Ladies and gentlemen, thank you for standing by. I am Jamie, your Chorus Call operator. Welcome, and thank you for joining the Arcadis conference call and live webcast to present and discuss third quarter 2026 trading update. All participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. Anyone who wishes to ask a question may press the star key followed by one on their telephone any time during the call. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephones. At this time, I would like to turn the floor over to Ms. Sinem Baykalöz, IR Officer. Ma'am, you may proceed.
Good morning, good afternoon, everyone, and welcome to our 2026 third quarter trading update conference call. My name is Sinem Baykalöz, and I am the Investor Relations Officer. Joining me on the call are our CEO, Heather Polinsky, and our CFO, Simon Crowe. As usual, we will start with a presentation followed by Q&A. Before we start, we would like to draw your attention to the fact that management may reiterate forward-looking statements made in today's press release. Please note the risks related to these statements, which are more fully described in the press release and on the company's website. Now, please, over to you, Heather.
Thank you, Sinem, and hello, everyone. Welcome to our third quarter 2026 results. We delivered another strong quarter and continued to build momentum. Growth accelerated, margins expanded, and backlogs strengthened. Importantly, the pattern of our performance reflects the priorities we have been putting in place throughout the year. Focus. Growth is being driven by the markets where we have chosen to focus, including water, energy, semiconductors, life sciences, and digital infrastructure. Simplify. We are progressing our portfolio actions, simplifying our operating model, and aligning capacity more closely with demand. Perform. Disciplined execution is translating into margin improvement, stronger billability, and cash performance.
Our strategy has one clear underlining objective: continuing to get closer to our clients and converting our expertise into more consistent growth and profitability. The momentum that we have been building throughout the year reflects these strategic priorities and our focus on disciplined execution.
We reaffirm our 2026 outlook and are using any headroom we have to, one, reinvest in, and two, transform the business. Let me take you through the quarter in more detail. We have green arrows across the board. Net revenues increased 4.3% in the quarter, capitalizing on sustained client demand. More importantly, the pattern of growth matters. It is precisely in the markets we identified at our Capital Markets Day as strategic priorities. Margin improved year-on-year to 12.5%, driven by our operational actions while we continue to invest in the capabilities needed to deliver sustainable, profitable growth. Our backlog continued to grow, giving us confidence and greater visibility on our future trajectory, which I will expand on shortly. And all while voluntary turnover continued to reduce, reflecting that we are bringing our people along with us on our transformation.
Turning now to backlog. Backlog organic growth and rolling order intake have continually increased over the last 12 months. Backlog organic growth this quarter is at 7.9%. This was driven by continued order intake strength in Water and Resilience, and major semiconductor wins in Places. Our order intake in Mobility reflects the timing of awards. Here, we remain focused on pipeline conversion, aligning our delivery capacity with expected workload and implementing our strategy. Consistent with this positive trend in backlog, organic revenue growth has also been accelerating throughout the year. This progression supports our confidence in the underlying momentum of the business and provides a stronger foundation as we move forward. A great example of this is a significant win in our Mobility business, an award from Irish Rail to deliver advisory and design services for their strategic rail review.
Let's now take a closer look at each of our business areas. Resilience remains a consistent performer with sustained growth in Q3, driven by Water across the U.S., Netherlands, and U.K., which includes Thames Water, Wessex Water, United Utilities, and the Environment Agency. In Germany, major grid expansion programs continue to support strong power growth. In Brazil, mining and critical minerals is supporting growth. The momentum we have been building throughout the year reflects the strategic priorities we have been putting in place and our focus on disciplined execution. This impact is reflected by our sustained improvement in growth and margin. Environmental restoration continues to be a differentiator across our geographies. This quarter, we are proud to have secured a multi-year environmental remediation program with 3M in Belgium to address historical PFAS contamination.
