Good evening, good afternoon, everyone, and thank you for joining us today for Pluxee Third Quarter Fiscal Year 2024 Revenue Call. So I'm Pauline, Head of Investor Relations. So today, our call will be driven by our CFO, Chief Financial Officer, Stéphane Lhopiteau, based on the investor presentation that is now available on Pluxee's website. Turning to slide three, here is our agenda for the call. Stéphane, we'll start by walking you through the highlights and the key figures for the third quarter before taking a deep dive into our financial performance for the top line. We will then provide an overview of the first steps we have taken in executing our M&A strategy, and we will finish with our fiscal 2024 and midterm outlook. Before closing the call, Stéphane will answer your questions during the dedicated session. And with that, I will hand you over to Stéphane.
Thank you, Pauline. Hello, everyone. It's really my pleasure to be with you today to present the revenue performance that Pluxee delivered in the third quarter of its fiscal year 2024, starting with our key highlights and achievements on page 5. Q3 was another quarter of strong growth for Pluxee. We continued to deliver solid performance across all key business indicators. Such performance was fueled by sustained positive market trends and disciplined execution. As a result, we delivered double-digit organic revenue growth, with still a notable contribution from float revenue. At the same time, our operating revenue organic growth in employee benefits proved to be robust despite a tough comparison basis in this quarter. We also met the first milestone in the execution of our M&A strategy.
In June, we signed an agreement to acquire Cobee, a Spanish fast-growing digital native player in employee benefits, which will help Pluxee strengthen its position and offering in Spain. We also formally closed the terms of our strategic partnership with Santander in Brazil. I will talk in more detail about these two transactions later. Turning back to our financial performance, the strong revenue growth in Q3 allows us to raise our full-year organic revenue growth target for the second consecutive quarter, and now up to circa +18%. At the same time, we reaffirm both our fiscal 2024 recurring EBITDA margin objective and the medium-term outlook that we presented back at our Capital Markets Day in January. Focusing back on our current performance, let's now look at our revenue trend over Q3 on slide number six. In Q3, we continued to deliver on our solid revenue growth trend.
Total revenue increased by +17.9% organically to EUR 297 million, with a 4.1% negative currency effect mainly related to Turkey. This achievement is a result of our capacity to deliver continued strong business performance in employee benefits while facing progressively a higher comparison basis. Float revenue also contributed substantially to our Q3 performance, as first, growing business volumes have continued to increase the float baseline in the balance sheet year-over-year, and second, interest rates have been maintained at a high level. Overall, for the first nine months, total revenue came in at EUR 889 million, corresponding to a +21.8% organic growth rate. Such revenue growth was fueled by strong delivery on our business development KPIs over the first nine months, as disclosed on page seven. Pluxee has seen continuous strong business momentum over the first nine months.
Year to date, we recorded new client wins for more than EUR 1.2 billion in annual recurring business volumes, tracking well above our full-year target of EUR 1.3 billion. Our net retention rate year to date stands at 103%, slightly ahead of our midterm objective, as we work with our clients in renewing existing contracts, growing the related portfolio, and cross-selling them new opportunities. In this respect, the further increase in average face value of EUR 1 billion over the first nine months was a key contributor to net retention, reflecting our capacity to translate existing legal cap headroom and further legal cap increases into business volume growth in all our markets. This gives us confidence in our capacity to deliver on our business volume target, as set for the full year.
In terms of financial performance, since the beginning of the year and in Q3, we are indeed on track with all key revenue metrics, starting with business volume issued, BVI, on slide number nine. In Q3, we recorded a total of EUR 6 billion in business volume issued. Such BVI increased to EUR 4.6 billion in employee benefits, representing a +10% organic growth over the quarter. Looking at the first nine months, we recorded overall EUR 18.3 billion of business volume issued, with employee benefits BVI increasing to EUR 13.8 billion versus EUR 12.5 billion in the year before. The related EUR 1.3 billion increase in employee benefits at constant rate represents a +12% organic growth driven by higher net retention, including increased average face value, and by robust business development.
