Publicis Group Sa S/Adr

Good morning. This is the conference operator. Welcome and thank you for joining the Publicist Group Third Quarter 2026 Revenue Conference Call. After the presentation, there will be an opportunity to ask questions by pressing star and 1 at any time. Should anyone need assistance during the conference call, they may signal an operator by pressing star and 0. At this time, I would like to turn the conference over to Mr. Arthur Sadoun, Chairman and CEO of the Publicist Group. Please go ahead, sir.

Thank you Sherry. Bonjour and welcome to Publicis Group's third quarter 2026 revenue call. I am Arthur Sadoun and I am in Paris with our CFO Loris Nold. Jean-Michel Bonamy is also with us and will be available to answer your questions offline after this call. I will start with the three highlights of this quarter and explain why we are confident for the rest of 2026 but also 2027. Loris will then take you through our numbers before we take your questions together. But first, please take the time to read this disclaimer, which is an important legal matter. Let's start with our performance. In Q3, we delivered plus 5% organic growth, accelerating from the first half, despite a higher comparable. We are bringing our 9-month performance to plus 4.8%. These results are fully in line with the upgraded guidance we gave you in July. We are therefore confirming all of our objectives for 2026. Organic growth between 4.5% and 5% with another strong Q4 within this range. A slight improvement of our record 2025 operating margin rate of 18.2% and free cash flow of circa 2.2 billion euros. Three highlights stand out this quarter. First, we continue to accelerate our market share gain and widen growth gap with our competitors. Second, our new business momentum is only getting stronger in a reshaped competitive landscape, giving us already strong visibility into 2027. And third, thanks to AI, our investments in data and technology are setting us apart, expanding our growth opportunities and improving our productivity and capacity to invest. Let me take you through the details of those highlights. First, our market share gains acceleration. Connecting Media, representing 62% of our net revenue, delivered high single-digit organic growth driven by market share gains, increased demand for AI-powered products and services, and new addressable markets. Intelligent creativity representing 25% of net revenue at a solid quarter at low single digit organic growth fueled by new business wins and scope expansions. At the same time, technology improved sequentially. While the situation in the Middle East kept global organic growth slightly negative, the US, our largest country, returned to positive growth in Q3. We expect this positive momentum to accelerate in Q4 with the entire business returning to positive performance. To understand these dynamics, it is important to recognize that AI adoption is moving at two different speeds. In marketing services, consumers are using AI daily and are already changing how they search, discover brands, and decide what to buy. As they turn to AI assistance for recommendations and comparisons, our clients need to adapt how they reach and engage with them. The imperative to adapt is immediate. Clients are ready to commit budgets faster because moving too slowly could mean losing market share. Enterprise transformation follows a longer cycle. It requires changes to core systems, processes, and ways of working, where adoption is progressing more slowly. With implementation taking longer and microeconomic uncertainty remaining high, clients are more cautious about committing significant capital expenditures as expressed by all IT consulting firms, including the market leader, again recently. This creates two distinct investment dynamics, urgency to spend on marketing to protect and grow revenue, and more measured commitments to enterprise transformation. Sapient is essential to the growth of both pillars. Today its contribution is strongest in marketing services, making its performance increasingly inseparable from the goals of our media and creative operations. Our geographic performance also demonstrates the consistency and resilience of our country model. The U.S., representing close to 60% of net revenue, grew plus 4.5% in Q3 against a demanding comparable of plus 7.1% last year, sustaining a strong 4.9% growth year-to-date. This performance was driven by connected media and intelligent creativity, both up mid-single digit, supported by major client wins. Europe delivered plus 4.7%, accelerating versus H1 and leading to plus 4.5% YTD, with strong connected media results and continued market share gains. Asia-Pac accelerated to plus 5.4% in Q3 from 4.1% in H1, with a 4.6% growth YTD. China, but also India, remained key contributors, both up double digits. As a result, this quarter, we are further widening the gap with our peers on net organic growth. We are growing more than three times faster than our peers on average in Q3 2026 on a multi-year stack, while we were growing just above 2.5 times higher last year. that sustained outperformance for 25 consecutive quarters demonstrates the strength of our model, its ability to deliver through different market conditions across capabilities and geographies. Our second highlight is new business, where our very strong performance in a newly consolidating landscape is giving us greater visibility into 2027. Omnicom acquisition of IPG has reduced the competitive field by 25%, fundamentally reshaping our industry and opening up two major