Our teams continue to invest in capabilities and client relationships that support ongoing growth across our energy, water, and environmental services. In Places, our action to focus and invest where we see the greatest opportunity are paying off. This business is starting to turn the corner, with positive organic growth of 1.2%. Underlying growth was even higher, at 4.2% when excluding the Architecture business in China. This is consistent with the performance we expect from our retained portfolio. That is a good example of the value we will achieve by being more focused, directing talent and investment toward markets where we see sustained client demand and where we have the strongest opportunity to differentiate. This will support greater growth. This quarter, growth was supported by life sciences and digital infrastructure across key geographies, and we expect to see continued momentum here.
Book-to-bill was strong at 1.3 x following major semiconductor awards. One example is the expansion of our engineering, procurement, and construction scope for a major semiconductor manufacturing program in the U.S. Going forward, we could continue to refocus our portfolio towards attractive growth markets, progressing the announced portfolio actions in China and Architecture, and directing talent and investment towards the areas of sustained client demand. Turning now to Mobility. Organic growth was strong in the third quarter, supported by major transportation programs in Germany and Canada, as well as closing several contract variations. Order intake, however, reflected the timing of several pursuits. Our pipeline in Mobility remains healthy across key markets, and we remain focused on disciplined conversion.
Our recent win is an example of this, where we are leveraging the capabilities of our recent acquisitions in Germany and Spain to win a multidisciplinary project for a major rail hub on the Munich-Berlin network. While major infrastructure programs remain central to our Mobility strategy, we are deliberately broadening the portfolio towards more programmatic, advisory, and asset lifecycle work. This creates deeper, long-term client relationships and a more balanced business alongside the inherently lumpy nature of our large design-build infrastructure awards. Capacity alignment is also important to how we execute our transportation strategy. These actions are intended to improve billability and project delivery, helping us deliver on our financial ambitions while also reducing revenue variability quarter on quarter. I'll now hand over to Simon to take you through the detailed financial performance of this quarter.
Thank you, Heather. In the third quarter, we continued to focus on our clients, simplify our operations, and drive a performance culture. Our third quarter results show that our actions are starting to bear fruit. Our margin expansion has continued to 12.5%. The improvement reflects continued disciplined execution in Water, in Resilience, progress in Places following the cost actions taken in the first half, and growth and margin coming from contract variations in Mobility. Lower overhead staff costs and our continued cost control also contributed with growth and a more scalable cost base supporting operating leverage. At the same time, we're continuing to invest in the operating model, commercial capabilities, digital, and AI. These investments are mostly funded out of operating cash flow and are important to future growth, but may impact the pattern of quarterly margin development.
We are reiterating today our margin guidance for 2026 of 11.7%-12% EBITA. Third quarter cash development was solid year-on-year and supported by our laser focus on improved cash collection and billability. Our working capital percentage as a percentage of annualized gross revenues came in at 12.4%, well below last year's 14% and in line with seasonality. We remain focused on billing, collections, and contract terms as we move towards year-end, and we're confident in our trajectory for the fourth quarter. The momentum we've been building throughout the year reflects the strategic priorities we've been putting in place and our Focus on disciplined execution. This impact is reflected by our sustained improvement in our growth and margin.
For the divestment of our Architecture business, we have preparations and separation planning underway. We have progressed the implementation of our China operations exit, addressing the necessary execution requirements and legal documentation. On a year-to-date basis, the indicative positive impact of these divestments on performance is approximately 150 to 200 basis points for organic net revenue growth and is around 100 basis points for operating EBITA margin. While we anticipate more benefit from the growth created by Focus, these actions are consistent with our strategy to Focus on higher growth and margin businesses. We continue our rightsizing efforts and review of other non-core activities to further optimize our portfolio. Turning to the actions supporting a simpler and more efficient organization.
In the first nine months, we recorded approximately EUR 42 million of restructuring costs and EUR 15 million of other non-operating costs, reflecting the actions we are taking on rightsizing and implementation of our simplified client-centric model. Importantly, these actions are starting to translate into the operating performance of the business. We are building a lower and more agile cost base with greater accountability, improved billability, and better alignment of resources with workload. As communicated previously, we expect the cost of that program to contribute approximately 40 to 50 basis points to our 2026 operating EBITA margin. There is still work to do. In the fourth quarter, we will continue targeted business and overhead rightsizing and implementation of the simpler client-centric operating model.