BVI from other products and services amounted to EUR 4.5 billion, as the positive underlying new business trend was offset by phasing effects, including the fiscal year 2023 major contract in Austria, referred to in our prior releases, and by the discontinuation of the public benefit contract in Latin America. BVI being a major contributor to our top line, let's now look on page 10 how it translated into strong organic revenue growth across all regions in the first nine months. In Latin America, total revenue grew by +23% organically year to date, including +16% in Q3. Double-digit growth was delivered by almost all countries, including Brazil and Mexico, despite the more challenging comparison basis. In Continental Europe, total revenue grew organically by +15% year to date and by +8% in Q3.
Positive business trends, particularly in meal and food in Belgium, France, and Spain, on one hand, and continuous high interest rates on the other hand, were partially offset by high comparison basis, especially in Eastern and Central Europe. Finally, turning to the Rest of the World, the region posted total organic revenue growth of +34% in the first nine months, accelerating to +42% in Q3. This resulted from the good performance delivered across the region, especially in Turkey, India, and Israel. Such global growth in total revenue was powered by both operating and float revenue, as you can see it when turning now to slide number 11. In the third quarter, we recorded total revenue of EUR 297 million. Operating revenue reached EUR 257 million, with double-digit organic growth, while such revenue continued to benefit from our strong business momentum despite last year's high comparison basis.
Float revenue increased by +76% organically to EUR 40 million in absolute value, as a result of the continuous float expansion year on year, and the interest rate stabilizing at a high level overall. Looking at the first nine months, operating revenue grew organically by +15% to reach EUR 774 million, and float revenue grew organically by +89% to reach EUR 115 million. We will now go into more detail for these two categories of revenue, operating and float, starting first with how operating revenue has evolved by activity on slide number 12. In Q3, we recorded EUR 220 million operating revenue in employee benefits, representing +15% organic growth. This was driven by the rise in average face value, as we continued to benefit from the increase in the legal caps seen over the last two years, coupled with new client wins.
This positive business trend was also supported by the elevated take-up rate, as our excellent sales team continued their effort in demonstrating and delivering Pluxee's strong value proposition for both clients and merchants. Operating revenue in other products and services decreased by -6% organically to EUR 37 million, as growth in engagement solutions could not fully offset the effect of a discontinued public benefit contract in Latin America. Excluding the impact of this contract, operating revenue in other products and services would have recorded positive growth in Q3. Turning now to float revenue on slide 13. Float revenue increased by +76% organically in Q3 2024 to EUR 40 million, in line with Q2 2024. This is a likely plateau in quarterly float revenue, depending on how interest rates will evolve going forward.
This was driven by sustained favorable business trend in BVI, increasing the float baseline in the balance sheet year-on-year, as well as by the stabilization of interest rates at a high level overall. Looking at the first nine months, float revenue increased to EUR 115 million, representing +89% organic growth year to date, fueled here again by both the growth in negative working capital, thanks to rising business volumes issued, and a more favorable economic environment in terms of interest rates in our fiscal year 2024 versus 2023. Looking ahead, we see a slight moderation in float revenue in Q4 compared to Q3, which will represent strong year-on-year growth. That's it for our strong organic growth in Q3.
Now, I would like to introduce the two significant milestones that we have just achieved in the execution of our M&A strategy, starting with the acquisition of Cobee on slide 15. We are excited by this transaction. Cobee is a fast-growing digital native player, which currently offers 12 distinct benefit solutions through its best-in-class technology suite and that are distributed to more than 1,500 clients. Cobee is a rapidly growing business with organic revenue growth of over 100% expected in Pluxee fiscal 2024, and Cobee is highly complementary to Pluxee. It also offers growth opportunities outside Spain, with an emerging and fast-growing business in Mexico. With this acquisition, we will reinforce our position in the Spanish market while enhancing our existing employee benefits offering and tech capabilities. The transaction will be fully funded from existing financial resources, with limited impact on leverage.
