but when you start to kick the tires, the reality comes to the surface, and it's translated into a new business for a quick corner, to be clear. I mean, we can all say that we're great. At the end of the day, it is the number that talks. And again, if you look at the JP Morgan reports, you understand a lot. That's exactly the number, but you see the dynamics. Now, I want to be clear on one thing. We talk a lot about new business in that corner because it's going to offset any kind of cuts we could see, so you should feel very confident about our guidance. But most of our growth is not done by new business. Most of our growth is done by the implementation of our model on our existing clients. which is why we are making a good retention, and this is why we are also growing with those clients. You need to understand that we have invested in new capabilities that have increased our addressable markets. And so we're able to grow, and this is what we're planning to do this year, between 4% and 5% when the average market is going to be below 1%, not only because we're in new business, it's only basis points. but also because we are able to develop new addressable source of business, like influencer, like CRM, like commerce, like production, that allow us connected to our identity to truly help our clients find the goals. And again, this is the reason why I'm in Chicago this morning. I don't have one client that doesn't want to know more about our capabilities. At the moment, we are having to consolidate, and if you look at the kind of pitch we won, there were a lot of consolidations, and go with one partner that can truly help them navigating in the uncertainty we're going through.

That's very helpful. Let me just have a very quick follow-up. So based on what you said, Q2 shouldn't be too different from Q1, so we should be toward the upper end of the four to five in Q2?

We are definitely going to be within this bracket, but, Loris, you want to say more? Because I see that you want to say more. As you know, we are not in the same room, so we have to connect. Laurie, do you want to say something on this one?

Yeah, I'll need to confirm that, you know, we said we're guiding 4 to 5 and same for, I guess, the second part of the year, which is what Arthur said earlier, which is extremely homogeneous performance for us throughout the year on a quarterly basis.

When you look at the increase in certainty, honestly, being well balanced from one quarter to another, I think is a fantastic strength. And by the way, which is an important point, it allows us, sorry, I'm going to insist on that because we're talking about the short term here, but this uncertainty creates also a lot of opportunities when it comes to talent and clients. We talked about the clients and how we are gaining market share because we have the model, but it's true also on talent. People want to be in the place that is going, that is innovating, that is gaining market share. They don't want to be in a place that is either declining or reorganizing. And so the difference we can make at this stage is that as we have a well-balanced revenue formula, we can plan on our costs in the right way. Someone is out of mute, so I don't know exactly what is happening. I don't know if I'm the only one who heard that, but that's a very important point is being balanced between the two quarters should give you the reassurance that we are work-solid. It's also a way for us to continue to invest properly in the people and the capabilities that will sustain the momentum we had for the last five years. That's great. Thank you.

The next question comes from Connor O'Shea of Kepler Chevrolet.

Yes, thank you. Thanks for taking my questions and congratulations on the results as well. Just a few follow-ups. One, I think, Artur, you mentioned, obviously, you couldn't rule out some sectors' spend slowing in the rest of the year. I'm just wondering if you have, at this stage, you see any sectors more vulnerable than others to cuts on an underlying basis because of the macro situation? Then second question, just wondering if you've made any changes again due to the deteriorating macro conditions in terms of your hiring policy going into Q2 at Sapient or other parts of the business? And then the third question, maybe for Loris, can you just give us an estimate if FX rates remain unchanged for the rest of the year, what potential Forex translation impact could be for the full year?

Thank you. Thank you, Conor. Look, on the sector, I think you will agree with me, as it is changing by the day, just look at the For instance, President Trump's announcement on automotive and before on tech and mobile, I think it's way too early. And as I said, everyone is being very cautious but also very combative and trying to manage it by the day, hoping that we will have more visibility that, by the way, we will definitely need at one point. The question you're raising about have we changed our policy, particularly on hiring, There is a reason why we have by far the best margin. Actually, there is two reasons. Reason number one is we have a product that has more value and recognize being more valued to our clients. I think it's very interesting to see that over the last five years, we have been able to increase our margin materially While winning a lot of new business ongoing, it shows that what we bring to our client has a premium that is justified. But we are also very well known to be very cautious on our costs. And as you know, we have a large platform with resources that allow us to manage our resources very tightly. So to be clear, when it comes to the hiring policy, we are being cautious. But I want to say also, we are being very ambitious. And we are clearly going for every strong talent that wants to join our journey. And the good news about what is happening on the market at the moment is that if you look at, let's say, the top three leaders, you have very different journeys. And we're able to explain to candidates why Chinese publicists could be a great place for them to progress collectively and individually in the year to come. So on one side, we have been cautious, as we've always been. On the other, we are being very ambitious on our ability to attract an unfair share of talent at a moment where our dynamic put us in a very good place to retain our best talent and attract, of course, the best.