Looking into 2027, as we set out at Capital Markets Day, we are targeting approximately 1,000 roles as part of overhead rightsizing while continuing to hire selectively in our growth areas. We expect the remaining Reset measures to be completed by the end of 2027. The associated restructuring costs are expected to be approximately EUR 60 million -EUR 70 million in 2026 and approximately EUR 70 million in 2027. This is not simply about reducing cost, it is about creating a more scalable organization, improving billability and accountability, and ensuring our resources are aligned with where we see the strongest client demand. Our ambition continues to be the EUR 1 billion of EBITA, and this requires driving growth, simplification, and a performance culture. With that, let me hand back to Heather.
Thank you, Simon. Let me close by coming back to momentum, because for me, this is about much more than the results of one quarter. Our simplification is designed around one objective, getting closer to clients and converting our expertise into more consistent growth and profitability. Over the last nine months, we have built a renewed executive team, met with over 200 clients, developed and communicated a clear strategy focused on immediate delivery, and at the same time, reset the organization for a new way of working. We have done that while continuing to invest in the business and deliver for our clients. Growth has recovered faster than we initially expected, but that has taken investment, and we will continue to invest in the people, capabilities, and transformation required to sustain that growth. This may impact the pattern of margin development.
Just as importantly, we have begun building the organization behind the strategy, and our client connections are giving us a sharper insight into where we can differentiate and where we need to improve to more consistently win. Capital Markets Day was another important step, but it was not the endpoint. Immediately afterwards, we brought together 160 leaders to begin taking the strategy through the organization. We are now moving from that leadership cascade to mobilizing 34,000 Arcadians around the same direction and priorities. We are building a stronger cadence of execution, greater clarity on where we Focus, simpler ways of working, clearer accountability, and a clear performance mindset.
That is why I see the momentum in our third quarter performance as important. It provides evidence that the actions we are taking are gaining traction and creates the opportunity for us to continue investing in long-term value creation.
With that, let's open the call for questions.
Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their telephone. If you wish to remove yourself from the question queue, you may press star and then two. Please use your handset when asking your question for better audio quality. Anyone who has a question may press star and then one at this time. In the interest of time, we do ask that you please limit yourselves to two questions. One moment for the first question, please. Our first question today comes from Sangita Jain from KeyBanc Capital Markets. Please go ahead with your question.
Great. Thank you for taking my question. One may be on the net revenue growth for this year. Obviously, Q3 was very strong and the order intake has been also very strong. How should we think about Q4? Should we think about the strength continuing and you maybe getting to the high-
We are confident in our backlog. You are right, we are seeing progress. As we have mentioned, not only have we been able to convert the backlog into net revenue, we are seeing that backlog grow. We are confident in our fourth quarter, our performance.
Great. Thank you. Then maybe a little bit detail, if I can get some on the strength in U.S. Water, the types of projects that you're seeing, the duration of the backlog, and the sustainability of the growth.
Yeah, absolutely. In our Water business, it is spread throughout the full U.S., and it's a strong contributor to our Resilience growth. The order intake and the net revenue growth have been pretty consistent, for not just this year, but actually the last several years as our team has really differentiated and focused on our ability to grow. Last quarter, we recognized hundreds of wins that we've had within our Water business. Our Water business is also a pretty diversified business. We do everything from asset management to environmental permitting and planning, to design and engineering, and advisory services for our clients. So it does bring forward all the full capabilities of Arcadis. We have both MSAs that we work under for our clients and large design build projects. So it's pretty diverse geographically as well as by subject area and service.
Got it. Thanks so much, Heather.
Yes.
Our next question comes from Dirk Verbiesen from ING. Please go ahead with your question.