In terms of value creation, it is expected to be neutral to EBITDA and free cash flow in fiscal 2024, and accretive to recurring EBITDA margin and net income from fiscal 2026. Let's now look at our second key M&A milestone on slide number 16. Following the approval by the Brazilian regulatory authorities, I am pleased to announce that we have now formally entered into a strategic partnership with Santander in Brazil. This is a significant step in our development in the country. It sees us entering into a 25-year exclusive distribution agreement, gaining access to Santander's 1.4 million B2B clients and integrating Santander's employee benefit activity in Brazil. It provides a unique opportunity for Pluxee to extend its leadership in the meal and food benefit market in Brazil by leveraging Santander's 4,000 sales managers, especially in accelerating SME penetration.
The deal structure will see Pluxee retain 80% controlling interest in our combined entity, and Santander will hold the remaining 20%, with both partners being strongly incentivized on the partnership success. We expect these partnerships to be accretive to organic growth and recurring EBITDA margin as early as fiscal 2025, with further acceleration onwards. Then, we expect the deal to be neutral to net income post-minority interest in fiscal 2026 and accretive thereafter. The related scope effect is negligible for fiscal 2024, as presented in Appendix 1 on page 21, where you will also see our other modeling consideration, including a change in other operating income and expenses. This is mainly a function of M&A activity, IT restructuring, and impairment charge. These items will also affect the effective tax rate in fiscal 2024.
After this update on these two M&A milestones, I will now move to our final section, which is about Pluxee's fiscal 2024 and midterm outlook on slide number 18. Our continued strong performance over the first nine months, especially the strong tailwind from high interest rates, enabled us to raise for the second time our organic revenue growth target for fiscal 2024. As such, we now expect organic revenue growth to reach circa +18% compared to +15% to +17% previously. Our recurring EBITDA margin target remained unchanged, meaning at least 35%, including standalone costs. Then, in light of our recent business trends, we reiterate our midterm financial objective to reach low double-digit organic revenue growth for fiscal 2025 and 2026, circa 37% recurring EBITDA margin in fiscal 2026, and above 70% cash conversion on average over fiscal 2024 to 2026.
Before opening the Q&A session, I will now conclude this presentation by a quick wrap-up about our recent achievement on slide number 19. We are pleased with this set of results delivered both in Q3 with +18% organic growth and over the first nine months with +22% organic growth in total revenue. Supported by well-oriented and sustainable macro market trends, we are executing on our strategic initiatives with discipline. It has enabled us to continue building a track record of sustained growth driven by a compelling value proposition for all our stakeholders, clients, consumers, and merchants, as well as by product innovation. The growth in business volume will continue to support both operating and float revenue, underpinning our midterm financial objectives. Alongside the growth in business volumes, our business model built on operational leverage will allow us to extend our recurring EBITDA margin.
Last but not least, our constant focus on cash generation will reinforce our net cash position, which will enable us to continue to deploy our targeted M&A strategy in line with our capital allocation policy. And with that, Pauline and I will be happy to take your questions.
This is the conference operator. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone with a question may press star and one at this time. The first question is from Julien Richer. Please go ahead.
Hello everyone. Three questions for me, please. The first one is more on the clarification of float revenue evolution in Q4.
You mentioned the slight moderation in Q4 compared to Q3 in float revenue. Does it mean something like mid-30s for Q4? Going forward, I know it's maybe a little bit early, and it depends on how interest rates will evolve, but if all else being equal, let's say, how do you think float revenue might evolve in 2024, 2025? Another clarification on Continental Europe, the slowdown you observed in Q3 in organic revenue. You mentioned Eastern and Central Europe. Could you please give us the exposure of Eastern and Central Europe at the group level? What is the contribution of those regions to total revenue? The last one on the situation in France, any news on the regulation front in France and your take, especially with the low visibility we have today with the elections? Any view on that would be appreciated.
Thank you.
Okay, Julien, thank you for your question. So regarding the evolution of float revenue in Q3, yes, the slight moderation, very hard to precise, and we don't guide precisely on a quarter-by-quarter basis on float revenue. But yes, slight moderation versus what we delivered in absolute value in Q3, what you just indicated might be a fair estimate so far. But we'll see. Again, that will depend on potential evolution of interest rates in a way or another. And going forward, it's even harder to say. What we can repeat again is that we will have the float baseline in the balance sheet. We will still grow going forward based on our ability to deliver improvements in the business volume.
That will be a first driver, a second one that we don't master, except that, as we said before, we have already started to extend a little bit the maturity of our investment, which will protect us a little bit. On the slowdown of Continental Europe and with this high comparison basis in Central and Eastern Europe, this is more related to the midterm contract. We had a high comparison basis the year before. And so we don't disclose details for sub-regions or countries. What I can tell you is that behind these areas, we have countries like the Czech Republic, Poland, or Romania with a high comparison basis. And so this is not a trend for the long term. This is just what we have in Q3 for these countries. And your third question was about the potential evolution of regulation in France.
So we are all waiting for what's going to happen next Sunday. And what we can only tell you that we are still highly committed to push for the modernization and digitalization of our business in France. And whatever is the outcome, we will see if what was contemplated, it's likely going to be put on the hold for a few weeks, a few months, we'll see. But we still consider that whatever is the final outcome of business is really at the heart of purchasing power improvement for the citizens and with a lot of value to bring to all stakeholders, to our clients, to the merchants. So we will see what's going to happen, but we will go on pushing for the digitalization.
Okay. Thank you very much.
The next question is from Praveen Gupta, Barclays. Please go ahead. Hello.
Thanks for taking my questions.
Just follow up to Julien's question there on French regulatory environment there. In May, we had French Court of Auditors highlighting social security deficit and advising government to curb on some of those to fund that deficit. Do you see any possible risk in medium term to relevant employee benefits in France, including meal vouchers on the back of that particular report, not just the current political environment? And then currently, the use of meal vouchers in supermarkets is allowed till December. Do you see any risk of future government not extending this beyond December 2024? I appreciate visibility is very low on this. And then finally, on the other operating expenses, can you just clarify more on that? What's exactly driving this rise to EUR 9,200 million versus around EUR 80 million previously? What was the provisions related to Santander deal or Cobee acquisitions were not previously factored in?
What else are we missing here? Thank you.
Okay. Thanks, Praveen, for your questions. So regarding the deficit that was reviewed by the Cour des comptes in France, this is true that our business was quoted in some press releases, but it's a really very, very small part of this deficit. And what matters even more is that I think it should be fair to consider all the value that our business brings to the French economy. When you make a pure tax calculation, again, this is a very small portion of the deficit versus much bigger things. And there is this very strong value that we can bring overall. And I think that there are many people who are aware of this strong value that we bring overall.
Regarding the use and the potential extension of the use of the meal voucher to food voucher, so we'll see what's going to happen. We have always said that for us, that should be the right thing to do to find the right balance between initially, all these vouchers were developed to be meal benefits. So the extension to food makes some sense for the purchasing power of our citizens in the current situation. But we strongly believe that we should keep something just for the restaurants in order to protect the initial purpose of these benefits. Regarding the other operating expenses, so the rise is not related at all to spin-off or rebranding or carve-out costs. I mean, there is a very, very slight, very small increase versus what we had initially estimated.
The EUR 60 million that we had unveiled at the time of the Capital Markets Day was fully related to this. At that time, we didn't have a view about the potential impairment which came. We disclosed this potential impairment as part of our H1 release, which is related to a digital platform that we developed with a partner. Now we are focusing on our own digital platform. So this is the first big part. It contributes to approximately one-third of the increase. Then we're going to have some restructuring costs, which are partly related to our new situation as a standalone company with the need to renew a few people overall in the company. Here and there, in some countries, we are also optimizing the way we're going to deliver our business going forward, which leads us to right-size, I may say, our business.
There is a bit of restructuring. Last but not least, we have confirmed, announced in mid-June and confirmed the Cobee transaction, confirmed today the closing of the Santander transaction. We have a bit of M&A activities and with some costs related to this acquisition, which are going to eat as well our other operating expenses. So it's really that and nothing else. It's too early to make a detailed disclosure, but of course, as part of our full year disclosure, we will disclose all the details on this.
Thank you very much. Really appreciate it.
The next question is from Hannes Leitner with Jefferies. Please go ahead.
Yes, thanks for letting me on. I have a couple of questions. So the first one, I would say, is in regards to your M&A strategy.
Could you maybe elaborate what are kind of the missing parts in the offering you are having? And then in terms of the float revenue, sorry. And then the other second question is in terms of the face value. You mentioned that you see some tailwinds here. Can you maybe talk here per different regions where you are standing and where basically the regulations are and how much of the corporates have passed on already some face value increases? Thank you.
Regarding the M&A strategy, I don't have in mind any missing parts. I think we have been clear on what we might be interested in in terms of M&A opportunity.
We have explained that on this M&A level, we have a very targeted approach, very targeted and disciplined approach in order to be able to see opportunities and with key levels, clearly identified levels, which are the ability to increase our market shares and even more in underpenetrated markets to be able to extend our product offerings and/or to acquire new tech capabilities. The good thing being with an acquisition such as Cobee that we have been able to tick all these objectives. And so we are more in this approach to focus first on organic growth and then accelerate by seizing opportunities. And so we don't have in mind any specific missing parts that we should target in order to complement our offering. Regarding the face value, there are some tailwinds relating to the increases in legal caps.
To fully connect your question with some specific regions, as we disclosed it at the end of H1, we have seen in the first half of fiscal year 2024, increases in legal caps in 14 countries, meaning in almost half of the number of countries in which we operate. So meaning that this is quite well spread. So we have these tailwinds in all the regions. And then the pace of increasing the legal caps, either through specific decision indexation or negotiation, because there are many different situations in all the countries, it's quite well spread.
Thank you for that. Maybe just a quick follow-up. In regards to your guidance, the upgraded guidance implies 8% organic operating growth in Q4. How should we think about this exit rate relating to your medium-term double-digit growth guidance?
The main reason behind this is limited and you made the math.
Well done on this, and you did it great. The main reason is the high comparison basis. So we have a very high comparison basis in Q4 of last year, especially related to the change in regulation in Brazil at the time when we fully benefited from the ban in discount, in negative commission, while this was afterwards amortized all along the quarters which followed by additional agreements with our clients. So this is really the main reason. And to be even more reassuring, if you look at the growth in business volumes, we are still delivering right now in Q3, which are some kind of leading indicators on what our revenue will look like going forward.
You can be reassured that, yes, with this double-digit organic growth on employee benefit business volumes, plus the potential upside that we always have with the take-up rate, we are confident on our ability to deliver on this low double-digit organic growth in terms of revenue going forward.
Thank you so much. As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question is from Justin Forsythe with UBS. Please go ahead.
Thank you. Thank you. I've got six questions. Just kidding. But a couple from me, actually. So I wanted to hit on the growth in business volume.
It looks like if I take the 9-month run rate and I deduct the 6-month run rate that you gave at the 1H, to me, that looks like if you add up the face value increases and client wins and incremental in 3Q of EUR 750 million, maybe I'm not doing the math right, but it looks like your face value or your volume increased about EUR 400 million. So was there a negative impact somewhere there in business volume? And it also looks like your take rate went up pretty significantly, even maybe above where we had expected it to in employee benefits. Was that solely the impact of the regulation in Brazil, or was there something else at play there? And I just wanted to ask a broader holistic question. You've answered a couple of questions on the French snap elections coming up.
Can you be clear with us in terms of whether there's any proposals that the Le Pen party has in relation to meal vouchers or if there's been any dialogue that they've had in terms of new propositions that they might roll out to benefit small businesses or anything like that? Thank you. Okay. Can you repeat your second question? Because you've been on the broadcast and then you had the question about the election at the end, but in the middle, that was about? Oh, yeah. Just on the take rate, if there was anything outside of the negative commissions in Brazil. Okay.
Okay. Okay. Good. So I'm not sure that I was able to capture all the way you did this calculation regarding the change in business volume, but what I can maybe specify is that the growth in business volume is related to three levels.
The first one is the growth in average face value. The first nine months, we had EUR 1 billion increase in business volume related to this average face value. We have the growth of our client's portfolio, including cross-selling. The growth of portfolio is related to cross-selling and also the change in the number of employees that we might have with our clients. We have another key contributor, which is the net client wins, which is the net of client that we win less client that we lose. We disclose clearly the client wins for EUR 1.2 billion. What I can tell you is the client win is much bigger than the client's losses.
So when you combine the average face value, the extension of the cross-selling and portfolio plus this net client wins, you come with a EUR 1.5 billion increase that we see in the business volume. Regarding the take rate, we are currently trading for the first nine months of fiscal year 2024, a take rate that is approximately 20 basis points bigger than what it was in fiscal year 2023. And this is what we have for the full year. Coming back to the question which was raised by Hannes just before, this is again a good example to be confident in our ability to deliver on low double-digit growth going forward. We are still improving this take-up rate. And it's more related to the ability, the strong capacity of our sales force to convince clients and merchants and to provide them with our strong value proposition.
And regarding your third question, we have no view on this right now. We have been in discussion with some civil servants which are part of the ministries so far. And then we'll see. We have no specific view on what might come from one party or another. We have just been in discussion so far, the Pluxee teams, with the people who have been in charge. For the rest, nothing was, to the best of my knowledge, nothing was indicated from any other parties regarding this. So we'll see.
Got it. Thank you very much.
The last question is from Ed Young, Morgan Stanley. Please go ahead.
Thank you. My first question is on your guidance. You've obviously upgraded your organic growth expectations again by around, I guess, 200 basis points at the midpoint, but you've left your EBITDA margin guidance where it is.
I just wanted to sort of ask you to sort of maybe talk through how you think about setting that guidance. Is that stayed the same because you're just trying to be conservative? Is that because you're sort of mindful about reinvesting some of that excess maybe to drive stronger growth? Or is that because the organic growth is being driven by better Turkey hyperinflation? So FX nets it off, and you're not expecting to see sort of much better in terms of an absolute revenue number. It'd be useful if perhaps you could talk about how you think about setting that guidance and the basis behind it. And then the second question was on Cobee. You've said it will have a very limited impact on leverage. It's obviously got a very high growth rate. It all suggests it's a very sort of small business.
So is this a really material acquisition for the group in terms of where it can be in several years, or is this just sort of a so we should just think of this as a sort of small bolt-on and a kind of signal about the kind of deals you'll do over the coming months and years? Thanks.
Okay. So regarding your first question, it's always a challenge for any company to balance the organic growth in the revenue and the improvement in the EBITDA margin. I think we are doing quite good when you think about how we started at the beginning of the year with this low double-digit objective, and we have been able to raise this organic growth up to 18% now.
And we also had committed at the beginning of the year on this 30.4% EBITDA margin, including standalone costs, and we raised it as part of our H1 release. So we are on a good track to deliver very well on these two indicators. And there is no we are very pleased with this. And of course, you're right, there is a little bit of opportunity for us to invest and to prepare for the future. And leveraging, especially the growth in float revenue, a significant part of our investment goes through OpEx and not CapEx in tech. And yes, we are also investing in order to prepare for the future, in order to feed the low double-digit organic growth going forward. Regarding the Cobee acquisition, so this is not insignificant, but this is not the big transaction. It's not very, very material, and we have very strong expectations.
It's going to help us to gain this strong leadership position in the Spanish market. We have strong expectations, strong synergies based on the high complementarities of Pluxee, which is going to bring very strong merchant networks and Cobee, which has this fantastic benefit offering. So we expect strong synergies from this. So it's not going to be a very material change to Pluxee, but this is a very satisfying first milestone in terms of acquisition, meaning that the Santander is also very exciting, but it was already engaged in the year before. And regarding the beginning of your question in terms of leverage, yes, it's going to be small because it's not a very significant price. It's a fair price.
We have a fixed price, and then there are going to be some earn-outs which are going to be related to the ability of this company together with our teams because we're going to combine everything to deliver the strong synergies. The current shareholders of Cobee are also highly incentivized to deliver all together the strong synergies. I think there are no more questions. Thanks a lot, everyone, for attending the call. As said before, we are pleased with this set of third-quarter results. We are confident that we can build on these results in the final quarter of fiscal 2024 and beyond. Thanks again, and looking forward to speaking to you at the end of October for our 2024 full-year results. Have a good evening, a good day. Goodbye.