On the effects, Conor, if you assume that today's effects rates or the current spots are applied to the remaining nine months of the year, this will have an impact of roughly 250 basis points, a negative impact of 250 basis points for the full year of 2025.

Okay, very helpful. Many thanks. Thank you.

The next question is from Julian Roche of Barclays.

Yes, good morning, Arthur. Good morning, Lois. Lots of my questions have been asked, so just... Three numbers. If I look at page six, how much of your intelligent creativity is production and what was the gross rate of production in Q1? That's the first number. And then the second one is how much was media up in Q1 using the old definition so we can compare your media performance versus peers. So percentage of production in intelligent creativity goes to production and goes to media. Merci.

I'm going to let Lois give you the number, Julien, but maybe I'll make a couple of comments. I think what is very interesting in our offer is that as we have put data and tech at the core of our media and creative operation, we don't think they could be compared with peers anymore. This is the reason why we are winning as we are winning with our category one, which is clients see our product and services differently from our competition. It doesn't mean that they will choose us every time. It means that they know that it's very different. So it's getting more difficult to distinguish, is my point, one with the other. And what is true between Epsilon and Publicis Media, honestly, it's so intertwined now under one PNL with the data of Epsilon at the core of the media operation that it's impossible, but maybe Loris can give you just a sense of that. But I want to say the same with production. Disconnecting what we call ideation, finding idea with production makes no sense because what our clients want now is not only a good campaign. We can come with a great idea, but if it's not adapted to this kind of fragmented media landscape, it's totally useless. So you need to have both that are connected. It is the same people that are taking care of both. We are not making any arbitrage between where we should spend. We make sure that we do what is right for the client. So it's really intertwined. But now, Loris, I don't know if you can give me a bit more of color on the numbers.

Sure, Julien, to give you more texture on the numbers, starting with production. So production is roughly 25, slightly more than 25% of intelligent creativity. Obviously, there is across geography. And at global level, it is up slightly above 10%, consistent with 24, so double-digit performance. On media, as we said in February, it's harder now to give you the separate performance of media as media epsilon are very intertwined. What I can tell you is if you look at connected media, which is roughly 60% of net revenues, it is driving high single digit growth in Q1 2025. And we expect that this will continue throughout the year.

Merci.

Merci beaucoup.

The next question, gentlemen, is from Christophe Cheblanc of Bernstein.

Yes, good morning. So I wanted to come back on the shrinking competitive landscape you were describing. We know the impact on your business will take place in 26. In 26, your value proposition edge vis-à-vis your peers will be the same. So If I add the two drivers, would it be fair to expect a new business contribution in 26 to be above that of 25? Would you give me a pushback to that assumption? And related to that, on the global pitches, which are highlighted as an important issue, what is the share of global pitches within the revenue base of publicists and the competition, please?

I'll start with the second one. We have, of course, less global paycheck, but the revenue are way more material. So, of course, a global win means a lot of very small wins. And so don't get me wrong, the small win add, and this is why there is something that I love about our performance, is that we are performing well in every region. This is because we are growing our client in every region and we are winning the business in every region. But, of course, the global win are the ones that are really having an impact on our revenue for the year to come. You know, what I mean about the shrinking competitive landscape is that today when you look at global niches, as I said, more than 90% are won by the top four. And so we're going to find ourselves in a position that there will be only three global players allowed to truly cover the entire world with capabilities at scale. It will definitely, as I said, create more opportunities because mechanically we will have one player less. It will change client mindset. And I think it's a great thing because they're also going to have to adapt to conflict. And they will have to understand that conflict is part of our business, as it is with making their accenture. Most of them already did that. But it will be even more present here. And now, it has been next year. statistically, yes, but that's the magic of new business. And again, as you have seen, we had a great quarter. The reason why, honestly, I'm very confident on new business is not the shrinking competitive landscape, it's the quality and the uniqueness of our offer. I mean, to come back to that, there is only three reasons why we're winning. It's pretty simple. And whether there is three or four players at the moment, we're winning anyway. So the reason why we're winning is the following. We have data, and tech at scale. And everyone can say everything, apart from a few players that have been invested in the last year. No one has the capabilities we have acquired and integrated. The second thing that is even more important today, particularly in this uncertain time, is that it has been hard, but we have integrated those capabilities within our media and creative. This is what I explained earlier, and now it's working. And then there is a third factor that we don't talk enough and which I think is a very big reason why we want so much in Q1. We have a management that is consistent, that is stable, that are the people that build this company under the vision of Maurice Lévy for the last eight years, I would say, and that are here to stay. And so when you are a client, you have the best of the capabilities you can expect. They are integrated into what you're pitching, and it's done by a team that has made the transformation of this company and is here to stay for the long run. Those three reasons are the reason why we're winning, not because we're poor versus three players, but hopefully it will also help.

