Good morning, this is the conference operator. Welcome, and thank you for joining the Publicis Groupe third quarter 2024 revenue conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions by pressing star one at any time. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Arthur Sadoun, Chairman and CEO of Publicis. Please go ahead, sir.
Thank you, Alicia. [Foreign language], and welcome to Publicis Groupe third quarter 2024 revenue call. I am Arthur Sadoun, and I'm here in Paris with our CFO, Loris Nold. Jean-Michel Bonnemaille is also here and will be available to take your question offline after this session. I will begin by sharing the main financial highlights of our Q3 and outlook for the rest of the year. Loris will then provide more details on our numbers. I will conclude with the ambition we have behind our latest acquisitions. As usual, we will take 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 our presentation. There are three highlights to take out of what has been a strong but also quite busy quarter for us.
First, we continue to win market share and delivered plus 5.8% organic growth in Q3, outperforming the industry again this quarter by more than 300 basis points on average. Second, we are upgrading the floor of our 2024 organic growth guidance to 5.5% versus 5%. In Q4, we expect to be able to sustain our momentum once again, even in an environment that has become increasingly challenging since the last quarter. Third, we have consolidated our leadership in influence and commerce, investing $1 billion in the acquisition of Influential and Mars United Commerce. Let me get into the details of our numbers and our guidance upgrades. We posted plus 5.8% organic growth on the quarter.
Despite the macroeconomic context, which has not been doing any better, we are accelerating on growth compared to our four-year CAGR of 5.1% in Q3. We continue to win market share for two main reasons. Number one, our new business track record that has been particularly strong this summer and year to date, as confirmed by JP Morgan rankings. And number two, our ability to capture a disproportionate share of our client spend on personalization at scale. Thanks to the unique combination of Epsilon leading proprietary data assets and Publicis Media Scale, these highly intertwined but complementary activities, representing 50% of our revenue, continue to grow this quarter at almost 10% together. In a context of continued client consciousness to our CapEx spend, as reflected in the result of all IT consulting firms, Publicis Sapient saw sequential improvement despite an anticipated slight decline.
Creative accelerated in Q3, delivering mid-single-digit growth, driven by solid momentum on production and new business wins, including scope expansions. We performed well in all regions, thanks to the strength of our offer. The U.S., our largest geography, once again, delivered strong growth this quarter at +4%, affirming our number one position in the market. Europe deliver +4.9%, accelerating versus Q2 2024. Asia Pac recorded +6.4% organic growth, with a very strong China at +12.4%, fueled by our continuing new business win, particularly thanks to our best-in-class and transparent media operation there. Second highlight, we are upgrading the floor of our guidance. In Q2, we said that if the macroeconomic environment remained challenging for the rest of the year, we would deliver 5%.
I think we can all agree that the global context is still very challenging, even more so than in July. But despite this, we are in position to confidently raise the floor of our guidance to +5.5% organic growth for 2024, particularly thanks to our new business tailwind. Not only does the new floor of our guidance represent an even stronger acceleration compared with our four-year CAGR at 4.7%, it also means that we will deliver another year of our industry outperformance. This guidance take into account the current macro uncertainties that affect client spend, that still weigh on Publicis Sapient, like other IT consulting firms, and that would impact clients end-of-year adjustments. Achieving our previous floor of 5% would have been a strong performance. Now, delivering 5.5% will be an even greater accomplishment.
Going beyond that would require an improvement in the macro in Q4, which I think we can all agree no one sees today. When it comes to 2024, not only should we outperform on growth, but we should also continue to deliver our industry-leading financial ratios. We confirm our operating margin guidance of 18%, as well as our free cash flow expectation of EUR 1.8 billion - EUR 1.9 billion , while sustaining our industry high bonus pool and investing EUR 100 million in our AI plan. I will now leave the floor to Loris, who will take you through the detail of our numbers. I will then come back to share with you the ambition behind our latest acquisitions.
Thank you, Arthur, and good morning, everyone. Let me go into the details of our Q3 net revenue. In Q3 2024, net revenue was EUR 3 billion and EUR 423 million, up 5.6% on a reported basis. This includes plus 5.8% organic growth, which comes on top of plus 5.3% organic growth in Q3 2023. A net negative impact of currency of 1.2 percentage points due to the depreciation of USD and the Argentine peso, partly mitigated by the increase of the pound sterling versus Euro. Finally, a contribution from acquisitions, net of disposals of 1 percentage point, mostly reflecting the revenue of Spinnaker and AKA Asia, but also Influential and Mars. Let's move on to the next slide, which shows our Q3 net revenue by region.
North America remained strong this quarter, up 5.3%, including +4.7% organic growth. There was a negative impact of USD versus Euro, more than offset by the contribution of acquisitions. Europe recorded 5.6% reported growth. Organic growth was robust at +4.9%. There was also a small positive impact of the pound sterling versus euro. Asia Pacific posted a very strong +6.4% organic growth, fueled by China at double digits. Middle East and Africa and Latin America continue to perform very well, with +13.6% and +13.3% organic growth, respectively, the latter being impacted by the depreciation of the Argentinian peso versus euro. Let's get into more details for each region, starting with North America. The region was up 4.7% in Q3.
In the U.S., the group's largest geography, all activities continued to perform well, delivering 4% organic growth, with the combination of media and Epsilon growing high single digits. Creative activities were up mid-single digits, driven by new business wins and scope expansion. Publicis Sapient posted a slight organic decline due to the continued wait-and-see attitude from clients. Let's turn to the performance in Europe on the next slide. Europe recorded +4.9% organic growth in Q3. The U.K., which is 9% of group net revenue, was down 2.6%. Media and creative together were up low single digits after three years at double digits, cumulating +42% in organic growth since Q3 2020. While Publicis Sapient remained impacted by delayed DBT CapEx and a challenging comparable, particularly when it comes to retail.
