Publicis Group Sa S/Adr

Good morning. This is the conference operator. Welcome and thank you for joining the Publicis Group first half 2026 earnings 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 Sadoun, Chairman and CEO of Publicis Group. Please go ahead, sir.

Thank you, Judith. Bonjour and welcome to Publicis Group first half 2026 earning 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 all of your questions offline after this call. I will start this presentation by sharing the main highlights of our Q2 and H1 performance, showing an acceleration on all fronts. Loris will then walk you through the full details of our members. And I will come back with our outlook and the reason for our confidence in raising our guidance and sustaining our strong momentum in H2 and beyond. As usual, we will take all of 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 the presentation with actually four key highlights. In a nutshell, in the first half of the year, we have been accelerating on all fronts. First, on net organic growth with Q2 at plus 4.8% despite a tougher comparable and a still challenging microenvironment. Second, on new business with a very strong first part of the year, which allow us to raise our guidance. Third, on our financial KPIs, starting with our headline margin increasing to 17.5% while investing further on our talent in AI and in ramping up our new business wins. Fourth, on our differentiation and addressable market expansion through strategic acquisitions leveraging the strengths of our balance sheets. Let's start with the detail of our top-line performance. In Q2, we once again reaffirmed our ability to deliver even in challenging microeconomic conditions. Organic growth came in at plus 4.8% on a net revenue basis. As expected, this represents a sequential acceleration versus our Q1 at plus 4.5% and despite a 100 basis point higher comparable base in an increasingly uncertain geopolitical context. This acceleration was driven by our marketing transformation activities, representing 87% of our net revenue, where we continued to capture a disproportionate share of our client demand for AI-powered services and products. They grew at plus 6.5% organically in Q2, compared to plus 5.6% in Q1, ahead of our six-year CAGR at plus 5.3%. These contributed to further widening the gap with our peers to 610 basis points in Q2, according to consensus. In detail, Connected Media, representing 62% of our net revenue, delivered a very strong performance again this quarter at high single-digit growth, accelerating versus Q1. This performance was driven by double-digit growth in Europe and high single-digit growth in the US. It reflects our continued ability to accelerate market share gains thanks to our scaled AI-powered media offering. Intelligent Creativity, which is 25% of net revenue, posted solid low single-digit growth in line with the expected long-term growth profile of these segments. The only part of our business that was seriously impacted by the macroeconomic uncertainty and particularly the Middle East conflict is technology, as experienced by other IT consulting firms, including the market leader. We continue to see delays in large transformation programs, of course in the Gulf, but with a direct effect on many other geographies and companies. This led to mid-single-digit decline in Publicis Sapiens, representing 13% of Group net revenue. I will make just two remarks on Sapiens performance. First, comparing Q2 with Q1, I would highlight that Sapiens faced a significantly tougher comp in Q2 of 600 basis points versus Q1. And therefore, we saw a sequential stabilization in terms of net revenue. Second, our ability to accelerate in Q2 and raise our guidance at group level despite those microeconomic challenges makes our performance and resilience even more remarkable. Turning to our geographies, we had another strong demonstration of the consistency and resilience of our country model globally. In particular, our two largest regions, totaling 86% of our net revenue, both grew organically at 5% or above. The US was up 5.5%, accelerating versus Q1, driven by high single-digit growth in connected media, with major wins from last year ramping up. delivered a very strong plus 5% growth, broad-based across markets, accelerating strongly versus Q1 despite a much higher comp of close to 200 basis points. Asia-Pac recorded a plus 2.6% growth with strong performance in Greater China at plus 7.5% while we experienced localized softness in Southeast Asia. LATAM continues its excellent trajectory at plus 11%. MEA was done minus 8.3% as expected, directly impacted by geopolitical tension in the region. Moving to our second highlights, our very strong new business performance in the last months make us confident in delivering the same momentum in H2 as in H1. In the last 18 months, we have seen a dramatic reduction of the competitive landscape due particularly to consolidation. After a very strong finish to 2025, we have had a couple of very sizable wins in the first half of the year with a real material financial impact that will start to progressively ramp up through the back end of the year, but also some local wins with more immediate impact on our numbers. That makes us very confident in raising our guidance range from 4% to 5% to 4.5% to 5%. Third, we accelerated on all our financial KPIs. We improved our H1 headline operating margin again this year to 17.5%. We were able to unlock 50 basis points of margin improvement as we continued to extract operating leverage, allowing us to reinvest more than 30 basis points in our new business AI plan and our talent pool upgrade, and deliver the remaining 17 basis points in margin increase. Headline EPS came at €3.52 in H1 2026, up 5.7% at constant currency. And headline free cash flow reached €957 million in H1, up 20.8% at constant currency. Getting to our fourth and final highlight. In H1, we are accelerating on our differentiation with two important strategic acquisitions. We finalized the acquisition of 160 over 90 in sport marketing in Q2. By putting epsilon data at its core and connecting it to our end-to-end media ecosystem, we will be uniquely positioned to make sport the fastest growing media segment of our industry, addressable and measurable at scale. and we announced the acquisition of LiveRamp in May, which, once closed, will enable us to enter a totally new addressable market, data co-creation. With LiveRamp as part of our strong interconnected ecosystem of Publicis Sapient, Epsilon and Marcel, we will go even further and faster in delivering a genetic transformation for our clients safely and transparently in their own environments. Thanks to their successful integration into our Power of One model and their ability to open up new addressable markets, our bolt-on acquisitions of the last two years have delivered close to 20% annual organic growth on a standalone basis, EPS growth acceleration at group level, and a strong contribution to our new business wins. Our ability to continue expanding our capabilities and addressable markets has been made possible thanks to the strength of our balance sheets. Actually, there is one last highlight for each one. After the Cannes Lions named Publicis Conseil Agency of the Year for the past two years and their client AXA as Brand of the Year in 2025, the festival has now recognized Le Pub Milan as its 2026 Agency of the Year. It's an incredible accomplishment that is only made better by the fact that Heineken, our global client since 2014, has been named Creative Brand of the Year. This latest achievement from Le Pump Moulin is everything we love at Publicis. Breakthrough work for iconic brands that demonstrate the power of creative ideas to transform our client businesses. I will now hand over to Loris to take you through the Q2 and H1 financials in detail before I return with our outlook and strategic updates.