Thank you.

The final question, gentlemen, is from Jerome Bodine of Odo.

Yes, good morning. Very three quick ones for me. The first one is on working capital. So have you seen any move or change regarding the current situation, especially on payment delayed in the U.S.? And could you make an update on the possible inflow, outflow for the year? The second one is on M&A. So you did a lot on data and around Epsilon for the last three years. Do you see an opportunity around Sapient now regarding the fact that the market conditions have changed and some of your IT consulting peers could suffer in the future, particularly in the U.S.? So does it make sense to increase your critical size on that market? The last one is a bit more general. Do you feel that the lack of economic visibility in the US since a few weeks lead advertisers to increase the demand for more targeted advertising solution and therefore your data solution versus traditional offers. So do you perceive the link between the economic advertising uncertainty and the possible increase in the demand for data to be more efficient in terms of arbitrage? Thank you.

Thank you very much. I'm going to leave you question one, Loïc. Sure.

So, Jérôme, on the working capital question, you will remember what we said in February, which is our objective when it comes to working capital is to reach neutrality in 2025. But our focus is really more on the average net debt because of two main factors. The first is, as you know, we have a very high seasonability in the first half of the year with some more significant cash outflow than in the second part. as we saw in Q1, again, fully in line with our expectation. And as always, the cutoff on working capital at the end of the period can be impacted by some very short-term swings in client collections. And so those have no impact on average net debt, which we confirm our guidance around 900 million for the average net debt.

On your M&A question, as you know, we are focusing on Bolton and we have a very disciplined approach. In 2023, things were too expensive. We didn't reach our unblocked. In 2024, we found great opportunity. We went a bit above this unblocked. And in 2025, we are in the range of the 800 and 900. We invested with Rotami on data because we clearly said that we want to strengthen our our identity graph outside of the U.S., which we definitely did. We say that on identity, now we are in a very good place. We have accelerated in influencer marketing because this is a place that is booming where we already did, and we are reinforcing on commerce. To your question on Sapiens, yes, we could be interested in Bolton acquisition, only Bolton acquisition, but honestly, not that much in the U.S., where we have a very strong position. Maybe outside of the U.S., with smaller firms that could complement what we have. But again, very disciplined, bolt-on in areas where we can increase addressable markets. I thank you very much for your last question because it gave me the opportunity to wrap up. You are making a very important point with does the lack of visibility changing client needs and behavior. The answer is yes, definitely. And I think one of the reasons why we had a strong march on the sea and such a new business track recording to run with a lot of wins coming at the end of the quarter is that clients, at the moment, and again for a while, are going to be looking for different solutions. Sorry to say it simply, but that will help them differentiating. This is why owning your data is so important. If you come with things that everyone has, it makes no sense. If you bring something that can make them unique and go, it makes way more sense. And they're going to focus on three areas in this kind of uncertain time. First, they want a communication that is more targeted. And again, this is what we bring with our identity, which is 91% of every adult connected to the internet globally. They're going to look for more connection, because don't get me wrong, one thing is to reduce your budget, the other thing is to hope for the same outcome. And to do that, you need to connect everything you're doing. This is why it's so important for us to invest in media's area, like influencer, that we can connect with our clients. So they will look for more targeted, they will look for more connected, and they will look for more measurements. And this is also a place where we're winning because we are radically changing our relationship with our clients. And again, that's the reason why I'm in Chicago today. We can say to every other client today, and we are saying to every client today, Mr. Client, don't judge us on our marketing output, i.e. how well our campaigns are working. Judge us on our ability to deliver business results for you. And those three things, a more targeted approach, a more connected way in terms of media, leading on measurement, is why we are delivering such a strong quarter. And I know that now you are used to seeing with us this kind of good performance, but I think it's always important to put it in perspective, perspective with our peers, perspective with the market in general. This is a very strong performance. We feel very good despite this level of uncertainty that is rising by the day. to deliver our guidance because we have this kind of new business track record that shows, again, the power of our model, but also will help us offset any potential cuts. And, again, we have the capabilities, we have the revenue mix, we are in a market that is growing, and we feel very confident, not only this year and beyond, to continue to outperform our industry. We just have to do one thing. which is to do exactly what everyone does at UBCS at the moment, focusing on our clients, focusing on what we bring, and heads and goals in this very uncertain world. Voilà. Merci beaucoup. I think we're done. The good news is the technology worked. So I think hopefully you have heard us well, and I'll see you very soon. Merci beaucoup.

Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.