France, which represents 5% of net revenue, posted +7.3% organic growth in Q3. Media was at double digits on top of double-digit growth in 2023. Creative was up low single digits, while Publicis Sapient was softer on the back of double-digit organic growth last year. Germany, which represents 3% of our net revenue, posted +7.6% organic growth, driven mostly by media. Lastly, our operation in Central and Eastern Europe continued to grow strongly, posting +19.1% organic growth on top of +15.9% last year, fueled by Poland, Romania, and Hungary. Turning to the next slide for our performance in the rest of the world. Asia Pacific, which represents 9% of group net revenue, delivered +6.4% organic growth, driven by media activities, which were up double digits.
Importantly, China remained very strong at +12.4% organic growth in Q3, sequentially accelerating +7% in Q1 and +11% in Q2, still largely driven by market share gains and despite macro uncertainties. Middle East and Africa posted a strong +13.6 organic growth, largely driven by media activities and Publicis Sapient growing double digits. Latin America posted a +30.3% organic growth, driven by both creative and media activities, in particular in Brazil, Mexico, and Colombia, as well as Argentina, partly due to inflation. On the next slide, you will find the group's performance by client industry for Q3. Again, this quarter, seven sectors out of our top 10 posted positive growth...
The tech media telecom sector, which represents 13% of our net revenue, continued to perform very well at +9% in Q3 2024, after +11%, both in Q1 and Q2. Healthcare recorded double-digit growth on top of double digits in Q3 2023, thanks to new business wins across different activities and scope expansion with a number of existing clients. Retail was slightly down due to the lower contribution from publicity sector this quarter, being impacted by delays in DBT projects in Europe and a tough comparable, particularly in the U.K.. And finally, auto posted positive growth despite a challenging context. Moving to my last slide, net financial debt. Net debt was EUR 1.71 billion at the end of September, up EUR 1.6 billion in Q3.
The increase is due to dividend paid in cash to our shareholders for EUR 0.9 billion, acquisition for circa EUR 1 billion, and all partly offset by free cash flow generation, including change in working capital. Change in working capital improved versus Q3 2023, in line with our objective to deliver an outflow of circa EUR 200 million for the full year of 2024. Average net debt on the last twelve months is EUR 406 million, down EUR 45 million versus average net debt at the end of September 2023. This concludes my financial presentation, and I now give the floor back to you, Arthur.
Thank you, Loris. As you have seen, we had a very strong quarter, and we feel confident in raising the floor of our guidance, despite what is an increasing macroeconomic headwinds. Q3 was also very busy on the M&A front with the acquisition of Influential, the world's largest influencer marketing platform, and Mars United Commerce, the number one independent commerce marketing company. These investments of circa $1 billion not only brings to the group two unique assets in high growth segments, it also further reinforces our model. We want to take five minutes to tell you more about how our media model is evolving with the rise of AI, the acceleration of personalization at scale, and our two latest acquisitions.
At a time where platforms, but also influencers and digital commerce, are completely rewriting the marketing rules, brands now have three imperatives to succeed: be across hundreds and thousands of media channels at the same time with custom content that fits every screen. Show up less like an ad and more like a real conversation, using influencers to recommend their brand as their reach now rivals some of the biggest publishers. Keep up with the new shopping experiences online and offline, and pay to play to show up on the digital shelves at the speed of commerce. Because media, creators, and commerce have all developed their own siloed and fragmented ecosystems, and the walled gardens have made their walls even higher, marketers are now at risk of losing control on their client relationships and being unable to link their marketing investments to business outcomes.
At Publicis, we have been solving that challenge by developing a connected media ecosystem. We have invested in new capabilities to take clear leadership on those three areas. We have connected them to Epsilon identities, all while building this ecosystem transparently and directly in our client-owned environments. Let me break that down for you. For the last years, we have been investing in new capabilities to lead in fast-growing own media segments like CRM, but also in paid media, giving brands the power to choose the channel and screens that matter to them. We have made publisher addressable at 90% to deliver a product like Lift, our connected TV offering, and have formed exclusive partnerships with the different platforms, leveraging our unmatched media scale, then we double down on commerce with the acquisition of Citrus, then Profitero, and finally, Mars United.
Today, we can give our clients a 360-degree view of purchase journeys and opportunities to influence shopper behavior. They can reach their prospects and make their products consumer top choice across millions of physical store shelves and 700 global retail websites. Finally, we are accelerating on creators. They are the newest media channel that captures attention across audiences. We are talking about an addressable ad market in the U.S. of $30 billion today, which in the next three years will exceed the $59 billion currently spent on linear TV. With Influential, we bring 4 million creators, including 90% of global influencers, with more than 1 million followers and 100 billion data points. This allows brands to find and activate the creators who resonate most with the shopper that will drive their growth.
Second, we are connecting these three areas of expertise to Epsilon's world-class first-party database that holds knowledge of 2 billion consumers at an individual level around the world. We are now in a position to truly deliver personalization at scale. Let me give you an example. Meet Lauren, who is one of Epsilon's 270 million individual profiles in the U.S. Thanks to identity, we know who she is, where she shops, what she buys, where she buys it, who she follows, and what she watches through a single identity profile. And by connecting this identity to our three media expertise, brands can connect with her through the media she really cares about, the influencer she's following, and the platform where she buys.
Our clients are available to link marketing investment that they are spending with learnings directly to business outcome, and they can do that with millions of different learnings, thanks to AI. Third, we make sure that this connected media ecosystem is built in our client environment and transparently based on four principles. The first is clean data. We responsibly and transparently manage our client data. We never use one client data for another or to enrich our own data. Second, we are committed to a clean Internet. We have zero tolerance for garbage media, even if zero incidents is impossible, and we add daily to our block list of over one million sites. Third, we practice clean trading every day in every geography, by the way, from the U.S. to China.