Thank you, Arthur, and good morning, everyone. Let me begin with the key highlights of our H1 2026 results. Revenue was 8 billion and 734 million euros, up 3% versus 2025 and up 5.3% on an organic basis. Net revenue was 7 billion and 229 million euros, up 1.1% versus 2025 and up 4.7% on an organic basis. Operating margin was 1 billion and 261 million euros, up 1.5% versus 2025 and up 7.4% at constant currency while the operating margin rate reached 17.4%. When excluding the live RAM transaction costs, headline operating margin was €1,268,000,000 with a record headline operating margin rate of 17.5% up 17 basis points versus 2025. Headline net income was 885 million euros, down 0.5% on a reported basis, but up 5.3% at constant currency. Last, free cash flow before change in working capital was 950 million euros. When excluding the live RAM transaction costs, headline free cash flow was up 20.8% at constant currency. I will now get into the details of the P&L free cash flow and balance sheet starting with Q2 revenue and net revenue Q2 2026 revenue was 4 billion 543 million euros up 4.2% on an organic basis Net revenue was 3 billion and 769 million euros Organic growth was plus 4.8%, which comes on top of plus 5.9% in Q2 2025. There was a negative impact of currency of 170 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 a positive 110 basis points reflecting the impact of our 2025 and 2026 acquisitions, namely Captivate, P-Value, HEPMIL, AGI, and 160 over 90. When factoring in those items, net revenue was up 4.2% on a reported basis. Let's move to the next slide and our Q2 net revenue by region. North America was up 5.4% on an organic basis on top of plus 5.8% in Q2 2025. There was a negative impact of the US dollar versus Euro partly offset by the contribution from acquisitions and reported revenue was up 4.4% in Q2. Europe delivered plus 5% in organic growth. There was a negative impact of the pound sterling versus euro, leading to reported growth of plus 4.2% for the region. Asia Pacific posted plus 2.6% organic growth. There too, there was a negative impact of currency depreciation versus euro, offset by the contribution from acquisitions, leading to a reported growth of plus 2.8% in Q2. Latin America continued to perform very strongly and reported plus 11% organic growth. When adding the negative impact of currencies and the contribution of acquisitions, reported growth was at plus 13.5%. And finally, Middle East and Africa was impacted by the geopolitical situation, leading to an organic decline of minus 8.3%. Let's get into more details for each region, starting with North America. In the US, the group's largest geography, which represents 58% of our net revenues, organic growth was plus 5.5% after plus 5.3% in Q2 last year. Connected Media was up high single digit and Intelligent Creativity was up mid single digit, benefiting from new business wins and scope expansions. Technology was down mid single digit in Q2. Let's now turn to the performance in Europe on the next slide. The UK, which represents 9% of our net revenue, posted a plus 2.8% organic growth. When excluding technology, organic growth was plus 8.1%, driven by very strong growth in connected media. Technology was down, as Publicity Sapient in the UK is servicing some clients based in the Middle East. France, which represents 5% of our net revenue, was close to flat. Lastly, our operations in Central and Eastern Europe were up double digits driven by strong growth in all segments with Poland, Romania and Czech Republic performing very well. Turning to the next slide for our performance in the rest of the world. Asia-Pacific which represents 9% of our net revenues was up 2.6% organically. China continues to be very solid at plus 7.5% organic growth in Q2 partly mitigated by software performance in Southeast Asia largely due to the impact of the Middle East conflict. Latin America posted a plus 11% organic growth in Q2 driven by double digit growth in connected media and intelligent creativity in particular in Brazil, Mexico and Colombia. As mentioned earlier, Middle East and Africa posted an 8.3% organic decline in Q2, with UAE and Lebanon being the most impacted countries as expected. In Q2, we estimated that the conflict in the Middle East had a negative impact of 30 basis points on our net organic growth. For your reference, you'll find on the next slide our H1 2026 performance by region. As you can see, all regions posted a strong organic performance, leading to plus 4.7% in total for the Group, on top of plus 5.4% in H1 2025. Last, net revenue was up 1.1% on a reported basis. Moving to the next slide and our simplified P&L down to the operating margin. Personal expenses excluding restructuring charges were down 0.6% year-on-year, generating 110 basis points in margin improvements. Restructuring charges increased by 21% due to the continued investment in talent upgrades with a 17 basis point impact on margin. Other operating expenses excluding the live rent acquisition costs were up 7.1%, representing 70 basis points of incremental costs as a percentage of net revenue. Depreciation was up 2.7%, mainly due to increased IT investments. Headline operating margin was €1,268,000,000, up 2.1% versus last year. At constant currency, the increase was plus 7.4%. Headline operating margin rate was 17.5%, up 17 basis points against the record level of 2025. When including the live RAM transaction costs, operating margin was €1,261,000,000. Moving to our next slide and our operating margin bridge. Our headline margin was up by 17 basis points, which includes, first, an improvement of 110 basis points of personal costs, excluding restructuring charges, driven by three main factors. Some scalability benefits on our 2025 recruitments, combined with some early impact from our gentrification initiatives on task optimization. Some rebalancing between our people cost and G&A, When it comes to our AI investments, as we rolled out our AI productivity tools to our talents. Some adjustments, including at Publicis Sapiens and our continued cost management discipline, notably when it comes to recruitment in H1. And second, this improvement was mitigated by two factors. a 17 basis points increase in our restructuring charge as we continue to upgrade our talent pool and a 76 basis points increase in our other costs reflecting in part higher spending on AI products and tools and some additional depreciation linked to our IT investments. Moving now to our headline income statement below operating margin and focusing on the main items. Headline net financial expenses were a charge of €62 million versus €44 million in 2025, mostly attributable to lower interest income for our US dollar cash balance. Headline net income tax was €312 million with an effective tax rate of 25.9%. The increase versus 2025 is due to positive non-recurring impact of some tax audits in 2025 and lower deductible LTIP expenses in 2026. Headline income was 885 million euros down 0.5% versus 2025. Again, the increase was 5.3% at constant currency. Next slide, our headline EPS fully diluted grew by 5.7% at constant currency to reach €3.52. On the reported basis, it grew at plus 0.3%. Moving to the next slide, free cash flow. Our free cash flow before change in working capital reached 950 million euros, up 14.7% versus 2025 and up 19.9% at constant currency. Headline free cash flow before change in working capital was up 20.8% at constant currency. Increase in EBITDA of 26 million euros contributed to the year-on-year growth. There was also a tailwind in tax paid, mostly resulting from non-recurring payments in 2025 and some benefits following the change in tax regulation in U.S. in H2 2025. This was partly mitigated by higher financial interest charge resulting from lower cash balances in U.S. dollars. Moving to the next slide, use of cash. In H1 2026, change in working capital represented an outflow of €2,089,000,000 fully in line with our expectations and reflecting the usual seasonality. The year-on-year deterioration of €344,000,000 in H1 cash outflow is largely explained by the reversal of the €234,000,000 positive effect recorded at year-end 2025. Acquisitions, including paid earn-out amounted to 672 million euros. It includes the upfront cash payments for Ag AI and 160 over 90 and the payment of earn-outs related to influential. On share buybacks, we spend 181 million euros in H1 2026 to cover our LT plans. Others known in cash items represented a positive €235 million versus a negative €274 million in H1 2025. There are two main reasons for the €509 million swing. 2025 was impacted by currency translation deterioration with the depreciation of currencies versus the euro. Change in earnouts improved by €214 million versus H1 2025 as H1 2026 included the elimination of the earn-out debt related to influential. When you consider payment for acquisitions and new earn-outs, we invested 517 million euros in H1 2026. Overall, net cash decreased by 1,763,000,000 euros. Moving to my last slide, net financial debt. The average net debt on the last 12 months was 1 billion and 131 million euros, representing an increase of 295 million euros compared to last year, due to the acquisitions completed over the last 12 months. We closed H1 2026 with a net debt of 1 billion and 215 million euros. And the financial leverage remained roughly stable at one time, as expected. This concludes my financial presentation, and I now give the floor back to you, Arthur.