opportunities for Publicis. Actually, the first benefits to all of the three global players. The consolidated competitive landscape gives Publicis and its two major competitors a greater chance of winning. We are already seeing this reflected in our respective new business momentum. As the latest convergence data shows, more than 90% of the old co-wins in H1 2026 landed with one of those three global payers. They represented less than 75% of the wins a year ago. It is even more important to note that these reduced competitive landscapes create more room to compete on capabilities and business outcomes rather than on price alone. That means better conditions for profitable growth and value creation across the industry. The second opportunity, however, is highly specific to publicists. While our competitors are reducing headcount and scaling back investments, we are pursuing a polar opposite strategy. We are strengthening our teams, doubling down on data and technology, and extending our Identity First model. Our intention to acquire LiveRamp is the latest step, building on our investment in Sapient and Epsilon and the position we have established in commerce, influencer, and sports. Clients increasingly value this difference. As they transform for the AI era, they want partners with the talent, technology, and financial strengths to invest alongside them. These continued investments in talent and capabilities are the number one reason why we have a retention rate close to 100% and the best new business track record. This is particularly visible in our Q3 new business performance, where JP Morgan looks at net new business, which is wins minus the losses. Looking year-to-date, we have been on a record run when it comes to net new business, and our performance so far will contribute approximately to 200 basis points to organic growth in 2027. and with a dynamic pitch environment and several months is still ahead, we have further opportunities to build on that contribution. These are assignments already won with revenues still to come. They give us a solid foundation for another year of industry outperformance. Our third highlight is the way AI is amplifying the value of our investment in data and technology already setting us apart. Four years after the rise of GENE-AI, its contribution to our goals, differentiation, and operating performance is clear. Since 2022, we have increased our net revenue by close to 20%, which is more than four times that of our peers on average. At the same time, we are widening our margin gap from 270 basis points in 2022 to close to 400 basis points in 2025. Looking ahead, AI strengthens our model in two major ways. It connects our capabilities, strengthening our category of one, and it improves our productivity, sustaining our capacity to invest. First, it connects our capabilities into an offering that clients increasingly need and that we can uniquely deliver. Clients are looking for a partner that can transform how they operate and how they grow. They want an AI-powered marketing engine built inside their own environment with control over their data and technology. An engine that they can plug, play, own, and control. That is what Publicis delivers for our clients end-to-end in a unique way. Sapient modernizes their technology and builds the data architecture for AI to operate at enterprise scale. Epsilon enables them to identify and engage each customer and prospect. Marcel provides the intelligence and orchestration connecting data, technology, agents, and workflows. And our media, creative, production, and commerce operations activate this engine across every touchpoint against measurable business outcomes. It means clients can know their customer individually Personalized interactions produce content faster and optimize media in real time, all safely and transparently within their own environments. This is why we are able to increase our addressable market and expand and deepen our client relationship. That is reflected in our new business leadership for the seventh year in a row and our ability to win three material AI-led transformation assignments, This year, outside of traditional pitch processes. Beyond this commercial momentum, our connected AI-powered capabilities enable to drive measurable business outcomes for our clients. Using our data and advanced analytics and predictive modeling, we have been able to significantly improve commercial effectiveness and marketing efficiency. Second, AI improves productivity, contributes to margin improvement, and generates additional capacity to invest. We have focused our efforts on two priorities. Making our talents AI-fluent, equipping and training more than 90% of our 114,000 employees with AI productivity tools, more recently thanks to our partnership with Microsoft. Deploying agents to automate manual and repetitive tasks, we have an objective of reducing them by an estimated 25% to deliver efficiencies and allow our people to focus on higher value work. These efforts have had a visible impact on our financial KPIs as reflected in the improvement of our people cost as a percentage of net revenue in H1 and in our increasing revenue per head. on our ability to drive further margin improvement while reinvesting more each year in technology, talent, and capabilities that will drive future growth. AI, therefore, creates more operating leverage that allows us to invest in talent, do more for clients, and deliver EPS goals for our shareholders. Now, let me hand over to Loris to take you through the detail of our members.