All of our clients using our platform have directly opt-in, sometimes a single opt-in, sometimes a double opt-in, even sometimes a triple opt-in. Last but not least, we operate clean performance measurements. We report in net revenue, not in growth. This means that there are no pass-through costs inflating our growth. For instance, our U.S. principal media activity represents less than 1% of our net revenue. To wrap up, if you take a step back, our revenue streams give you a clear idea of our current dynamic and the model we are executing. Today, our connected media ecosystem, composed of Epsilon, our media capabilities, and our digital experience agencies, represent close to 65% of our revenue. It will continue to be strongly accretive to our growth this year and beyond.
This ecosystem is fueled by intelligent content, thanks to our creative agency and production studios, accounting for circa 20% of our revenue. It is powered by Sapient technology, which represent 15% of our revenue. We believe this model fits the new marketing rules and responds directly to our client needs, as you can see, for example, from our sustained new business momentum. It actually make us confidence to continue to outperforming the market in the coming years. In what is a more challenging than expected macroeconomic context, Publicis is actually accelerating in 2024. We continue to win market share in Q3, delivering a very strong 5.8% growth on the top of an H1 at +5.4%.
Going into Q4, we are planning to keep the momentum until the end of the year, and we are actually upgrading the floor of our full year guidance to 5.5% ahead of our four-year CAGR at +4.7%. We completed two strategic acquisitions with Influential and Mars United Commerce, which will be critical addition to our go-to-market, making us confident that we will continue to outperform the industry in the year to come. I would like to thank our clients for their trust and, of course, our people for their outstanding work all around the world. Thank you all for listening, and now with Loris, we are ready to take all of your questions.
This is your 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 touch-tone telephone. To remove yourself from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Laura Metayer with Morgan Stanley. Please go ahead.
[Foreign language], Arthur and Loris. Thanks for taking my question. Two questions, please. First one on the creative business. So it accelerated to mid-single digit % growth this quarter from low single digit %, I think, in previous quarters. Could you talk in a bit more details about the drivers behind this?
Hi, Laura. You want me to start directly with this one, or you want to ask the three questions first? Hello? Hello?
Sorry, her line got disconnected.
Okay, so maybe we go to the next question, and we're gonna take Laura back, because I definitely want to answer at least her first question, but I'm gonna wait for her to be back.
The next question is from Nicolas Langlet with BNP Paribas. Please go ahead.
Yes, hello. Good, good morning, everyone. So I've got three question. The first one, can you give us an update on the tone of conversation you had with your clients recently? And if you have any specific comments regarding the automotive segment, which is going through a difficult period, that would be April. Secondly, on Sapient, so we see mixed signal for from your peers. Based on your pipeline and recent discussion with clients, do you expect to return in positive territory as soon as Q4, or it's more H1 2025 story? And finally, in terms of mid to long term outlook, you have been growing above 5% for various quarters now, and that despite Sapient being negative. You also closed on those bolt-on acquisition and fast growing segment. You sustained investment in tech and data.
So with that in mind, should we consider the 5% plus we have seen in recent quarters as the new normative organic growth for Publicis in the midterm? Thank you.
Wow, a lot to unpack here. So I'm gonna start with the client, then go to Sapient, and then I'll come back on the guidance, so where can I start? I mean, last time we talked in July, the macro was not great. I would say that in many cases, it has gone worse, not better. It's not true for every industry, but in general, and I guess we are starting to see that with a different publication, it is a challenging time. Now, I think the tone of our client is still a tone of confidence, because everyone has understood now that it's all about business transformation and making sure you adapt, to this new world, I would say, and that's the case, to come back to your point, on the automotive sector.
I mean, as you have seen in Loris' presentation, the automotive sector is actually still growing for us. Year- to- date, we are 4.2%, and the truth, to come back to your question, Nicolas, is that we are used to see ups and downs in industry, which come back to my point about the tone. Sometimes it gets better, sometimes it gets worse. What really matters is a commitment to transform, which is at the heart of our own proposition. 18 months ago, we were saying that the tech was down and suffering. We are double-digit growth on tech this year. It's true that for auto, there are some challenges, but I think there is a good news with auto is, I think we can all agree that people will not stop using car anytime soon.
So we know what will happen with car manufacturer is what we have seen in many other industry, which is they're gonna go faster and deeper into their own transformation. And where we are positioned today in terms of capabilities, model, and relationship, actually put us in a strong position. So again, I think there is very good reason to be confident. And by the way, we have shown in the past that it's not because some categories are declining, that our business is not growing and outperforming, so we feel good about that. Sapient, it's a great question.
You know, it's, it's always important to put Sapient back in perspective, because the least we can say is that, when Maurice Lévy decided to go to technology with Publicis, I would say almost a decade ago, it has been challenged by the market at the time, and it happens now to, demonstrate that the vision he had at the time is exactly where the market is going. This is why when you look at the repositioning we did, with Sapient, actually exactly five years ago, and we announced it to the market at this time. In the last four years, Sapient has been growing 30%, which is, of course, very material.
What is even more interesting, and coming back to your question, Nicolas, is that last year, where most of their peers, all the system integrators were negative, we actually grew by 3% coming from 19% in 2022. So it gives you an idea of the dynamic we've had. Now, you're right. And coming back to clients, in this case on business transformation, there is a wait and see attitude that we clearly see. It doesn't mean that they are not committed to transform, so we are starting consulting projects, we are winning pitches, we are not losing clients. But at the moment, when it's about heavy CapEx investments to truly transform, there is this kind of wait and see attitude that we see, again, with all IT consulting firms, as you just said.