Thank you, Loris. As you just saw, in Q2, we have been accelerating on all fronts, organic growth, new business, financial KPIs, and the differentiation of our model. This makes us very confident in sustaining our strong momentum for the rest of the year and raising our guidance despite persistent microeconomic uncertainties. We now expect an organic growth range of plus 4.5 to 5% which represents an acceleration in H2 versus H1 when adjusted for the 40 basis points tougher comparable. We are confirming our guidance on an operating margin rate slightly above 18.2% in 2026 and we now expect our free cash flow to reach circa 2.2 billion euros up from circa 2.1 billion previously. There are actually three major reasons that make us confident in sustaining our momentum in this challenging time, both for the end of the year and as we enter 2027. First, we continue to win market shares, thanks to our differentiating model. To cut a long story short, not only are we winning more than our competition, but we are also losing less. As evidenced in our guidance upgrade, we have sustained our very strong new business track record in the first part of the year, with several large wins, some that were made public and some that were not. As you know, we don't disclose our new business wins as we are not chasing for headlines. But just to give you an idea, the six major wins of the last six months alone will secure close to 200 basis points of growth on a full year basis when they fully ramp up. But what I believe is more remarkable is that being at the heart of our client transformation allows us to have a very high retention rate of close to 100%. In fact, we haven't had any losses in the last 12 months that could materially impact in the next 12 months. Second reason for our confidence is that we are growing with our client thanks to AI. AI has first and foremost been a structural tailwind for us for several years now. Since the rise of Gen AI three years ago, we have actually grown by circa 20%, allowing us to continue increasing the gap with our peers. Actually, over the last three years, we have grown four times faster than our competition on average. AI allows us to connect our unmatched capabilities in data, media, production, and technology and link client investments to business outcomes. It has contributed significantly in accelerating the performance of our marketing activities, which represent 87% of our revenue. This was visible once again in Q2, when those capabilities grew organically by 6.5% versus 5.6% in Q1. Those of you who came to our presentation in Cannes heard directly from two of our largest clients that we won in the last year how we are able, thanks to AI data and technology, to transform their marketing model and deliver high growth at a lower cost in a unique way. This is the main reason why we are growing our client base by 200 to 300 basis points every year. AI also continued to be a productivity boost with significant gains from automation and task optimization. Actually, since the launch of our AI platform Marcel in 2017, we have almost doubled our EBITDA and our margin has increased by 270 basis points over the last eight years. Last but not least, the third reason for our confidence is our continued investment in talent and capabilities. Our strategy in the last 18 months has been the polar opposite of our competitors. Not only have we been acquiring new capabilities from commerce to influencer and now sports and data co-creation, but we have also been investing in talent by recruiting and retaining the best profiles, training everyone for this new world, and reinventing how our team operates with AI tools. This is highly valued by our clients who are looking for partners who can invest on their behalf in the capabilities they need to win and the people who can get them there. From that perspective, our strong financial structure is clearly a competitive advantage as it positions us as a trusted partner of our clients all along their transformation journey. Our only focus will remain execution as we deliver our balance sheet over the next 18 months. As you have seen in H1, not only have we demonstrated once again the consistency and the reliability of our business performance, but we have actually accelerated on every front. This allows us to upgrade organic growth guidance and improve every financial KPI for the rest of the year despite ongoing microeconomic difficulties. Our net new business, the growth we deliver with our clients, thanks to AI, and our continued investment in our talent and capabilities make us confident in maintaining our momentum beyond 2026 and in reaffirming our 27 and 28 objectives of delivering at least 7 to 8% net revenue growth on average and 8 to 10% annual headline EPS growth at constant currencies. Let me finish by thanking our team for their incredible work and our clients for their trust. Thank you all for listening and now, with Loris, we will take all of your questions.

Thank you. 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 1 on their touch-tone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from Adam Berlin at Goldman Sachs.

Hi, good morning. Thanks for taking three questions if I could. The first question is around 2027 organic growth. We've obviously got good trends in media and creative. Is there any reason why we wouldn't see this momentum in media and creative continuing into 2027 as we put together forecasts for next year? That's the first question. The second question is we had a short ceasefire in the Middle East for a few weeks. Can you just talk about what you saw in terms of demand for services? Did they kind of quickly bounce back and then get subdued again when the ceasefire stopped or was there not really much change during that brief period just to get a sense of what might happen when, you know, hopefully the war finally ends? And then the third question is for Loris, you talked about 7% growth in underlying operating, other operating costs and you mentioned AI. Is that essentially token? So are we seeing kind of Thank you very much.