Yes. Good afternoon to all. My first question is on the remark you made during this presentation on that growth is recovering faster than initially expected and requiring some investment. How should we read this? As you also said, it may affect the margin development because there are still quite an intense headcount reduction program ongoing into 2027. So what kind of moving parts should one expect, and in what way would that affect the margins in maybe the upcoming quarters? That's my first question. My second question is on the order intake in the Mobility business. I do acknowledge that it can be quite lumpy on a quarter-to-quarter basis, but the 0.7 in this Q3 is quite a low point. What does the pipeline actually look like? Do you foresee an improvement in the upcoming quarters? Thank you.
Hi Dirk, it's Simon here. On the growth, we've been really pleased with the change that we've had over the last three quarters. It's been very positive. Obviously, we started the year with a little bit of uncertainty, but we've built on the momentum that we've seen in the market. We've been focusing, as we said in the Capital Markets Day, on those strong markets, and they've been doing very well for us. So I think what we're just trying to do is be very balanced and very measured. We are taking costs out.
We're looking for that to drop down through to the margin, but we are making investments for growth. That's really key. We're hiring some great people in our strong markets, in semiconductors, in water, in pharma, and in some of our other businesses in rail and road, and power and energy as well.
We're making those investments. Those hires take time to bed in, they take time to ramp up, they take time to really be fully utilized. So we're just being a little bit balanced and cautious, but we've had a good three quarters, and we continue to push on through to Q4 and into 2027. So that's how I would sum that up. In terms of Mobility, your second question, and I'm sure Heather wants to come in here as well, but look, it is a lumpy business. We've had some really good projects, and we continue to build on the very good pipeline that we have. Obviously, we're looking for those to convert. But it is lumpy, and if you look back over history over the last few years, it is a lumpy business.
One thing we are doing is focusing on some of the medium and smaller end. We don't want to rely on these large projects all of the time. We love these large projects, and we really welcome the large projects. But ultimately, we have some great teams and great resources across the world that we deploy onto these projects. So we're looking to make sure that our strategy is very focused on winning big, but winning small and winning medium projects as well. Heather, perhaps you've got something to add.
Simon, I think you said it. We have won quite a few MSAs this year for our Mobility business. I think you are all aware we do not book the MSAs. They are not counted in our order intake. Therefore, that is one of the reasons we have such a strong belief in our pipeline, because converting those, in some cases, we are a single awardee, and in other cases, there is a significant spend and just a few awardees, and our teams are positioning for real projects that we see really coming to life to help us achieve the long-term growth and to implement this strategy.
Okay, thank you.
Thanks, Dirk.
Our next question comes from Martijn den Drijver from ODDO ABN AMRO. Please go ahead with your question.
Yes. Thank you, operator, and good afternoon. I have two questions, and I will do them one by one, please. Heather, can you talk a little bit about the behavior of clients, split into public, regulated, and private clients, in light of the higher interest rates on both sides of the Atlantic and the impact on governmental budgets?
Yes. Martijn, thank you for the question. We have actually not been seeing a significant impact in our U.S. public markets as a result of this. As you are aware, the U.K. has been a challenge for us in some of the key areas. In Europe, we are seeing projects continue to go forward because of the market drivers. We are still seeing growth across the market. We have not seen delays or cancellations as a result of interest rates. On the private side, earlier this year, we had some concern from our teams that projects would be delayed. But we are not really seeing that. We are seeing the investment, the reshoring, the digital infrastructure continue to move forward, with significant demand. I think that is reflected in our order intake and our backlog.
Understood. My second question is for Simon. Simon, if the Q4 2026 free cash flow mimics anything like Q4 2025, and you seem to allude to that, I get to a net debt EBITA at the end of this year of 1.1 x. Absent M&A, does that meet the criteria of below optimal leverage that would allow Arcadis to opt for a share buyback?
Great question, Martijn. Thank you for asking that one. I think we are pushing hard to collect the cash like we did in Q4 2025. You remember those days in Q3 and Q4 of 2025. We had a big push, and we obviously delivered a record number for Q4 2025. We will continue to push hard, and we will continue to evaluate the M&A spectrum. There are lots of really interesting bolt-ons out there. Our pipeline is pretty full, and we are evaluating things. Then obviously as we get to Q4, we will look at the opportunities to deploy the capital and our capital allocation in line with what we said at Capital Markets Day. Yes, we are positive about collecting the cash, positive about M&A, and positive about looking at the capital allocation.