The good news is, if it's a good news, yes, I think it's a good news, but of course, we're expecting way more. Publicis Sapient this quarter has improved sequentially. And by the way, to come back to your question, even with the Publicis Sapient performance as it is, we are confident in upgrading the guidance. I'm gonna come back to that in a second. But honestly, there are two things that I will take out of Sapient. First, I think it's interesting to see that Publicis Groupe growth is way higher than all of those system integrators. And second, the fact that we are extremely confident on what the capabilities of Sapient can bring to our clients, but also to ourselves, to be honest.
As you know, we used this year, where there have been a slowdown with client and Sapient, to do our own AI transformation. We are growing at a very fast pace. It's very promising. Hopefully, you saw it in the media presentation we just did. But it's also true for what we do in creative, particularly with production, and I'll come back maybe on that later when Laura will be back. And also in the way Sapient can position itself. I mean, AI is going to disrupt companies that have huge headcounts delivering basically code. This is not where Sapient is. It's on an AI high-end services that should take advantage of this transformation. On the guidance, let's be clear, we're not gonna give you a guidance for next year now.
What hopefully you have understood from the presentation that we just made is that, because of our new business track record, that we plan next year, by the way, everything you see now is for next year, roughly. Because of our revenue streams, and we wanted to spend a bit of time to explain you that 65% of our business, that is kind of Connected Media Ecosystem, very accretive to our goals, 20% with creative and what we call intelligent content, which is creative, and production, and Sapient means a very good revenue mix, and our platform organization for our margin make us confident to outperform.
But as I've got you on the line, and maybe to step back on the guidance we just presented, which I think is also a reason for our confidence and hopefully for yours. Because when you look at Q3, the real big news is the fact that we are actually able to say, "Okay, the macro remain tough," and actually we believe has even deteriorated since Q2. But we feel very strong on our feet for the rest of the year, and we are now in position to sustain the momentum of the previous quarter, getting into Q4. Maybe I will come back on the detail of the guidance later, but I don't want to talk too long. I want to make sure we take all the question, but this is where we are today.
Thank you. Thank you.
Next question is from Laura Metayer, with Morgan Stanley.
Hi. Sorry, I got disconnected earlier. So my first question was on the creative business, what drove the acceleration this quarter? Is that sustainable? And also, in the light of more gen AI tools being used, how are your conversations with clients evolving in the creative business? And then secondly, could you give us an update on Epsilon outside of the U.S., how it's going, what you've achieved recently, and what are the next goals for Epsilon outside of the U.S.? Thank you.
I'm taking notes, so Epsilon outside of the US, Laura, I will let you give a couple of things, and I'll come back on that, but I'll take your question on creative. First of all, I was afraid that we were the one being disconnected, so I'm sorry you lost us, but I was a bit reconfirmed when I thought it was you and not us. We're happy about our performance on creative agency, and there are three reasons why I guess we are growing like this. The first is new business activity has been pretty good. Let's be clear, there is way more media pitch than creative pitch, but way more, for a very single reason, but simple reason, by the way, which is a good reason, well, a good and a bad reason.
The bad reason is media and the media landscape has been changing way faster than the creative landscape. And so, agencies and clients had to adapt to this new model that we just presented, which create more opportunity. On the creative, although there is, you know, digitalization, socialization, everything you want, we haven't seen so much transformation versus what we have seen in media, which means that there is less pitch because the good reason there, and, again, it's true for us, but true for others, you do great work when you create a long-term relationship with your client and you trust each other. And the good news is, many, many advertisers, when it comes to creative, believe that it's better to stay with this agency and sometimes change the people than change the agency, and we love that.
There are some clients here, and as we are in France, you can think about a couple in France that started to work with Marcel Bleustein-Blanchet then worked more with Maurice and still working with me now. So we like that. Now, the reason why we are growing is threefold. As I said, new business, for sure. Second, client expansion, because it's not because they are not pitching, but they are not distributing the work differently to their best partner, and we are taking advantage of that. And third, which come back to your gen AI question, production. Production is a big topic, and you need to distinguish two things into production.
You need to distinguish production studios using AI to deliver more content faster, more agile, cheaper, and of great quality, and we have made huge progress into that, and we are gonna unveil even more innovation beginning of next year, and then what we call the production backbone, which is how you link the data with the media and the content to truly deliver personalization at scale, and there we have a huge advantage, is that not only we are leading in terms of production capabilities, but also we have Sapient who can, as a system integrator, truly help us build this kind of backbone for our clients.
So yes, I think there is a lot of work to do, and I think the industry should be very humble when it comes to production, because there is a lot of work to do to truly connect the data with the content. But this is a very big source of growth for the market in general, and for us in particular, if we do it right. You wanna talk about Epsilon, please?
Yeah. Hi, Laura. On Epsilon outside of the U.S., I would make three comments. The first to answer your question around the growth profile, I mean, it would come as no surprise that we're starting off a much smaller base, so it's growing outside of the U.S. much faster than in the U.S. But more importantly, our ability, as you know, to connect and grow Epsilon in key markets like the U.K., like China, and a few of those large market outside of the U.S., has been driving a lot of the new business and momentum that you've seen in the last 12 months.
So it's a big priority for us, and, speaking of which, and that's the third point, is when we look at the acquisitions that we have in the pipe, many of them are focused on the driving geographic expansion for Epsilon outside of the U.S. So big priority, growing much faster than U.S., and, obviously helping us a lot around new business.
I think what you hopefully have seen in the presentation we made is that we have a unique capability to connect the data with paid media, with commerce, and with influencer. Coming back to Epsilon outside of the US, the great news is we can build Epsilon data stack on the back of our Publicis Media operation, and truly accelerate. This is one of the reason why, by the way, Epsilon number and Publicis Media number are so intertwined now, is that, as I said in last call, sometime we favor putting Epsilon at the service of Publicis Media to transform an existing client or win a new one, than the own growth of Epsilon.
What matters at the end is the double digit growth we are delivering on both, not only in the US, but also the progress we are making outside of the US. Thank you very much, Laura, and I think we can move to the next one.