Thank you, Adam. I'm going to take one and two, and I guess I will leave you three. Look, it's a bit early to talk about 27, I guess. What I can tell you is a couple of things. You have seen over the years the strength of our media and creative business. By the way, not only in winning new business, but in increasing our revenue with existing clients and not losing big clients. So far, I'm touching wood because it could happen anytime. But again, when we look at 27, it's definitely too early to give you an indication, but there is good sign of confidence. The first is the new business we have won recently. allow us today to be very confident that we will deliver again 200 basis points next year. The second, that for me is the most important one because it's the one that could keep me away from sleeping, is we haven't lost any big clients in the last six months that could have an impact at least for the beginning of next year. So that means that we're entering 27 with a good dynamic. And maybe the most important one, Adam, for next year and in general is We have a conjunction at Publicis of two incredibly strong factors that again makes us very confident for the future and this is why we are reiterating our guidance for 27 and 28 is that on one side you have seen a drastic reduction of the competitive landscape. I mean Five years ago, we had the double of players at global level that we have today. And let's be clear, it doesn't mean that the smaller players are not dangerous locally. But when it comes to big marquee companies with huge spend, let's say above 800 million, the competitive landscape has been reduced from four to three players. So that is helping us. And what is on the top of that is that not only the competitive landscape is reducing, but on the other hand, our addressable market is just increasing. This is why we have insisted on the 20% growth of our Bolton acquisition. We are, thanks to our balance sheet and the strength of our balance sheet, investing in new sectors that will allow us to grow. So, again, don't expect any number from us. But expect already us outperforming the industry again in 2027. It's a bit early to say, but we feel confident about that when you look at new business and addressable markets and entering into H1 2027 with a lot of confidence. The Middle East question is a very big question. So the impact of the Middle East as a business is basically not really material because it's 3% of our revenue. Yes, it has been declining, but nothing significant that would change anything. A bit on the margin, by the way. And I think it's interesting to see that not only we are accelerating, but sustaining our momentum despite these kind of things that are having an impact. Now, your question is more interesting on the fact that the Middle East is having or not an impact on the demand and the service. I think that, again, if I take a step back, you need to look at those challenging times that our clients are having a very different attitude when it comes to OPEX and CAPEX investments. So, on the one hand, they know that if they cut their marketing spend, They will lose market share. That actually will be very difficult to win back. They have experienced that many times, so they are very aware. And honestly, this is why, despite the conflict in the Middle East, we continue to capture a disproportionate share of our client demand when it comes to AI-powered marketing services and products. I mean, again, it's 87% of our business, and it has been growing in Q2 by 6.5%. And we are seeing, thanks to that, every effort we have made, how we have implemented AI, allowing us to increase the gap by more than 600 basis points based on consensus with our peers. Where there is a difficulty is that on the other hand the lack of visibility that is due to these geopolitical events are actually now coming back on the top and it's true that it led all of our clients in the IT services to delay further their large discretionary expenditure that are more about capex in this case. And this latency attitude has been very well drafted by the competitors of Sapiens, and particularly the leaders, so I won't insist on that. But again, when you compare like for like, the kind of slowdown in capex investment is also our case with Sapiens. Again, I'm going to insist a lot on that, and I'm sure there will be a question about SAPIAT later, but what is very important for us, and hopefully you see this in our performance, is that despite this challenging environment, will it be the Middle East? Will it be what is happening in the IT sector? We are able to raise our guidance, and actually, we are expecting an acceleration in H2 versus H1 on an underlying basis. And this is thanks to the strength of our overall model. I'm going to stop here. I'm sure there will be a question on Sapiens, so we'll come back. But Loris, I will pass on you.

Sure. Hi, Adam. So when you're looking at AI run costs, I would make three or four comments. The first is those are typically for licenses and usage. And as such, they are very much a normal operating cost. The second is we have good visibility on real-time consumption, including at the user level, and we track them on a daily basis with limits and alerts that we put in place to monitor and control the usage. The third point is, as you saw from H1, there's definitely a rebalancing between the people cost and tech cost, and we've said that before, but we're expecting it to stabilize now. What we are observing, if anything, is that the productivity benefits that those tools can generate do offset the cost, and it's been clearly evidenced in our margin improvement. So if anything, it's been having a positive impact on our margin, and we anticipate this to continue.

Yeah, we can't go into the detail of what we are doing there, but it's incredible to see how we are able not only to accelerate on our top line, but accelerate on our bottom line, all of this while investing massively into our future. Thanks very much. Thank you.

The next question is from Adrien de Saint-Hilaire, Bank of America.

Thank you very much. Good morning, everyone, for taking the questions. I've got a few, please. Arthur, on the six accounts you mentioned, are these new clients or is that scope of work expansion with existing ones? Secondly, on your connected media performance, in particular in the U.S., is that a function of clients increasing their marketing budgets or is that more a function of Publicis increasing its wallet share, I'd say, with those clients? And then lastly, Arthur, I'm just trying to reconcile the comments you made recently about the fact that clients are willing to pay more for people than technology. And then at the same time, we see that indeed you're spending more on technology than on people, perhaps in the first half. I mean, in terms of percentage growth, not in absolute terms. If we could just reconcile those comments. Thank you.

Yes. I'm going to go the other way around. I'm going to start by the third. To be clear, and this is a discussion we had, is that we believe that we need to have the right balance between people and technology. I like, and I know it's a bit provocative in the AI world, but I like to say that we are still a service business. We are a service business with the best capabilities of our industry and beyond in data technology and of course AI. But the truth is, the reason why we have been performing so well today is that we have the right balance between the best people of the industries and unique capabilities, all of this working through the power of one. And by the way, if you look outside of the holding company world, even in the LLM world or in the tech world, the companies that are thriving today are the ones that have this good balance between service and product because again, and maybe the question will come back later, AI is very difficult to implement at an enterprise level. It's difficult to scale. It's very expensive. It doesn't deliver business outcome immediately. And so, yes, you need the best capabilities, but you also need the right people to take the client by the hand and bring him to this. And this is why, by the way, we continue to invest in our talent. And the least we can say is that we also invest in our capabilities. Connected Media in the US. Now, the truth is we are winning market share, and I'll come back to that on new business. Clients are spending more with us. I'm not even talking about new business because your question was more on our clients. The reason why we can go 200 to 300 basis points with our clients, and actually it's way more when you look at Connected Media, is exactly for the reason I explained earlier about the addressable markets. When you take leadership, In the influencer world, you see your revenue grow. You win in your business, but you see your revenue grow. When you invest heavily in agentic commerce, you see your revenue grow. Tomorrow, when we're going to invest, or actually when we're going to scale sports and make it addressable and measurable, we're going to see our revenue grow. So we are continuing to nourish new capabilities, our connected media system, and of course our clients, and we are growing from there, basically. Now, coming back to your question on new business, let me take a second on that and try to wrap up a lot of things that have been said because I know there have been a lot of questions in the recent weeks. And again, this morning, we already received a few. I mean, first of all, and you would remember that, we had a very good finish of 2025, very high finish. And the truth is, we also had a very strong first half of the year when it comes to overall new business. Basically, and honestly, thanks to the differentiation of our model, but also because, as I said before, the competitive landscape has been dramatically reduced and some players have been a bit distracted recently. So what we wanted to give you, again, as in everything we are doing today, is give you clarity, visibility. And so we basically had six major wins, which are, to answer your question, new accounts. It's new clients. If it's an existing client, it goes into our client goals. If it's a new business, it's that it's a new client. And this has allowed us, those new clients, those six new clients, has allowed us to roughly deliver, we will deliver, thanks to those wins, 200 basis points of contribution on a full year basis. I mean, we are talking here about 300 million euros of net new revenue for the Group. I think it's important to understand the magnitude of what we're talking to, okay? And to give you a bit more of color, because I think it's important, this is going to ramp up But out of the 200 basis points, there will be only 50 basis points this year. This is why, by the way, we are upgrading our guidance, because now we feel confident that with those 50 basis points, we can upgrade our guidance. And the other 150 is going to be for 2027, though the question I had before, which again makes us confident for next year. I know it's a bit complicated, and I'm sorry because, as you know, we don't comment on new business wins. We don't give you names. We don't talk to the press. And because we don't talk to the trade press about what we win, there are some things that you can see and others that you can't. and we have a big question about that that has come many times which is okay some of your competitors have been claiming basically for the last three quarters through actually big headlines that they have done even better than us okay let's be clear if it's not only headlines it should translate after what is nine months into their numbers and their performance starting now and honestly this would be great for the industry because we need our peers to do well so if they are doing even better great but i think what is important for you to take out of that is what matters is not the press headline is how what we win translate into growth and margin and i guess when you look at the last seven years we have been number one in new business We have made a good case out of that. And again, I'm sorry we are not disclosing more than this, but for many reasons, we have decided to stop a couple of years ago. And as you can see in our performance, it has pretty helped us. So I'm going to stop there. I know I'm talking too much. So now I'm going to make a shorter answer because I'm very frustrated about the Tuesday game. So I'm trying to recover. Let's go. The game, the soccer. Next question.

The next question is from Jérôme Baudin, Odoo BHF.

Yes, good morning all. Three questions on my side. The first one, just to follow up on the Middle East question, so can you just precise what's the assumption in your guidance? You said a drag of 30 basis points in Q2, so is that the assumption for H2? And the same question for Sapien, is the assumption a decline of meeting a digit? So that's my first question. The second one is on Sapiens. So you have not said much so far about the Microsoft partnership. So I don't know if that's the right timing, but I would be curious to have a bit more color on how the relationship is evolving and in particular on the go-to market and revenue generation. And staying on Sapient, so you said when you announced the acquisition that LiveRamp will be integrated within Sapient. So could you just help us to understand the rationale beyond this move? Is it mainly an organization question, so to make sure that LiveRamp will be seen as independent from Epsilon, or is it also a commercial decision to leverage the Sapient client relationship and Salesforce. Thank you.

Thank you very much. I'm going to start very quickly on the LiveRAM question. It won't be part of Sapient, it will be part of technology, to be very clear, because it's a tech company and it's a product company by essence. Again, I will be very, very pleased to answer your question once we close, but there is very little I can say for the moment, more than what I said during the call. So again, it's going to be in technology but not part of Sapiens. And by the way, as we are on that, we talk the day of the acquisition. Since then, honestly, the reaction from our clients has been extremely positive. And to come back to one point that has to do with tech, as you might have read here and there, our competition have raised an issue about neutrality. And the truth is that for our clients, This is a non-event, all of them. And the reason why it's a non-event, which comes back to your question, is that you need to understand that live ramp technology is neutral by design. Live ramp is a technology, is a platform of data collaboration. And so it will live within our technology. It will work particularly with Sapient to build agents for sure. But more than that, at the moment, it's very difficult for me to tell you. We need to go through the process and then I promise we'll have a lot of time to answer all of your questions. On Microsoft, again, we don't talk about any particular client, so I won't be able to give you much more detail, although the relationship is very, very strong. But maybe I use this opportunity, and then I pass on to you on the Middle East, and we'll start by Sapient, I guess, and then go on to the guidance, to tell you a couple of things about Sapient that hopefully will start to answer your question. First, as we say, like the rest of the IT consulting industry that you know well, we are experiencing a slowdown that is only amplified by the Middle East crisis. We talked about that. But I think what is very important there, and Loris mentioned it and I did, is that actually Sapient was facing a significantly tougher cope In Q2 versus Q1 of 600 basis points. So actually, those guys have managed to stabilize their net revenue sequentially, which is when you look at all the headwinds in the industry is important to note. Second, and that's definitive for your question, so far, I don't know about you, but it's not like we see the world getting any better soon. We saw a couple of news this morning, I say how the market is going to react to that, but things so far are not going to get better. So, to be clear, we are not including any major improvements in our guidance for H2 for sapiens. So, actually, we expect it to be in line with industry. But, you know, What is important there is that Sapiens only represents 13% of our revenue. And I think this is something that we need to insist on. But when you look at their performance in isolation, actually this is not reflecting the full value it creates for the group. Sometimes I'm asking myself, are we right to put Sapiens apart? Because again, it doesn't show what it brings to our group, okay? In a couple of words, Sapient is actually supporting our top line of the marketing activities. The reason why we are growing so fast at 6.5 is not only thanks to our creative and media operation. It's because on what represents 87% of our revenue, we have Sapient technology, we have Sapient engineers, more than 20,000 people, that can help us in production that has truly become a tech thing. I mean, we are growing double digits in production. It's helping us on media that is growing close to double digits and is definitely helping to win some pitches through the enterprise-grade AI solution they've got, you know, and that is making a real difference. And what you don't see either is that it also contributes to our operating margin outperformance versus our peers, as we can leverage all of their technology internally. So maybe the thing I want to leave you with on Sapient is that, of course, they are part of their business that remains very exposed to the software ID spending that all of their peers are experiencing, but the true value extends far beyond in own PML. And so, again, maybe in a couple of months we will spend more time explaining you this because the reason why we are performing as we do as a group as also to do with how we use the agentic and AI expertise of Sapiens for what is 87% of our business that is growing 6.5% with a good margin as you have seen in Q2.

And Jérôme, a couple of points maybe on the Middle East. I mean, first, as we said before, the region represents Less than 3% of our revenues and as Arthur was talking about Sapiens, where we see a larger impact from the region is on Publicis Sapiens, including, by the way, in the UK as it's a hub that manages a number of clients based in the Middle East. When you look at the overall impact in Q2 of the Middle East region, it's approximately 30 basis points on the top line, as I said earlier in my presentation. Now, looking at the rest of the year, I mean obviously we can't predict when the conflict is going to be resolved, but we included in our upgraded guidance the fact that the situation more or less remains the same.

Again, the resilience of our model is maybe what we are the proudest of. Being able to accelerate in H2 despite all the headwinds we've been just talking, hopefully is reassuring. And you know the story is that if everything was doing well, imagine what we can deliver when we are delivering 4.8% on such a difficult quarter in terms of headwinds.

Thank you very much. Thank you.

The next question is from Nicola Longley, BNP Paribas.

Yes, hello, good morning, everyone. I've got three questions. First one on the full year guidance, so what has to go right to land at the top end of your organic sales change guidance? Do you need a better macro or potentially the underlying momentum and connected media could be sufficient to reach the end? Second question on the pitch environment, how would you characterize the current pipeline and would you say you see more offensive opportunities for the group in H2 compared to H1? And finally, on personal costs, so they were down 90 basis points in H1. Loris, you mentioned the rebalancing and the adjustment at Sapiens, so what would have been the decline on the underlying basis? And looking ahead, should we expect the gap between net revenue and personal cost growth to widen from here or to stay roughly at the current level? Thank you.

Thank you, Nicolas. So for those that just joined, again, I'm going to start with the guidance. So as you know, we are now expecting our net organic growth to reach roughly between four and a half to five, which is an upgrade. And more importantly, this means that we're going to outperform by far our industry for the seven years in a row. To come back to your question, I will make a couple of comments. First, again, we told you we want to give you visibility. I think it's important to see that we are expecting Q3 and Q4 to be within this new guidance. So again, sustained momentum, to come back to your question, about what we have been doing. Second, and we have been insisting on that, but we see the same dynamic between the H1 and H2. And actually, we see an acceleration when you look at the underlying basis as the comp is tougher. And to come back to your point, honestly, what will make us able to reach the high end of the guidance is that the macro condition needs to improve. We need to improve a bit. We see the lever to get there. Don't get me wrong. We are making sure that we are anticipating a world that doesn't change that much now. But if it were to improve for any reason, yes, we should be able to reach the high end of our guidance. On pitch activity, I mean, it's busy. It's a busy time. And I think that there is some good news and less good news, I would say. The first good news is that clients every day understand more that with the rise of AI, they have to choose their partner, and we talked about that, primarily on capabilities and talent. And that's the reason why we're winning. And by the way, the pitches are shorter, there are more on capabilities, and clients understand this need. So much so that in some cases, actually, we are not pitching anymore and winning without a pitch, just about the client kicking the tires. We have a couple of examples on that. Some of them, by the way, are not public. The second good news, I already talked about it, is that the competitive landscape is reducing. So this, of course, improves the chance of the leaders to win. And as we are one of them, it's improving our chance to win. I would say the only less good news is that the financial pressure of some of our other players in our industry has led to some pricing behaviors sometimes that are not right. The truth, and you know how we behave on that, we are trying not to participate When we anticipate that the client is going to be really price driven, which we understand perfectly, but we are not interested by that, we have actually passed in H1 roughly six pitches. Thank you very much. Many, by the way, were saying that AI will be an headwind for us. Not only it is a tailwind when you look at our number, I talked about that, we go by 20% with double the EBITDA, but even more importantly, AI creates a more complex world. And it means that our clients, more than ever, need the right capabilities and the right people. And this helped us also in terms of new business. You want to take the last one?

Nicolas, on personal costs, it's a bit too early to guide on the full year when it comes to personal costs, depending on the balance with reinvestment in H2 around talent upgrades and obviously where we need to invest in new business with ramp-ups. But you should assume that personal costs go down as a percentage of revenue this year. And as I said earlier, it's a combination of a few factors and maybe it's worth repeating some of them. One, we had some scalability benefits in some of our recruitments of 2025 to which you need to add the early impact of the initiative we've launched when it comes to processes and task optimization through agentic AI. Definitely the rebalancing that I spoke about on people cost and G&A when it comes to AI investment as we rolled out those productivity tools. But that again should stabilize given the investments were already made. and then the adjustment that we see here and there including at Publicity Sapiens. But again, what's important is that we confirm the slight improvement in our margin for the full year. Understood. Thank you. Merci.

The next question is from Sierra Donnelly City.

Thanks, and thanks for the presentation. Most of the questions have been asked, but I've just got a couple left. Artur, actually, one was on the point you just alluded to in terms of increasing complexity. Something we heard at CAN quite consistently was, you know, the shift from traditional search to generative searches. leading to this increasing complexity which is making them rely on their agency partners more. But actually one of the other things we heard across the board was that it's leading to marketers moving up the funnel in terms of their approach to remaining visible in generative search. Can you just comment on whether you have seen that come through and whether this is going to be a positive tailwind for not just this year but obviously next few years? And then just on your comments around AI productivity, I'm just interested in terms of any internal KPIs you're looking at to try and quantify that and if you can help us understand that as a revenue per head or how are you guys trying to quantify the ROI benefit from the AI investment you've made?

Thank you very much. I'm realizing that I'm talking too much and that the hour has already passed, so I'm going to make a short answer on that. You're raising, of course, a very, very important question about, you know, how search, new search, particular GEO will raise. I would make just one comment that hopefully tell you how bullish and ambitious we are about what is happening, is that three years from now, 50% of the content that we are producing today won't be for human, but for machine. We will continue to produce as much content for humans, but we will have to produce double of content for machines. And that means that, again, talking about addressable markets, if you have the data, if you have the technology, in this case, if you have the production backbone, you should be able to see some growth from the fact that not only we need to talk to humans, but also to machines. And this is what I put into the new addressable market. These are areas where we have a lot of opportunities because, and I will close by that, because we have the capabilities. Because let's be clear, there is no way you're going to be able to talk to machine properly and transform that into sales if you don't have identity. Because at the end of the day, you need an anchor that will allow you to see a person. And sorry to be a bit technical, but when the LLMs go onto the web to look for something, there is no digital trace of a consumer. So if you don't have an identity to make sure that you can link your investment to business outcome, you're basically blind. And that's where we have a big advantage.

So on the topic of AI productivity gains, I think there's probably three things that are important to say. The first is, and Arthur said it earlier, it's early days. And so we need to remain very cautious. I don't need to go back on all the recent studies including the MIT one that shows that what 95% of AI pilots turn no or negligible RI and it's largely due to what we said earlier which is the complexity and the cost. More specifically when it comes to us I think it's safe to say that we have not lost a minute and we've been executing what is largely a two-step plan The first, and I mentioned this earlier, we've been looking at certain tasks and manual processes, and we are aiming to cut the volume of those tasks by an average of 25%, and then scaling it across the operation, and that is well underway. And the second point is, as it was mentioned earlier, through our partnership with Microsoft, We've essentially equipped and trained the vast majority of our 110,000 or so talents with AI productivity tools, and it's really helping them work faster, better, and most importantly, focus on higher value work. The third point that I would make is and probably the best KPI you can look at is that REI plan is delivering a margin improvement. And so again, we generated 17 basis points of margin improvement in H1. After reinvesting, what was around 30 basis points, Again, our efficiency gains into talent upgrades and overall our AI plan. So if you look at what's in front of us, I would say that this plan should allow us to sustain our margin improvement commitment while continuing to invest in transforming our talent pool.

Thank you. Hello.

The next question is from Conor Oshie, Kepler Chavreau.

Yes, thank you. Three quick questions from my side as well. Just to come back on the tailwind from new winds secured in the first half that will benefit the second half and 2027. Arthur, you mentioned 200 basis points. From memory, I think in previous quarters after a very strong 25, it was Closer to 250 basis points if I remember right. Is that suggesting at the moment it's slightly weaker in terms of the contribution although still very good with a lot of new business in play or am I reading too much into that? And then a couple of quick questions maybe for Loris. In terms of the UK business, can you give us a sense of what proportion of the UK business is the tech activity? And then a final question in terms of the French business, just to understand why the out-of-home or the drugstore business was dragging down growth as significantly as it was in the Q2. If you could just give us a little bit of color on that. Thank you.

So first of all, don't read too much into what we said. It's actually a very, very good new business track record for this year. We're going to reach 250 basis points this year. This is why we're upgrading our margin. Our guidance, sorry, not our margin. And we feel very strong about the dynamics. You know, finishing H1 with 250 basis points of new business For 2026 and already feeling good for 2027 is the best position we can be in at the moment, honestly. So only good news on that front. You want to talk quickly about UK and France?

Yeah, I mean, on the UK, when you look at the overall performance, as I said earlier, excluding the tech business, We're at 8.1% in the quarter so we continue delivering very strong performance primarily driven by actually both connected media and intelligent creativity and a lot of new business and market share wins. Sapient is a little bit difficult to explain in the UK as I said earlier because it's Partly a domestic business and partly international operations of Sapien. This is why I said there was an impact of the Middle East. And so it's servicing a number of markets from the UK base. And so if you look at the revenue that it generates It's probably close to 30% of the total group revenue in the UK, but not all of it is UK-specific, so it's hard to isolate the performance in the UK. On France, it's the difference between the 4% and what I said in my earlier remark, which is France was flat. is the impact of the outdoor business, which is media transport. It's largely a phasing and a comparable effect. And then the retail business, which is the drugstore, which is fairly small in our operations.

But, Conor, thank you for raising the question because we talk a lot about the US and you have seen how our media and creative operations are performing actually beyond six or seven percent. But what is very encouraging is that we see the same kind of trend in our number two countries, which is the UK, as Loris just told you. I mean, 4% for France when you extract this media activity shows you that it's a good performance in a market that is very difficult. And I will never insist enough on our Chinese performance. The 7.5% in the market that is declining for most of our peers, and as in many cases, the second market for many of our clients, sometimes the first market, The next question is from Anna-Patrice Berenberg.

Yes, hello. Thank you very much for all the answers that were provided. Three questions from my side. First of all, on the life ramp, because you highlight again how independence of life ramp is important. What were your discussions with the clients so far? Because I saw that life ramp is now also doing the advertisements that they will stay independent in the governance. So how important it is and what's the feedback from the clients since you announced that position? The second question is on the Net New Win business. So you're showing in your presentation the 2025 plus H1 2026. If we'll take only H1 2026, what would that number stand for you and for the competitors? And then the last question, you're talking about 200 basis points coming from Net New Business Win. What should be the underlying growth that we should add those numbers to? So what should be your growth of the existing clients underlying without those net new business? Thank you.

I don't think we are in a position to answer number two. I did not understand very well, but you were asking us to compare with peers, which we don't do. So this we can't answer. The 200 basis point that we are talking about is pure new business. As we said, let's say we grow between 4% and 5%, okay? There is between two and three hundred percent of these goals that comes from existing clients that we are growing and this includes the fact that we don't lose any clients and on the other hand you have between again 250 to 200 that comes from a new business which are new clients that we can add and as I told you it takes between three months to nine months to ramp up the business, and this is why the new 200 basis point that we want in H1 is slowly starting to ramp up in H2 and will accelerate into one of 2027. On LiveRamp, I don't know if you were there when I raised the point, but actually this neutrality thing is a non-event for our clients, to be very clear, for a single reason that I already laid out, which is LiveRamp technology is neutral by a sense. It's not like it's a problem for any one of them. Now, I know it's a bit frustrating, but we can't say anymore anything further at this stage until we are closing the operation, which hopefully will be before the end of the year. Next question, because we're very late. Thank you very much.

The next question is from Julien Roche, Barclays.

Yes, good morning Arthur, good morning Loris, Jean-Michel and Carla. A quick one and two strategic ones. First one is how much was production in the first half as a percentage of total and how much was production organic in Q2? And then IT consulting growth has slowed from 6-7% before COVID to 2-3% now. Looking at share prices, the market believes that AI will take that growth even lower. So why is the market wrong? Why is employing 20,000 IT consultants a good thing as a standalone contribution? And lastly, can you help us measure progress in moving from time and material model, which I believe is 85% of your net sales, to a new model based on either output, outcome, subscription, etc.? Thank you.

We're going to take it the other way around. So Loris, you start with the first one and then I'll go to the second one.

Yeah, just on production, it's doing really well. I mean, in Q2, we're very high single digit in terms of organic growth, and the share of intelligent creativity is slightly above 25%, obviously, as it grew in the last year. It was double digit last year and the year before, so we remain in the same territory, give or take one percentage point.

I love your second question and I wish I had more time. We are not an IT consulting firm. We have nothing to do with IT consulting firm. The only thing that is in common with IT consulting firm is 13% of our revenue with Sapient. And as I said, as for the other IT consulting firm, Sapient is suffering from a slowdown that is coming from our client just You know, waiting and see in terms of CapEx spend. Now, I don't want to give you any hope, but this is going to come back. I don't know when, but it's going to come back. Because if you think that those clients won't have to invest CapEx in their technology, in their data, in order to transform, you're wrong. It will happen. Now, when? I don't know. And the good news for us is that it's only 13% of our business. But to come back on your question when I'm saying that we are not an IT company is that the core of our business is marketing transformation. It's about media, creative, data, and technology getting together to transform the marketing model of our clients. And the reason why we are growing so fast at the moment and distancing ourselves from our peers is that AI has totally revolutionized The way we do marketing. And because we have been investing in first-party data, in tech infrastructure, with Sapient in this case, and the best media and creative capabilities, we are able to go to our clients and tell them, yes, the world is very complex. Yes, AI is difficult to scale. Yes, you have a lot of pressure because you have to increase your bottom line and your top line together. But today, by putting identity at the core with Epsilon, by modernizing your mainframe with Epsilon, by activating this highly complex media ecosystem with our media activities, from commerce to paid media to influencers to CRM, and by producing content that will work for human and for machine, we are able to actually increase your sales and reduce your costs. And I think you were there in Cannes, we had two of the biggest CMO in the world that we won last year that came on stage in form of 350 clients and 100 of you guys and showed up what it means. So to be very clear, Sapient is a competitor of those IT consulting firms. It is suffering as they do at the moment but what they bring within Publicis for us to really win in marketing transformation is what is making the difference and actually allowing us despite all the tailwinds to deliver 6.5% of growth on what is 87% of our business on a margin that is only improving.

So, Julien, a few comments on remuneration models and what we are observing. The first is on the so-called full outcome-based model. I mean, it remains fairly limited and we have not seen any significant evolution Recently, the second, I think you asked the question sometime before, on SaaS also remains fairly marginal and at less than 1% for Group Net Revenue and it's primarily sitting at Epsilon. The third part is, as you described, the overwhelming majority of our roles range from headcount based to time and materials, more specifically at Publicity Sapient, but all of them include some variable elements. usually under the form of bonuses and maluses, but that's for a limited portion of the total remuneration. And if you look at this variable portion, based on those predetermined KPI, they represent roughly 10% on average of our total remuneration for our existing contracts.

All right. A quick last one before we wrap up, I guess, because we're late.

The last question is from Christophe Cherblanc-Bernstein.

Yes, good morning. So thanks for taking my very last question which is on personal cost. So I don't think I have any recollection of personal cost improving by 110 basis points. So was there any benefit from your India platform? I'm asking the question because some India-based company have mentioned FX tailwind bearing in mind that the local currency has collapsed.

I wouldn't, you know, qualify this as offshoring, you know, sort of benefits for the most part. I think we've driven offshoring quite a lot in the past few years already. I go back to what I said earlier, which is definitely a scalability benefit of the recruitment that we had in 2025. The AI productivity initiative that, you know, are starting to scale up and there's obviously investment attached to it. And that's where you see the rebalancing from personal cost into, you know, tech cost and G&A increase. And then we've had some adjustments, you know, normal adjustment on the business, including at Publicis Sapient, given the top line performance that has been softer. So that's normal course of business, if you will. But we're definitely planning on a lower personal cost number for the landing this year.

Yeah, I wish we had actually more questions on that, so thank you, Christophe, because what we delivered on the margin and on the cash flow, by the way, is pretty exceptional because, of course, the headwinds we're seeing on the geopolitical level didn't help, but we're able to overperform also on that. Sorry, we have been a bit long, so just a few words in conclusion. Hopefully, you see that our H1 performance confirms What we have consistently demonstrated over the last several years, and consistency matters. We are delivering faster growth in the industry, we are winning market share, which shows the strength of our model, and we are actually widening the gap with competition. We are expanding margin, we talked briefly about that, and generating strong cash flow while we continue to invest ahead of our peers in AI data and people. And that's very important for us. We talked a lot about that in Q1, but our ability to continue to invest in people and in capabilities thanks actually to our organization for people and to our balance sheet for capabilities make a big difference. It's a tough context out there, and we are confident not only to raise our guidance for 2026, but more importantly, we are confident in our abilities to sustain a superior growth rate and create value on the long term. That was your question about 2027. If I were to sum up, I would say that beyond a strong quarter, we are making the demonstration that AI is accelerating the competitive advantages that we have been building for nearly 10 years now. I will actually say more because it started with Maurice Vision. So again, thank you for joining. I have to say, but sorry for all the English and French football fans on the call. It has been a rough week. I love to go to bed early before the earnings, but I've been suffering with many of you. And I guess we will see you on the pitch on Saturday. Hopefully you can have a bit of time with you and your family to rest in the coming months, but I'm sure we'll meet soon. So merci beaucoup and have a good day. Thank you very much.

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