Understood. Thank you.
Our next question comes from Simon van Oppen from Kepler Cheuvreux. Please go ahead with your question.
Hi, good afternoon, all. I have a question on margin development. On slide 14 of your presentation, you indicate that the cost out program is expected to contribute roughly 40 to 50 basis points to the full-year 2026 operating EBITA margin, with a further reduction of 1,000 overhead planned for 2027. Could you please clarify how much of the 2026 benefit reflects the annualization of measures you implemented last year versus new savings realized this year? How much additional margin improvement we should expect in 2027 from the annualization of the 2026 measures and the planned overhead reduction? Thank you.
Thank you, Simon, for the question. Look, I would say a lot of the margin accretion, the 40/50, has come from everything we've been doing sort of Q4 onwards from 2025. It's really difficult to parse it out. A lot of the timing is not exact. Obviously, we announce the numbers to the market, and then it takes time for things to work through. We have, obviously, guidelines, we have legislation in certain countries, we have timing to be considered. We'll work hard. Look, on the margin, we remain committed to our Capital Markets Day targets.
We're pushing and pulling every lever we can to get the growth and get the operating leverage to make sure we've got cost discipline. We'll just keep doing that. We'll just keep doing that every day, and keep driving forward. We've got good markets, so we're optimistic about growth.
And then we have good control and good discipline around costs. Where we see we do not need those resources, we will either try to redeploy them or see if we can exit those resources. It is constant, just really trying to pull the levers all the time and work on that Capital Markets Day margin.
All right. Thank you very much.
Our next question comes from Kristof Samoy from KBC Securities. Please go ahead with your question.
Thank you, operator. Good afternoon. I have a question on Mobility. You specifically made reference to the recognition of variation orders in the third quarter. I do not recall recent earnings calls with reference being made to this. Can you disclose the size of magnitudes of the variation order recognized this quarter? Is this something that we can expect more going forward? Is it linked to the increased push towards commercial ability, or is it just a one-off thing? Then, maybe that as a first question for Simon.
Yeah, Kristof. So, look, it's a couple of million EUR. It's not a huge number in terms of the variation which contribute to growth and margin expansion in Mobility. Look, as I said in the prepared remarks, it's lumpy. We win large awards, and we have a lumpy profile in Mobility. We're looking to change that so we've got more predictability of earnings and more predictability of resource allocations as we go. Look, a lot of our projects are large projects. They will have some one-off variations. Hopefully, they're all positive. Sometimes they're not, you know how our business is. It was a couple of million in this case for this quarter.
Okay. Just, I was wondering regarding your planned exits and disposals, can you already give some indication about the accounting treatment per year-end of these assets? Will they be treated as held for sale assets?
Yeah, great question, Kristof. Look, we're accelerating as fast as we can to get to that position so that we've got a nice clean set of accounts that we can show you. I can't guarantee you year-end, but I'm really pushing. If we meet those criteria, you know what they are about immediately available and all the rest of it. We're working closely with KPMG and our internal accounting guys to just make sure that we meet those criteria as quickly as we can. As you appreciate, our Architecture business has spread its tentacles throughout the business, and we've put a nice perimeter around that now. We've got advisors coming on board very soon. We've got I think about 15 work streams set up to get that all sorted out.
We've got a leadership team as well now appointed internally, which is really good, and they're highly motivated and excited about that. The same goes for China. Both Architecture and China, we'll push as hard as we can, Kristof, to get to that held for sale. That's the question Sahar was asking the last few months, how can we get there quickly? We've mandated the team to do that as fast as possible.
Mm-hmm. If you were to report them as of the fourth quarter as held for sale, that means then by virtue of simple mechanical accounting treatments, your full-year reported operating margin will grow by 100 basis points, yeah? Pro forma?