[Foreign language]
Next question is from Conor O'Shea with Kepler Cheuvreux. Please go ahead.
Yeah, yes, thank you. Morning, and thanks for taking my questions. Three questions from me as well. Hopefully, quick questions. Firstly, just on the, can you give us a sense of the contribution from new business wins to the organic growth in the third quarter, particularly in the healthcare sector? And, you know, when that might run out, given what you can see in terms of the existing wins. Second question in terms of sector spend, and I noticed that the food and beverage sector slowed quite a lot in the third quarter. I think it was flat versus plus 6% in the first half. So can you give us some sort of color on that?
Then the final question, just on Sapient, -1.1% organic worldwide, I think. Can you just give a sense of whether that number was, I guess, slightly lower or in line in the North American business, standalone? Thank you.
Okay. I'm gonna let, Loris state the, beverage question and the Sapient question, but I'm gonna start with the contribution. You know, if you look at, at new business contribution, on average, is between, one hundred basis points and two hundred basis points, roughly. I would say when you look at the tailwind and, the reason why we are confident, it is closer from two hundred basis point, which is roughly a third of our growth, okay?
Mm-hmm.
I think what is very interesting, if you take a minute, is to look at the JP Morgan reports, okay? Not only year to date are we doing three times better than the second best player in the industry, but even when you look at Q3, we are doing the double of the second, knowing that it is in Q3, that those two big pitches that I won't name-
Mm.
- and that we did not participate, landed. And so to come back to your question, we are, of course, expecting the same kind of tailwind for next year, because everything we have been winning recently, will have an impact for next year. Now, I have to make one comment here, which is very important, is if you ask me, the thing that I'm the proudest of, is not, our new business rate win, is our retention, rate.
Mm.
Because it's great to win clients, but, it's even more important to keep the loyalty of your existing clients. It actually demonstrate that you continue to build with them, what will be their future and their ability to grow.
Just quickly on the food and beverage industry. You're right, Conor, to say that it was flat in Q3. But year to date, it's up by 4.1%. And also, let's not forget that this was the second fastest growing industry vertical last year, where we delivered more than 20%. So you have a very high comparable.
Mm-hmm.
It's still performing pretty well from our perspective. On Sapient, in U.S. specifically, the situation remains the same as Arthur described, so we're still slightly negative.
Okay. Makes sense.
Maybe I can add-
Thank you.
Maybe I can add one point on the CPG, and it's a conversation we had a year ago, is that the great news on CPG is that it was one of the least last category that was still relying a lot on cookies because they are selling product with a very low average price. They now realize will it be to manage their portfolio, that getting into identity is truly important. And that, again, give us an advantage. Let's be fair to our competition, some of them have been investing in identity in the last years, and good for them, and I think good for the industry, but that's gonna be very interesting to look in the coming years.
Great, clear. Nice, thanks.
The next question is from Adrien de Saint Hilaire with Bank of America. Please go ahead.
Yes. Good morning, everyone. This is Adrien, so a few questions, if you don't mind. First, if we can kick off on principal media buying. There's been a fair amount of debates in the last few months about this practice. I think even there was a commentary made by someone about potentially some companies using black box models. Very kindly, you framed us how big this is for you in terms of revenue, but I'm curious to what extent you think that's driving growth and market share gains, the fact that you do principal media buying. That's the first topic. The second topic is, you've raised your guidance on revenue twice. We haven't seen much of an increase on the operating margin.
Obviously you're not a high operational leverage business, but I'm just curious, like, which areas are you reinvesting in? And then thirdly, I'm just curious if you think that this year in 2024, the elections in the U.S. are having any sort of unusual impacts on your business compared to previous elections. Does that add more uncertainty than usual to Q4? Is that the normal uncertainty, I would say? Thank you.
Thank you, Adrien. Again, a lot to unpack. I'll start with your first question on principal media buying. I guess when you talk about commentary from some, you are referring about the comment that WPP made in Q2, where they talk about a black box in the U.S., in the market, right?
That's right. Yeah.
Yeah. I guess it is. So, what can I tell you about that? First, and maybe more importantly, not only we don't, as Publicis, operate black boxes, but I can safely tell you that it is the same for our peers. I was surprised to hear this black box comment that I haven't heard for a while. But if I come back to your question and what you're saying, I will make two specific comments. The first is, it would be wrong to say that, you know, this media platform and this principal media buying is the reason for outperformance. I gave a number in the presentation that I can repeat for you, is our principal media activity in the U.S., entire, represents less than 1% of our net revenue.
So as you can imagine, it is not the reason for our growth. Now, it is not because it's not the reason for our growth, that it has not to be transparent. And I think it's very important to note that those media platform has nothing to do with the black box. As I said, they worked on an ad hoc basis, client by client, which means that there is no client that can go into our own platform if it doesn't ask for, and sometimes two times or three times. We never, ever use our client data for another client, or by the way, for ourselves. And as we said, we have zero tolerance for garbage inventory, which is garbage media. Now, just to close on this one, as I said, I was very surprised by this WPP comment.
I mean, it's exactly five years ago, for those who were already on that call, we made a very strong profit warning, and we said we have our own things to fix. We have a plan. We're gonna put it on track. We were confident about what was coming. But again, at that time, the least we can say is that I was a CEO under pressure, so I know what it is. And honestly, I don't think that throwing stones at competitors, or by the way, predecessor, will help neither WPP nor the industry. Maybe we're gonna move on, the margin, and then I'll let you say a word about the US.
Yeah, Adrien, just to step back, I mean, in 2024, as you know, we anticipate maintaining the best financial ratios of our industry and the operating margin of 18%. Just to remind you, the 18% includes roughly EUR 100 million of incremental OpEx to finance our AI strategy and investment, as we introduced in January: investment in our talents and new business ramp up, and what remains, what should remain in the three high bonus pool, as in the past year. So, in that context, I mean, we've clearly proven our ability to create operating leverage and elasticity in our cost base.
