Publicis Group Sa S/Adr

Good morning. This is the conference operator. Welcome, and thank you for joining the Publicis Group's first quarter 2026 revenue conference call. After the presentation, there will be an opportunity to ask questions by pressing star and one at any time. Should anyone need assistance during the 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 2026 revenue call. I am Arthur Sadoun, and I'm here in Paris with our CFO, Loris Nold. Jean-Michel Bonamy is also here, and will be available to take your questions offline after this call. I will start this presentation with our Q1 highlights. Loris will then take you through the numbers in more detail, before I come back on the reason why we are confident in delivering our full year and midterm guidance. As usual, we'll take your questions together after the presentation. But before we start, please take a moment to read the disclaimer, which is an important legal matter. There are three key highlights for the quarter. First, we continue to outperform, with Q1 growth revenue up by 6.4% organically and 4.5% in net revenue growth, in line with our expectations. Second, we are delivering this very strong performance despite a deteriorating geopolitical context proving the resilience of our models. Third, we are confirming our guidance of plus 4 to plus 5% net organic growth and all financial KPIs for 2026 with Q2 organic growth expected to accelerate slightly versus Q1, demonstrating our confidence in our ability to deliver industry-leading results once again this year. Let's start with the first highlights. Q1 marks our 20th consecutive quarter of outperformance, an unmatched track record in our industry. In November, we indicated that if the new industry's largest player did not report organic growth on a net basis like all peers, including IPG, we would need to adapt. As a result, from now on, we will report our top-line performance using two organic growth metrics. Gross revenue, to allow a light-for-light comparison with the industry's largest player, as we want to ensure that you have clarity and transparency on our respective performances. And net revenue, our historic metric for consistency. When it comes to Q1, our gross revenue grew by 6.4% organically, reflecting strong momentum at the start of the year and demonstrating our ability to capture a disproportionate share of the market. This includes net revenue organic growth of 4.5% right at the midpoint of our full year guidance and fully in line with our expectations. As in prior years, we have seen consistent delta versus Q4 of roughly 140 basis points. We are further widening the gap with competitors on an estimated net revenue basis as in previous years by close to 800 basis points this quarter compared to 650 basis points a year ago. Our second highlight is that we are once again demonstrating that our model is built to perform even as the geopolitical context increases micro-uncertainties. Our AI-powered marketing services, representing 86% of our net revenue and encompassing data, media, creative, e-commerce, CRM, and production, delivered strong organic growth of 7.6% in growth revenue and 5.6% in net this quarter as all client demands continue to rise. The only area where the situation in the Middle East is waiting on our operations is around large transformation CAPEX projects as client visibility decreases further. As a result, technology, representing 14% of our activity, was affected with a slight organic decrease. This is particularly visible in SAPIENT UK-based international operations, given their exposure to several Middle East-based clients. All of our key regions benefited from our momentum in AI-powered marketing services and delivered solid growth. The U.S., our largest market, representing 59% of our net revenue in Q1, delivered another strong quarter at plus 4.7% organic growth, bringing the region to a seven-year CAGR of 4.7%. Europe delivered plus 3.9%. Asia-Pac was up plus 5.9% organic growth in Q1. And as expected, the Middle East-Africa region, which represents 3% of our net revenue, was down mid-single digits in Q1. This brings me to our third highlight. While macro conditions appear to be getting tougher, we remain committed to giving you visibility on our performance for the rest of the year. Not only are we confirming our 2026 guidance of plus 4% to plus 5% for the full year, we are also confident that the 4% is rock solid. Supported by 200 basis points of new business tailwinds, strong client retention, and continued growth across our client base. Concerning Q2, if micro-conditions do not significantly deteriorate, we would expect to see a slight acceleration versus Q1, despite the comp being 100 basis points higher. We are also reiterating our guidance of another slight improvement in our operating margin in 2026 versus our industry high of 18.2% in 2025 and a free cash flow guidance of circa 2.1 billion euros. I will now hand over to Loris, who will take you through the detail of our numbers. I will then come back with the reason for our confidence in delivering on our full-year 2026 guidance, but also on our mid-term objectives for 2027 and 2028, which we announced earlier this year.