No. We will hold them for sale. We will give you the alternative performance measures which we have given today. We gave you the growth and the margin impact by removing China and removing Architecture. We will just keep those indicative until we have got a really tight handle on it, and it is held for sale. That is how we are going to report it, I expect in the fourth quarter. As soon as we meet the criteria, we will make those proper disclosures so that you can review them as you should do. We are going to be as transparent and as open as we need to be, as we want to be, and we will be as we did today.
Mm-hmm. Okay, just one last question. Resilience, there were some comments made to double-digit growth in U.S. Water. The overall Resilience organic growth is 5.6%. What type of activities in there pull down the U.S. Water double-digit growth rate? If you could give some color there, please.
Just to give you a sense, the U.S. Water portion of our business in Resilience is about 25% of that business. Just keep it in context as you look at the impact that that had. Our Germany business is really strong and also growing significantly. There are some challenges that we have talked about in the past around the U.K. We are seeing a turn as it relates to the Water program in the U.K., and we have also had some challenges that are related to our Environment business, specifically in the U.S., which is the largest part of the business. That has been a focus of ours in our transformation to be able to more consistently elevate our environmental services across the entire business.
What we are really excited about is that the areas that we have identified for Focus, the Water and Power, or Energy work is really taking off and having strong performance while our U.S. Environment business has been a bit slow.
Okay. Thank you. No further questions.
Thank you.
Our next question comes from Luuk van Beek from Degroof Petercam. Please go ahead with your question.
Yes, good afternoon. I have a question about your margin guidance for the full-year, because if I look at Q4 and I make an adjustment for the revenue adjustments you did last year, then you basically require roughly stable margin year-on-year, while Q3 showed a nice improvement driven by factors that should also continue in Q4. I was wondering, are there any offsetting factors that you expect for Q4, and is that related to the investments that you talked about? Can you elaborate a bit on those investments in a sense that, can they suddenly hit in one quarter, or will it be a more gradual process where you hire people and see the costs increase ahead of the revenues? Temporarily.
Yeah. Thank you for the question, Luuk. We continue to hire people in our strongly performing business areas. They do take time to ramp up. We also are hiring people in our services like advisory. We are building a really good business there. We just want to make sure that we are measured, and we are very measured about the Q4. We have got good momentum in the first three quarters, so we are really just being careful about Q4. But we reiterated our guidance of 11.7%-12% EBITA margin. That is where we are heading. Also we have reiterated the growth guidance as well.
So yeah, we are on course, but we are transforming the business as you know. We are turning the business around and that does take time, and it is not a linear trajectory. But we are still building on the momentum and positivity of the first three quarters.
I think, Simon, what is really important here is that we are not just in a simple cost reduction program. We are taking costs out to be able to invest in the commercial capacity of the business, in technology, in AI development, in making our systems simpler for our people, and also as we have discussed, we are in a transformation program of both our operating model and our way of working, and that is examples of the specific investments that we are making.
Thank you.
Thanks, Luuk.
Our next question comes from Natasha Brilliant from UBS. Please go ahead with your question.
Thank you very much, and good afternoon, everyone. I've got two questions. The first is just thinking about organic growth across the different GBAs or industries. If you can give us any color on how that might split between volume and pricing in Q3, if there's been any changes in those dynamics or any color there. My second question is, if we just take a step back and think about your growth versus the overall market and the current momentum that you're seeing.
Obviously, lots of moving parts across different industries, but how do you think you're faring versus competitors in the wider market? Is it that you're pivoting to better areas or are you winning more business? Semiconductors was an example that you called out. Is that just more projects that are up for grabs that's driving that growth, or are you meaningfully taking share?
Thank you.
Maybe I will start with the last one and then come to the first question. The market is strong, and we see more opportunity than the growth we are even reflecting today within the market. I think we have spoken about that at Capital Markets Day. It is pretty consistent among our peers that they have been growing at a faster rate than we have. We are happy that we are seeing the momentum, but we are not there yet.
We believe there is still opportunity for us to grow, as we talked about in our strategy that we have set out for the next three years, which is why I have said there is still much work to do. We are proud of the momentum we have created, but we are not there. The organic growth is supported primarily by strong underlying client demand and our focus on commerciality.
When we talk about Focus, there is another number of elements to it, but part of it is to make sure that we put our best people and our strongest foot forward to be able to drive success in the areas that we have the right to win, and we know that we have differentiators to win. That is what we are doing. Volume versus pricing, yes, I believe that there is opportunity for us within the market that we have not yet tapped into. From a commercial perspective, we are not buying projects to create this kind of opportunity. What we are doing is being really focused on where we pursue and how we can deliver value to our clients and outcomes.
I will just call your attention to one of the wins that we disclosed here in this conversation today, which was the semi- win, which is also about our pedigree. It is about the skills we have and the client relationships that we have that are allowing us to grow, and that was a pretty significant win for us in the quarter. We are going to focus on doing more of that, where we have the right skills, strong client relationships, and investing more in those locations.
Super. Thank you.
Our next question comes from Chase Coughlan from Kempen. Please go ahead with your question.
Hi, good afternoon, all, and thank you for taking my question. I actually just have one, going back to the organic growth expectations for Q4. As I see it, obviously Q3 was very strong. It feels like it's accelerating. The order book looks solid. I am trying to understand why the guidance, even the 3% on the top -end of that range, it feels quite conservative. Especially if you consider the revenue sort of write-down that we saw Q4 last year, making it quite an easy comp. Is there anything that I am just forgetting or any other moving parts that I should be aware of that may be as to why it might not exceed the low -single-digit range?
No, you are not missing anything. I think you have probably got used to our measured and conservative views on forward-looking measures. Look, we are feeling good about where we are. As Heather said, we are not there yet. We have got a lot of work to do. But you are not missing anything. We are just being measured and cautious about this quarter. But obviously we are pushing hard on the growth and we are pushing hard on the margin, and you have seen that manifest itself over the last three quarters.
Simon, we are really trying to keep the focus within the organization and not get distracted towards the end of the year, and that is something that we have put a lot of energy in, especially given the volume of change that we are having in the organization. Just something to keep in mind.
Yeah. No, very clear. And maybe one follow-up actually on, I guess, capital allocation. I think you already alluded earlier to the fact that Q4 free cash flow will still be quite strong. Just looking at the leverage, I am curious as to if there is any major changes in how you are viewing potential M&A opportunities in the space since the CMD, how you are viewing a buyback, anything incremental there?
I think, look, we are not promising to beat the Q4 2025, but we are pushing hard on the cash flow. That was a record last year. We are pushing hard on that. There are no big changes since CMD. It was only a matter of weeks ago. But look, we are trying to accelerate on the bolt-ons. I see a lot of opportunity there to do some smaller bolt-ons like we have done in the past that can be integrated pretty quickly and can either turbocharge a part of the world where we need to build on or a part of the sector mix or a part of the service mix.
So SATEL was a great example of that. So I have really, as I said, I have challenged the team and myself to really try and accelerate the number of things we are looking at.
It does not mean to say we are going to do them all, but at least we get the pipeline moving and that should translate into things that are actually being executed on. And then, of course, we will keep a really good eye on leverage and the capital allocation as we discussed at CMD.
Okay. Perfect. Thank you, Simon and Heather.
Thank you.
Thank you.
We do have a follow-up question from Martijn den Drijver. Please go ahead with your follow-up.
Yes. Thank you, operator. Heather, you just mentioned commerciality as one of the key drivers. You also mentioned the market is strong. You had Simon-Kucher help you with the pricing strategy. Can you help me understand what did you do on your rates and prices year-to-date, or how should we think about that going forward?
Yes.
A similar type of question. Let's do this one first.