We said repeatedly that our cost base is first and foremost at the service of our top line growth. Going forward, you know, we are continuously looking at areas where we can extract more efficiencies thanks to both the acceleration of our focus on automation and delivery. When it comes to 2025, obviously, it's too early to say, but as we've said at the launch of our AI initiative, the EUR 100 million investment of 2024 should be slightly accretive on 2025 margin.
On the U.S.?
On the election in the U.S., it's a very simple answer. As I think we've mentioned before, we expect no impact because we're not involved in any political campaigns. It's obviously not impactful for us one way or the other.
But honestly, that's an important one. Honestly, that is an important one because every four year, we are asked to participate in those election. It would have represent an increase of our revenue, but we have a code of conduct called Janus that prevent us from doing these kind of things for always, I guess, and of course, we stick to it.
Thank you both. I guess my question was more on the other advertisers. Like, does that create additional uncertainty for your regular clients, those elections?
... I mean, Q4 is always, a quarter of adjustments, to start with. There is a risk for instability depending on how the election will go. And again, I think that the most important news you should take out of this publication is that our model is strong enough, and our new business tailwind are strong enough to feel confident, that despite all of this uncertainty, we will actually deliver and actually over-deliver versus what we said in July, which again, was not expected in July.
Thank you.
[Foreign language]
The next question is from Tim Nollen with Macquarie. Please go ahead.
Good morning, Arthur and Loris. I've got a couple quick follow-ups, please. Firstly, on the principal media question, you mentioned that it's less than 1% of net revenue. Just curious because your pass-through revenue as a proportion of your net revenue is quite a bit larger number than that, and I think that includes production and media costs and out-of-pocket expenses. So just to be clear, the less than 1% of your net revenue from principal media buying, does that mean of the pass-through revenue, those other items comprise a much bigger proportion of that number? And secondly, in the past, you've given an Epsilon specific growth figure, and I see a number of Epsilon plus media being up 10%.
I wonder if it's possible to split out Epsilon versus its contribution to your media business. Thanks.
Thanks a lot. I'm gonna take the Epsilon question. I mean, and it's a great question, Tim. So, again, if you look, and I don't know if you were there, yeah, I guess, of course you were, when we did the acquisition. When we made the acquisition, we said we wanna grow between 0% and 3% when we put things back on track. Organic growth has been double digit for the last three years, so hopefully we don't have to demonstrate the value and the dynamics that is there. Now, as hopefully we have demonstrated during the presentation, Epsilon and Publicis Media operation, as I said, are now totally intertwined and at the heart of our connected media ecosystem.
So the truth, and we can give you the number, of course, is that neither the low single digit growth that we were anticipating this quarter for Epsilon, nor the very strong double digit growth of media truly makes sense on their own. This is what I explained for international. You have to look at them together, because what we are looking is for the overall goals, and sometime we will favor a new business versus maybe a product that we can sell. We will allocate resources to a specific client, where the revenue is with Publicis Media. This is the beauty of the one P&L, by the way, is that we know how to reward our people based on the overall performance and not on a single performance.
Once I've said that, again, when you start to look at things like this, you actually see that we have been delivering double digit growth, year to date, and for three years in a row, when you put those two together. And I would say even more importantly for us, and this is why it's very difficult to distinguish now, this is the reason of our number one position in new business. I would say since twenty nineteen, if you remember the win we were having in twenty nineteen, despite the fact that we were in a challenging position as an organization, we were able to win thanks to Epsilon data connected to Publicis Media. There were no revenue for Epsilon, but it was allowing Publicis Media to start and continue to grow, pretty strongly and made a difference.
So it's true that now it's really connected. Loris?
Yeah, on the question of pass-through, Tim, so if you break down pass-through cost, you have media, you have production, you have experiential, and you have a few other items. But when you start moving from a gross revenue to net revenue, the share or the impact of media becomes much more reduced because you're moving to the margin contribution in net revenues. So obviously, as you are at the gross revenue level, you have a much greater impact of pass-through coming from media.
Thank you, Tim.
Okay. Thank you.
The next question is from Silvia Cuneo with Deutsche Bank. Please go ahead.
Thanks. Good morning, everyone. I would also like to ask three questions. The first is a follow-up on media and Epsilon, where you highlighted the strength of the combined offering, particularly in North America. And I wanted to ask if you could share your thoughts about the sustainability of your competitive advantage versus peers in this area, and update us on the potential new business pipeline ahead. And, secondly, given the significant investment in Influential and Mars United, what are the key integration milestones perhaps into next year? And, if you could comment about the contribution these acquisitions would have, to growth and potentially, also from a margin standpoint. And then final question on personalization.
If we look at slide 30, where you unpacked your model in connected media, intelligent content, and technology, can you please share your thoughts about how this split could evolve as you push on, more personalization at scale? Thank you.
Sorry, I was taking note, because there is a lot here again. And by the way, a lot is contained in the presentation we made, but I'm gonna try to make most of the points. First, I mean, our Connected Media Ecosystem in the U.S. is strongly accretive to our business overall, because there are two markets, I'm sorry for the other one, that are pretty, if not very advanced, when it comes to marketing transformation. It is the U.S. and China. And by the way, we didn't talk about China, but when you look at our 12% performance in China, versus our competition, you understand that we are winning market share, basically, thanks to our model, and by the way, the transparency of our model.
But coming back to the U.S., we believe it is, of course, very sustainable, and it has been already for more than five or six years. Because, again, we are leading in capabilities, and hopefully you see that, by the way. We said we're gonna move to bolt-on acquisition, that you are gonna complement what we have done with Epsilon, and will help us to build this connected media ecosystem. And in order to continue to outperform, not only we are winning in new business, but we are adding capabilities, like Mars, that can actually continue to outperform in the US and in other countries.