Thank you, Arthur, and good morning, everyone. Let me begin with the key highlights of our Q3 2026 revenue. Revenue reached €4,614,000,000, up 6.9% on an organic basis. Net revenue was €3,808,000,000. Organic growth was plus 5%, coming on top of plus 5.7% in Q3 2025. There was a net positive impact of currency, of 150 basis points due to the appreciation of the USD and some Asian currencies versus the Euro. And acquisitions, net of disposals, contributed a positive 140 basis points, reflecting the impact of our 2025 and 2026 acquisitions, namely 160 over 90, p-value, HEPMIL, and fabric. When factoring in those items, Net revenue was up 7.9% on a reported basis. Let's move to the next slide and our Q3 net revenue by region. North America was up 4.4% on an organic basis. This comes on top of a very high comparable of plus 7.1% in Q3 2025. Organic growth for the first nine months was in line with Group's total at plus 4.8%. There was a positive impact of the USD versus Euro on top of the contribution from acquisitions and reported revenue was up 7.6% in Q3. Europe delivered plus 4.7% in organic growth. And it is worth noting that when excluding the impact of technology, Organic growth was up 7.7%. There was a positive impact of the pound sterling versus the euro leading to a reported growth of plus 5.3% for the region. Asia Pacific posted plus 5.4% organic growth. There too, there was a net positive impact of currency appreciation versus the euro on top of the contribution from acquisitions leading to a reported growth of plus 10.1% in Q3. Latin America continued to perform very strongly and was up 23.8% in organic growth. When adding the positive contribution of currencies and acquisitions, reported growth was plus 31.4%. And finally, Middle East and Africa was down minus 1.4% as it continues to be impacted by the conflict. Reported net revenue were up 5% thanks to the positive impact of currency changes. Let's get into more details for each region, starting with North America. The US, the group's largest geography, representing 59% of our net revenues, posted organic growth of plus 4.5% after plus 7.1% for the same period last year. This brings the year-to-date performance slightly ahead of total group at plus 4.9%. Connected media and intentional creativity were both up mid-single-digit in Q3, benefiting from new business wins and scope expansions. And technology turned positive, growing low single-digit this quarter. Let's turn to the performance in Europe on the next slide. The region posted plus 4.7% organic growth, and when excluding technology, grew at a very strong plus 7.7%. The UK, which represents 9% of our net revenue, was broadly flat on an organic basis in Q3, due to the conflict in the Middle East, which continues to impact publicly sapient UK hubs. When excluding technology, organic growth was plus 7.1%, driven by very strong growth in connected media. France, which represents 5% of our net revenue, was up 4.5%, with connected media and technology performing well. Lastly, our operations in Germany and in Central and Eastern Europe were up 7.7% and 7.2% respectively, driven by strong growth in connected media. 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 5.4% organically. China continued to be very strong at plus 10.6% organic growth in Q3. India was also up double digits. Southeast Asia continued to be softer, still bearing the impact of the Middle East conflict. Latin America posted plus 23.8% organic growth in Q3, driven by connected media and intelligent creativity, in particular in Brazil and Mexico. As mentioned earlier, Middle East and Africa posted a minus 1.4% organic decline in Q3. For your reference, you will find on the next slide our performance year-to-date by region. As you can see, all of our regions posted a strong organic performance leading to plus 4.8% in total for the Group year-to-date after plus 5.5% for the same period last year. Last, net revenue was up 3.3% over the period and on a reported basis. Moving to my last slide, net financial debt. The average net debt over the last 12 months was €1,196,000,000 in line with our expectations. This represents an increase of €239,000,000 compared to last year due to the acquisitions completed as well as the impact of the lower USD versus the euro in the last 12 months. We closed Q3 2026 with a net debt of €1,598,000,000. This concludes my financial presentation and I now give the floor back to you, Arthur.