Sure. Thanks for asking about the Simon-Kucher activities. A couple of things. We have them engaged with 27 active bids or bids that are waiting for selection. We have had two of those bids come forward, as about EUR 10 million in wins. So we're seeing the positive trajectory. We have trained hundreds of people through the efforts of Simon-Kucher to help us in really thinking about pricing in a different way, and being more creative about how we look at value pricing, and creating a greater sophistication in how we price and manage our work, particularly understanding what our strength is in the market, the value we create for the client, and their willingness to pay.
It is also helping us to be more selective in the work that we pursue, and then looking at how we can differentiate that pricing by managing scope and being more commercial, not just in the pursuit process, but through the delivery process. The last piece is they're helping us on value-based and outcome-based pricing where appropriate, and that includes talking to our clients about it way before an RFP shows up, but also how we can propose alternative solutions to our clients in the bids.
Do you dare to put a number on what the effect has been year-to-date? Is that something that you can quantify?
I think that you can look at our backlog and our bookings and see that the steps that we're taking are helping us go in the right direction.
My final question is, one of your goals was to increase that hit ratio, and you just mentioned commerciality again. Is that more the stick, accountability, and you're still going through a reduction of FTE phases, or is it more the carrot, the incentives that you've provided to the team? Can you elaborate a little bit on that element?
Well, it has to be a little bit of both. I'd like to keep all the Arcadians that are at Arcadis today and to have a hit rate, win rate, and backlog to be able to support all of them and everything we do. That's really not what we've seen. What Simon has mentioned, we've been targeted in how we've taken reductions across the organization to be disciplined in the places that we know that we have the capability of growing, that we have that right position. We've also talked about the incentives that we put in place for our teams, and really encouraging our teams to drive that.
The third piece, which you didn't mention, which isn't a carrot or a stick, is about making it easier for our teams to do what they know is right for our clients and produce that value.
I think that's going to have the biggest impact, quite honestly, versus a carrot or a stick, because our people are motivated to deliver projects for our clients. That's what Arcadians. It's why people are attracted to us, is because of our mission of improving quality of life. We only do that when our clients put trust in us to be able to deliver. So I'm really excited to remove some of the obstacles and the complexity we put around them to be able to continue to drive our win rate up.
Understood. Thank you.
We do have an additional follow-up from Dirk Verbiesen from ING. Please go ahead with your follow-up.
Yes. Thank you, operator. A follow-up on the strong order intake in the Places or the buildings activities. You do distinguish the facts on organic growth between the core and the non-core activities, but how does it balance in the core and non-core activities in terms of the book-to-bill? It looks particularly strong in the core activities with semiconductors mentioned and healthcare, I think.
How do the non-core, let's say, the potential divestible businesses hold up in this market?
Yeah. We're turning a corner in Places. The decision to sell Architecture is the right decision for Arcadis. We think that there's a natural owner, much better natural owner of that business. We had strong wins, as we said, in semiconductors, which features in Places. That really helped the order intake. I think it's a balanced outlook there, a balanced view of what happened. But I think the semiconductor win really helped us, so that was very positive. And look, we're pursuing a lot more of those, so I'm hoping that we can convert a lot more of those semiconductor opportunities going forward.
I think, Simon, just look at the 4.4% growth without China and Architecture gives you a sense.
Exactly.
The 1.3x book-to-bill gives us good visibility on moving forward. We are believing and seeing the improvement is broader than any one individual award. It's really about growth in life sciences and digital infrastructure across the U.S., Europe, the U.K., and Ireland. And that's precisely the attractive sectors we identified in CMD.
But it's fair to say that the book-to-bill in the core must have been higher than 1.3, I guess so.
Yeah. It is stronger, yeah.
Yeah. Okay, thanks.
Ladies and gentlemen, with this final question, we will conclude our Q&A session. I would like to turn the conference call over to Ms. Polinsky for closing comments. Thank you.
Thank you everyone for your questions and for joining us today. At Capital Markets Day, we said the market and opportunity are there, and our job is execution. The momentum in Q3 provides early evidence that that execution is improving. However, there is still much more to do, and we remain focused on delivering with pace. Thank you.
Ladies and gentlemen, the conference has now concluded and you may disconnect your telephones. We thank you for calling, and have a pleasant day.