And so to come back to your Mars question, I mean, the thing that you are all experiencing with your mobile at the moment we're talking, is that we are actually truly living a commerce revolution. I think it's a moment where every marketing experience can actually become a commerce one. And what we have done with Mars is now put together under the same roof, sorry, what are definitely the market leading end-to-end capabilities in commerce. And to come back to your question, we are able today to have a unique knowledge of customer purchase journey, not only client, but prospect, and we know how important it is to CPG, and that's based, of course, on the Mars acquisition, but also on everything we have with Epsilon.
We have deep relationship with all the major retailers, with the online or offline, and that's again we had it on our side, and now Mars is adding a lot to that. We can do digital shelf optimization. That's thanks to the acquisition we did with Profitero. We know when a competitor of one of our brand is running out of stock on a website or on a shop, and we can push our product. And we have leading retail media offer that allow us not only to, to achieve the growth of our client, but to be able to measure it. To be able to know when you invest X, you get Y in terms of business return.
And then on personalization, and I'm gonna go fast on that, because I guess this is a topic we're gonna come back on very deeply, beginning of next year when we come back and we tell you exactly what we have done with our AI strategy. I mean, when you have the data as we do, when you have a single structure as we do, when you have 35,000 engineers as we do, what you can achieve with AI to truly get to personalization is truly amazing and super promising. And again, a bit more for later, but Loris, you want to add something?
Yeah, Silvia, on the impact of those acquisitions, as we've said in the presentation, you know, in 2024, it will add about 120 basis points to our growth, and probably be considering 150 basis points going into next year. Margin-wise, it's in line with our margin, so it's very clear.
Thank you very much. We still have questions because we have passed the hour? Yeah. Okay, a couple of questions. Let's go.
The next question is from Julien Roch with Barclays. Please go ahead.
[Foreign language] to Loris, Jean-Michel et Lauren. My first question is coming back on Tim's question on Epsilon. I understand that now Epsilon is intertwined with media, but you did say in your answer, we can give you the organic, so I'm asking again, can we get the organic Q3? And then the second question is coming back to that new split, so 65% connected media, 20% intelligent content, 15% technology. Before it was a third, a third, a third. If I add all media, add a third, and all Epsilon at 16%, I get 48%, but you say connected media is 65%. So can you give us more color on what is that 17% difference?
And then lastly for Loris, where do you see year-end net average net debt at the end of 2024? Merci.
[Foreign language]. So as I said, Epsilon is roughly low single digit, but again, as media is very strong, double digit, and most of this, or most of the- a big part of this growth is due to Epsilon. It won't be fair to take one without the other for our people. But then if you want to put it in your model, this is where we are. The question you raised on the 65 is a great question. Maybe what I did not insist enough in the presentation that I just made listening to you, is that what we understand by media now, in this connected media ecosystem, is not only paid media, it's also what we call owned media, which is CRM, dot coms, everything, every digital asset built by clients to go directly to their customer.
The reason why we're moving from 50% to 65% is that we are adding all of our digital experience agencies, starting with Razorfish or Digitas. The reason why we are doing this is, if I want to be a bit provocative, because with a vast number of our client now, we know people at an individual level. Take the Lauren that I just presented earlier on. We know Lauren. We know what she buys, where she buys, what she follows, the kind of media she likes. We know where she lives, and we know all of that in a very compliant way.
And we are in a position now to say to our client: "Look, maybe you should spend less in paid media and start to invest in your own environment." Because Lauren, yes, you can get her on, you know, connected TV, but it might be cheaper to get her on CRM. And that's where identity is absolutely key. And this is why we are having this momentum. And by the way, this is why looking at the Epsilon performance on the standalone doesn't make sense, is that the value created by Epsilon is, first of all, the ability to connect those different media expertise, and being able to go to our client and tell them, "Mr. Client, we know how you can spend 10% less in paid media.
Invest just 2% of this 10% in your own digital ecosystem, and get a business outcome that will be superior than the one you would have had," and that's what really makes a difference, and this is why we are adding to our paid media, the owned media, plus Epsilon into the mix.
[Bonjour] Julien. On the net debt, year-end and average, so at this point, and obviously given the impact of this acquisition, we expect year-end net cash position to be roughly EUR 350 million . On the average net debt, at the moment, we are estimating it to be slightly below EUR 700 million . When you put that in the context of some of the guidance we've been giving on leverage, including the leases, we should have a financial leverage that sits anywhere between 1 and 1.1 times.
[Foreign language]
The next question is from Tom Singlehurst with Citi. Please go ahead.
Yeah, good morning. Tom here from Citi. Thank you very much for taking the questions. I, the first thing I was gonna ask about is M&A. I've got two questions, on that, if that's okay. The first one is just sort of rough sense of the overlap in the client base for Influential and Mars United Commerce with your sort of existing business. I'm just trying to get a sense of whether the payback from those acquisitions above and beyond the, the acquisition impact is gonna be in the form of new business or accelerating organic with existing clients or a bit of both. That would be a really useful thing to understand. The second question may be a bit more challenging, so I apologize, but, you know, Omnicom has just seen a bit of an acceleration, in growth.
I mean, I know it's a function of how they disclose organic, but from their sort of commerce acquisition in Flywheel, I think I'm right in saying that Publicis has actually lost some of the Unilever commerce work in the U.S.. I'm just trying to get a sense of with Mars United Commerce, you know, how much of that deal is sort of proactive and about securing new capabilities of future growth, and how much of it is defensive? Those are the two questions. Thank you.
Thank you. As you know, we don't comment our win, and some of our competitors love to comment our losses. So, I can tell you one thing, is that the net-net in commerce is pretty significant. I mean, honestly, I think the only thing you need to look at to understand who's winning, particularly on commerce, is to compare organic growth from one holding company to another, and you will have an answer that is way more rational than a couple of press release. On M&A, because this is a big question. You need to understand that, when we go for an acquisition, and a bolt-on acquisition, we have a couple of criteria. And they are not in this order, but I'm gonna give you them in this order. First is, we are bringing people.