Thank you, Arthur, and good morning, everyone. Let me go into the details of our Q1 revenue and net revenue. Revenue was $4 billion, 191 million euros, up 6.4% on an organic basis. Net revenue was 3 billion and 460 million euros. Organic growth was plus 4.5%, which comes on top of plus 4.9% in Q1 2025. There was a net negative impact of currency of 760 basis points due to the depreciation of the US dollar the pound sterling, and several LATAM and APAC currencies versus the euro. And acquisitions, net of disposals, contributed 130 basis points, reflecting the impact of 2025 acquisitions, amongst which Lotame captivated BR Media and P-Value. Factoring in those items, net revenue was down 2.1% on a reported basis. Let's move to the next slide, which shows our Q1 net revenue by region. North America was up 4.7% on an organic basis, on top of plus 4.8% in Q1 2025. This solid performance reflected the continued strong dynamic across both connected media and intelligent creativity. There was a negative impact of the USD versus Euro, partly upset by the contribution from acquisitions and reported revenue was at minus 4% in Q1. Europe delivered plus 3.9% in organic growth, led by strong performances in the UK and southern Europe. There was also a negative impact of the pound sterling versus euro, leading to a reported growth of plus 1.2% for the region. Asia Pacific posted plus 5.9% organic growth. China and India were very strong up double digit organically. There too, the impact of currency depreciation in the region versus the Euro led to a flat growth in Q1. Latin America continued to perform very strongly and reported plus 13.3% organic growth with strong contributions from Brazil and Mexico. And finally, Middle East and Africa was impacted by the geopolitical situation leading to an organic decline of 5.1% for the quarter. Let's get into more details for each region, starting with North America. In the US, the group's largest geography, which represents 59% of our net revenues, organic growth was plus 4.7% after plus 4.1% in Q1 last year. Connected media and intelligent creativity were both up mid single digit benefiting from new business wins and scope expansions. Technology was down low single digit in Q1 with continued wait and see attitude from clients. Let's turn to the performance in Europe on the next slide. Europe recorded plus 3.9% organic growth in Q1. The U.K., which represents 9% of our net revenue, posted a strong plus 6.2% organic growth. Connected media was a double-digit. Intelligent creativity posted a mid-single-digit growth, while technology was down, as Publicity Sapient in the U.K. is servicing some clients based in the Middle East. France, which represents 5% of our net revenue, posted plus 1.6% organic growth fueled by connected media up mid-single-digit. Germany, which represents 3% of our net revenue, was slightly up due to some very positive year-end adjustments in Q4. Lastly, our operations in Central and Eastern Europe were also slightly up after posting double-digit growth last year. Turning to the next slide for performance in the rest of the world. Asia Pacific, which represents 8% of our net revenue, delivered another strong plus 5.9% organic growth, led by connected media, up double digits. China continues to be very solid, with a remarkable plus 11.7% organic growth in Q1, benefiting from positive forward phasing. India also delivered a very high performance, with plus 11.7% organic growth in Q1, followed by Australia at plus 7.6%. Latin America posted a plus 13.3% organic growth in Q1, driven by WG growth at Connected Media, in particular in Brazil and Mexico. As mentioned earlier, Middle East and Africa posted a 5.1% organic decline in Q1, with UAE and Israel being the most impacted countries as expected. Moving to my last slide, net financial debt. Net debt at the end of March was 1 billion, 156 million euros, up 1.7 billion euros in Q1, fully in line with our expectations. This increase is due to the usual change in working capital outflow in Q1 and the €175 million of share buybacks executed in Q1, partly offset by free cash flow generation. Acquisitions, including new earnouts, amounted to €57 million in Q1, related to the acquisition of Adji and investment in Amilabs. Payment for the acquisition of 160 over 90 will take place at closing in the course of Q2. Average net debt for the last 12 months is 1 billion and 35 million euros, up 363 million euros versus average net debt at the end of March 2025. This reflects the impact of acquisitions completed since Q2 2025 and is consistent with our full year guidance of circa 1.1 billion euros. This concludes my financial presentation and I now give the floor back to you, Arthur.