I think the reason why we have been successful in our acquisition, it's that people first every time, and we make sure that the culture fit and that we can get along together. Second, of course, we look at, is that too expensive or not? And that's the reason why last year we didn't do so many acquisition, because the market was high, and this is why we had those two opportunities. The third is: How does it complement our existing model? And how are we gonna leverage even better, either our media, our creative, Epsilon or Sapient operation? And the fourth, which come back to your point, which is, is the integration gonna work? Okay, and the good news about both opportunities is that it creates only upside, and I'm gonna explain you why.
Mars is not like we didn't have commerce capabilities before, and yes, the client list is very complementary. Never forget that we have other commerce brand, like Arc, that will continue to live, by the way, and that will be under the same umbrella to build this end-to-end model. So there is a complementarity in terms of clients. Influential is different, and Influential, they work with all of our clients already, and they work also with their competitors. They are the leading platform when it comes to influencer, by far. And so we don't have any conflict issue there, because it's a capability that we just don't have at this scale, by far, so far. So we are really adding a leg to our model, which free us up from any conflict. I hope I answered your question because this is a very important one.
We have been very slow in the way we go for bolt-on acquisition. By the way, both of those new acquisitions were through a competitive process. We knew it was exactly what we needed for our model. We arrived at a price that was very decent, but more importantly, with people, value, culture, and a go-to-market that hopefully complement itself pretty well, as you have seen today.
Very clear. And one quick - Oh, sorry.
It's us or it's Tom, no?
We are losing connection with Mr. Singlehurst.
Oh, I was gonna ask a-
Oh, he's back.
I was gonna ask a follow-up, if it was okay, which was, in terms of the envelope of spend on M&A, you're obviously a little bit over the original projection, which is fine because of the assets that you're buying. Is that part of a sort of new sort of normal in terms of anticipated M&A spend running into next year? I know you're not necessarily gonna set guidance at this stage, but should we continue a sort of, should we expect a continuation of this sort of rate of investment in an M&A to support new capabilities and new.
Tom, I'm gonna take that question. So if you look at the acquisition that and what we spent since the beginning of the year, including H1, we are at roughly EUR 1.2 billion. Put that in the context also of what we did spend last year, which was less than EUR 200 million. And so, if you look at the average of the last 24 months, we are exactly in the envelope that we talked about when you were raising the question on cash allocation. So I think it is still a very good yardstick to continue, you know, looking at our acquisition envelope going forward.
Clearly, we have a very good pipeline at the moment, which is great. As we said before, we announced Mars and Influential, but nothing of the magnitude of Influential and Mars. So we'll continue being very aggressive when it comes to bolt-on acquisition, but I would stick to the envelope that we've communicated early on in the year.
Very clear. Thank you very much.
Thank you, Tom.
The last question is from Christophe Cherblanc with Bernstein. Please go ahead.
Hello, good morning. Thanks for taking my question. So, I'll be quick. First, question is on the new business and the impact on margin. Is it fair to assume that when you're in a ramp-up phase, when you're starting a new business contract, it's dilutive to margin, or do you reach a normal margin very soon? That's the first one. And the second one is a very quick one for Loris. There was a mention of Argentina inflation. Is this a boost which is significant? Because the inflation seems to be 200%. I just checked, and even on a small base, that could be significant. Thank you.
Loris.
So specifically on Argentina, I mean, as you saw, we posted a very strong growth in Latin America of plus 30% this quarter. It is primarily driven by the top line performance in Brazil and Mexico, followed by Colombia, and those are the three largest market. And then, on top of that, you have an impact of the inflation in Argentina, but it is not what is driving the growth in that region. It is primarily the performance of those three markets and the market share gain that we've benefited from in that region.
On the new business, yes, at the beginning it is dilutive, and let me explain you why. I mean, we have been number one in new business for the last five years now, so we had to onboard a lot of clients. And one recipe for success is not to wait for the contract to start to bring people on board. And so to give you an example, everything that we have won in H1 that will start between Q4 and Q1 next year, we have started already to staff. They are working with incumbent agency, and we make sure that we do that in the best interest, first of all, of our client, but also, to be honest, of the incumbent agency, as they are people that can move from one place to another.
You know, it's a very brutal business that we are in now. You see, when you lose an account in the U.S., you might have to let go hundreds of people. And so we make sure that not only we keep the best service for our new client by investing ahead of revenue but also working normally with incumbent to do a good job there for our people, which is what we matter the most. And so to be clear, yes, it's dilutive at the beginning, and normally it's actually dilutive before we start to get paid. Then we start to get paid, we are fully staffed we have a contract, we know how it work, and that could be good. Look, I think we're done with the question. I'm gonna thank you. Sorry, we've been a bit longer than expected.
Hopefully, you're gonna take three things out of this call. First of all, a very strong Q3 in a challenging environment, and continuing to outperform the industry pretty significantly when you look at the net revenue. As I said, the news today is our ability to upgrade the low end of our guidance. I think you need to take that as a sign of confidence, not only for the rest of the year, but for the model going forward and in the future. It's true, and we discussed about that, some industries are suffering, some countries have some difficulties. There is uncertainty ahead.
So there is a feeling here that could be a bit negative overall, but we feel very confident, not only in our ability to deliver, but actually deliver a bit more than what we say. And finally, and thank you for the question, as you can see, we are accelerating on our model. We haven't changed our strategy from day one, but we are adding new bricks that bring growth, that solidify our margin, that allow us to continue to win new business, to continue to grow. And again, we are only focusing on the execution. And I think I'm done now, and I'm gonna thank you, and see you very soon. [Foreign language] .
Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephones.