Good morning. This is the conference operator. Welcome, and thank you for joining the Publicis Groupe First Quarter 2025 Revenues 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 and one at any time. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero. At this time, I would like to turn the conference over to Mr. Arthur Sadoun, Chairman and CEO of Publicis Groupe. Please go ahead, sir.
Thank you, Sherry. [Foreign language] and welcome to Publicis Groupe First Quarter 2025 Earnings Call. I am Arthur Sadoun, and I am in Chicago, where it's pretty early, but as you know, at Publicis, clients always come first, particularly in those uncertain times. Loris Nold, our CFO, is in Paris. Jean-Michel Bonamy is also there and will be available to take all of your questions offline after this session. I will start with our Q1 highlights. Loris will then provide more details on our numbers. I will conclude by sharing with you why we are confident that our strong performance is sustainable despite what is a deteriorating macroeconomic environment. As usual, we will take all of your questions with Loris after the presentation, crossing fingers that the connection between Chicago and Paris will work seamlessly.
Before we start, please take the time to read the disclaimer, which is an important legal matter. Okay, let's dive into the presentation. There are three highlights to take out of our results. First, we posted a very strong Q1 at +4.9% despite increased macroeconomic tensions. Second, our record new business wins over these periods make us extremely confident to deliver on our 2025 guidance. Last but not least, we are further accelerating on our differentiation thanks to disciplined strategic bolt-on acquisitions, investing close to EUR 500 million year-to-date to reinforce what we call a category of one. Let me take you through the detail of our highlights. With 4.9% organic growth in net revenue, which is the industry reference, we delivered a very strong Q1 despite a tough comparable basis and are actually accelerating versus a five-year CAGR of 4.5%.
This performance stands out especially considering the uncertain and deteriorating macroeconomic context, leading companies across many industries to adopt a more cautious growth outlook, and the significant expected slowdown of our peers this quarter, with consensus pointing to a negative organic growth average in Q1. If you look at our organic growth performance by practice, Connected Media delivered high single-digit organic growth this quarter thanks to the unique combination of Epsilon leading proprietary data assets and Publicis Media scale. These highly intertwined and complementary activities represent 60% of our net revenue. Intelligent Creativity, representing 25% of net revenue, posted a very solid quarter with high single-digit organic growth driven by momentum in production and new business wins, including scope expansion. Finally, the only area impacted by the deteriorating macroeconomic context is technology at Publicis Sapient, representing 15% of our net revenue.
The wait-and-see attitude from clients on CapEx that we have seen for several quarters now is actually worsening due to increased lack of visibility. This is reflected in the result of all IT consulting firms, including Publicis Sapient, which is down mid-single digits. Looking now at our geographical performance, the U.S., representing 61% of our net revenue, posted solid organic growth at +4.1% in the quarter, +6% excluding Publicis Sapient, on the top of +5% last year. Europe delivered +2.7% organic growth after 6% in Q1 2024. It is actually important to note that this would have meant +5.2% excluding Sapient. Asia-Pacific was up +4.8% on an organic growth basis, with China up 9.3%. Second highlight, our new business momentum sharply accelerated over Q1 as we topped the new business charts for the six years in a row.
For the quarter, we ranked first on new business, with net media billings 10x higher than the second-place competitor, while the rest of our peers are negative, according to J.P. Morgan. To cut a long story short, we had a dozen of material wins while not losing any significant clients. Thanks to that, to offset the potential impact of the deteriorating environment, and are well on track to reach our 4%-5% organic growth guidance for the full year. 4% is still a rock-solid draw. It factors in the current deteriorating economic landscape, including cuts in marketing spend as a result of the reduced client visibility in the context of U.S. tariffs, but also a negative performance at Publicis Sapient throughout the year in line with peers' expectations.
Organic growth could reach 5% if clients regain visibility, leading to fewer cuts in traditional ad spend and resumption of CapEx, translating into an improvement of Publicis Sapient's performance. With a Q2 expected within our full-year organic growth guidance, our performance will be reassuringly balanced between the first and the second half of the year. We are also confirming a slight increase in margin for 2025 compared to our industry high level of 18% in 2024, along with a free cash flow projection of EUR 1.9 billion-EUR 2 billion. Third highlight, we invested circa EUR 500 million in bolt-on acquisitions since the beginning of the year, maintaining the fast pace of H2 2024. We have announced a number of strategic acquisitions, including Atomic 212 for digital media in Australia, BR Media for influencer marketing in LATAM, and of course, Lotame to reinforce our identity graphs, particularly outside of the U.S.
These investments further differentiate from our competition, allowing us to deliver the innovative capabilities and products that help our client grow and increase our addressable markets. Our disciplined bolt-on acquisition strategy has been a key pillar of our capital allocation and has delivered remarkable financial results. Since the beginning of last year, we have invested EUR 1.7 billion in acquisition, which combined delivered circa 15% organic growth in 2024, are expected to accelerate with more than 20% organic growth in 2025, and we add more than 200 basis points to this year's reported growth. Looking at the rest of the year, we are on track with our block of EUR 800-EUR 900 million. This acquisition strategy allows us to reinforce what we call a category of one, as we explained in our Connect online video last month.
If you haven't seen it, it is easy to find and give real insight into the strengths of our capabilities, the uniqueness of our model, and how we are truly leveraging AI where it matters the most for our clients. I will now leave the floor to Loris, who will take you through the detail of our numbers. I will then share the reasons why we are confident to deliver a strong performance on a sustainable basis this year and beyond.
Thank you, Arthur, and good morning, everyone. Let me go into the details of our Q1 net revenue. In Q1 2025, net revenue was EUR 3.535 million, up 9.4% on a reported basis. This includes + 4.9% organic growth, which comes on top of + 5.3% organic growth in Q1 2024, a net positive impact of currency of 200 basis points due to the increase of the USD and pound sterling versus euro, partly mitigated by the depreciation of several LATAM currencies. Finally, a contribution from acquisitions, net of disposals, of 240 basis points, reflecting the revenue of Mars United Commerce, Influential, Spinnaker, AKA Asia, and Atomic 212 in 2025. Let's move to the next slide, which shows our Q1 net revenue by region. North America remained strong in Q1, up 11.3%, including + 4.8% organic growth.
There was a positive impact of the USD versus euro on top of the contribution of acquisitions. Europe posted +4.3% reported growth. Organic growth was at +2.7%. There was also a positive impact of the pound sterling versus euro. Asia-Pacific posted +4.8% organic growth, fueled by Greater China at +9.3%. Middle East and Africa and Latin America continued to perform very well, with +11.5% and +28.3% organic growth, respectively. Latin America was impacted by the depreciation of the Argentinian peso versus euro in reported growth. Let's get into more details for each region, starting with North America. The region was up 4.8% in Q1. There was a negative contribution from Publicis Sapient due to the IT consulting sector facing delays in DBT Capex. In the U.S., the group's largest geography, we delivered +4.1% organic growth.
Connected Media grew mid-single digits, and Intelligent Creativity was up close to 10%, driven by new business wins and scope expansions. Publicis Sapient posted a mid-single digit organic decline due to the continued wait-and-see attitude from clients. When excluding Publicis Sapient, organic growth in the U.S. was up 6%. Let's turn to the performance in Europe on the next slide. Europe recorded + 2.7% organic growth in Q1. When excluding Publicis Sapient, organic growth was up 5.2%. The U.K., which represents 9% of group net revenue, was up 1.9%. Connected Media and Intelligent Creativity together were up mid-single digit, driven by strong new business, while Publicis Sapient remained impacted by delayed DBT CapEx. France, which represents 5% of net revenue, posted a 4.5% organic decline. Connected Media and Intelligent Creativity were slightly up year-on-year, while Sapient was down due to a very high comparable at + 30% in Q1 2024.
Germany, which represents 2% of our net revenue, posted a 5.1% organic decline. Excluding Sapient, organic growth was positive at low single digit, fueled by Connected Media. Lastly, our operation in Central and Eastern Europe continued to grow strongly, posting a + 14% organic growth on top of + 21% last year, fueled by global new business wins benefiting the region. Turning to the next slide for our performance in the rest of the world. Asia-Pacific, which represents 8% of group net revenue, delivered + 4.8% organic growth, driven by Connected Media activities, which were up double digit. Importantly, Greater China remained very strong at + 9.3% organic growth in Q1, largely driven by market share gains and despite macro uncertainties. Middle East and Africa posted a strong + 11.5% organic growth, driven by Connected Media activities and Publicis Sapient.
Latin America posted a + 28.3% organic growth, thanks to the strong performance in Argentina, Mexico, Brazil, all growing double digit. Growth in Argentina partly benefited from inflation. On the next slide, you will find the group's performance by client industry for Q1. Nine sectors out of 10 posted positive growth, and as expected, we are seeing a more balanced growth among sectors. Financial was up double digit, accelerating versus 2024, thanks to new business wins. Healthcare recorded double-digit growth on top of double-digit in Q1 2024, thanks to new business wins and scope expansions with a number of existing clients. Food and beverage was up 11%, thanks to new business wins and scope expansions. The TMT sector remained positive against a tough comparable of + 11% last year. Moving to my last slide, net financial debt.
Average net debt for the last 12 months is EUR 672 million, up EUR 289 million versus average net debt at the end of March 2024. This reflects the impact of acquisitions completed since Q3 2024 and is consistent with our full-year guidance of EUR 900 million. Net debt at the end of March was EUR 728 million, up EUR 1.5 billion in Q1. The increase is due to the usual change in working capital outflow in Q1, partly offset by free cash flow generation. Acquisitions, including earnouts, amounted to EUR 130 million in Q1 as payment for the most recent investments are taking place in Q2. This concludes my financial presentation, and I now give the floor back to you, Arthur.
Thank you, Loris. Let me now take a moment to address the potential impact of the current macroeconomic climate on our operations. Of course, many of our clients are facing a very challenging situation due to uncertainty on tariffs, rising inflation, and a dual political context that is more volatile than ever. This tough environment has not materialized in our number, with March being the strongest month of the quarter. Like everyone else, we could experience cuts from several clients across many industries for the rest of the year. This raised one very legitimate question: Is our strong performance sustainable in today's environment? The answer is yes. We have never been so strong, despite such an uncertain context, for one main reason. We have built the products and the services that our clients need to drive profitable growth in good times and particularly in more challenging times.
With Epsilon and now Lotame, we have the best identity graphs bar none of the industry to help them grow. Today, every client has realized that the danger of relying on cookies or third-party data and the urgency to build direct relationships not only with their existing customers, but also with prospects. We can uniquely help them to see and directly engage with 91% of all adults on the internet globally in a safe, secure, and compliant way. We have built the industry's strongest and most connected media ecosystem from paid, earned, shared, and owned media, driving efficiencies for our clients and optimizing their marketing spend, linking it directly to business outcomes. We have created a unique production backbone linking our identity capability to our 50 end-to-end content studios around the globe to minimize waste and maximize creative asset reuse.
Thanks to our 25,000 engineers, we bring this new marketing model to life within our own client environments to make them future-proof at the edge of AI. Those four unique competitive advantages are not only accelerating our client growth, but also ours. Leading in identity gives us a unique competitive advantage in new business, but also in client retention. Being able to connect the entire media ecosystem at an individual level opens up opportunities to accelerate in fast-growing markets, shifting to intelligent creativity, reignite growth for our creative agencies, and being able to help our clients radically transform their business model to adapt to this new marketing paradigm will bring Publicis Sapient back to accurate growth for the group when they resume CapEx spend. We now have the most diversified revenue mix in the industry, making us more resilient than ever to every business cycle.
Our advanced capabilities in our connected media operation, representing 60% of our revenue, have considerably increased our addressable market in fast-growing segments like advanced TV, retail media, influencer, commerce, and CRM. These new sources of revenue are compensating the cuts in traditional advertising that we, like all our peers, are experiencing. Over the past five years, this unique revenue mix has allowed us to significantly outperform our industry on all KPIs and grow twice as fast as them. 2025 will be another demonstration of that, with a strong performance well ahead of competition, proving the strength of our model. Despite increasing macroeconomic turmoil, Publicis is already off to a very strong start, posting +4.9% in Q1 and very confident in delivering our guidance of 4%-5% for the full year.
One more very encouraging thing: we are ideally positioned to seize the opportunities of a shrinking competitive landscape in what is a growing sector. The marketing service industry we belong to is undervalued, despite the resilience showed during COVID and its ability to grow faster than GDP in the last year. Now, with Omnicom's takeover of IPG, we will move from four main players winning more than 90% of the global pitches in 2024 to three. This 25% reduction of the competitive landscape is already having a material impact on our client decisions on partners and will mechanically benefit us once the deal is completed. [Foreign language] we had a very strong start to the year with organic growth at + 4.9% in an increasingly uncertain environment.
Our record new business performance in Q1 will offset the potential effects of a deteriorating microenvironment and makes us very confident in our ability to deliver on our 4%-5% organic growth guidance. Our continued and disciplined investment in bolt-on acquisition to strengthen our category of one model is truly differentiating us from competitors and bringing the kind of innovation our clients need. As we enter our sixth year of strong performance, our capabilities, our model, and the incredible talent and dedication of our people mean we expect to be able to sustain this level of outperformance in 2025 and beyond. At a moment where our competitors are busy looking inward, we have only one focus: helping our clients navigate this complex marketing landscape and grow in this challenging time.
I would actually like to thank our clients for their trust and also sincerely thank our people for their outstanding work in this particularly busy time. Thank you all for listening now. With Loris, we will be ready to take all of your questions.
Thank you, sir. 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 your question, please press star and two. The first question comes from Nicolas Langlet of BNP Paribas.
Hello, Arthur, Loris. I've got three questions, please. First of all, on the current trading, what's the sentiment among the top clients at the moment? Have you seen any change in recent weeks? March was very strong, but what about April so far? I am curious what you embedded in terms of U.S. macro in the low end of the guidance, the roughly +4%. Second question on bolt-on M&A. It has been roughly six months since you acquired Influential and Mars United Commerce. I am curious how the integration of those assets went, what was the response of clients, and whether you already see tangible revenue synergies from those deals. Finally, on data, WPP recently acquired InfoSum. I am curious how you think this acquisition could change the competitive dynamic on data services offered. Thank you.
Wow. Thank you, Nicolas. A lot of strategic questions here. Maybe I'm going to start with number one. Loris, feel free to jump on any of them if you want to add something, but I'm definitely going to start with the mood of our clients globally and in the U.S., by the way, as I think it is a very important question. I mean, when you look at the mood of our clients, I think it is important that you actually distinguish how they have behaved until now, end of Q1, and how they could behave for the rest of the year. I mean, what we try to demonstrate in our presentation is that you have to separate on Q1 and since the beginning of the year, what is CapEx from OpEx, okay?
When you look at CapEx, meaning all the long-term investment they can make on transformation, you know for a while now that clients have been having this kind of wait-and-see attitude, and it has been reflected in every IT consulting firm, including Publicis Sapient, and this has only accelerated. To be clear, our clients are going to wait to see if there is more visibility before starting to invest. Now, I think that one of the good news of our result is when you look at OpEx, which is really the spend on marketing budgets, clients continue to invest because they need to sustain and win market share. Actually, when you look at the quarter, our best month is actually March. We show that there is still a momentum. Okay?
It's, of course, too early to talk about April now, but you can see that the momentum on OpEx has been there. That is what we have seen so far. Now, let's be clear. You look at the last weeks, and the least we can say is that the macroeconomic uncertainties are actually rising by the day. Of course, they could, and I say could for the moment, be some reduction across some industries through the rest of the year. Honestly, with the strong Q1 we had and the material new business win we had, we feel very, very confident that we're going to be able to offset all of those potential cuts and definitely deliver on our guidance.
I will make one final comment that is more on the general mood that hopefully can be helpful for you, is that, I mean, our clients and ourselves, by the way, we are used to manage uncertainty. We went through COVID, we went through war, we went through inflation. I think that everyone knows that at the moment, if you stop to invest, you lose market share that are very difficult to take back. What I would say about the mood is that our clients are definitely cautious, but they are also very combative, and they are looking for opportunities to grow despite the uncertainty. It's all about being more targeted, and I'll come back on the question on data. It's all about being more connected within the media to be more efficient, and it's all about measurement, which makes, again, the role of data so important.
When it comes to the acquisition, maybe, Loris, you want to say a word about our performance on Influential and BR Media, and then I'll say a word and come on the last question.
Sure. Hi, Nicolas. Just on acquisition, as Arthur explained earlier, obviously, we have a very clear strategy when it comes to bolt-on M&A. As we said, we have invested roughly EUR 500 million since the beginning of the year, and if you take a further step back, EUR 1.7 billion since the beginning of 2024. You look at it from a few perspectives. First, we are well on track with the allocated envelope that we guided you around. Second, the performance has been very strong. If you look at the 2024 acquisition, it delivered 15% top line. We are looking at up to 20% top line in 2025. What is important is to understand also where we stand. We have a good pipeline, but we remain very cautious when it comes to our acquisition. That is answering your question on integration and synergies.
As you know, we have very strict financial discipline for each one of them, which essentially means three things. One, they have to be immediately accretive, and that's true for both the top line and the bottom line. Two, we are very thorough when it comes to our integration plan. Last, we are also extremely strict when it comes to valuation. We will continue looking at acquisition. We are on track to deliver our envelope, but we will stay very, very cautious.
If I can add two points on that. First of all, our M&A strategy is definitely accretive to shareholder return. When you look at the growth we are able to deliver for small and big acquisition, I know that now we have, I think we have a savoir-faire that makes it happen immediately, as I said. I would say, even more importantly, with every of those acquisitions, we are directly addressing a client need.
To come back about Influential and BR Media, the world of influencer and creator is just booming at the moment, and those acquisitions have been welcomed and received by our clients in an incredible way because, again, they understand that it's all about identity and how do you connect this identity with the overall media landscape from publisher to CRM to retailer and to influencer, and we have taken a leading position there that makes a huge difference. Now, on your last question about WPP acquisition on Infosyn, you know what Infosyn is? It's a clean room. By the way, it's great to have a clean room, don't get me wrong, but it is a commodity. Epsilon is using the clean room since we bought them.
There are many, many clean rooms on the market, and by the way, we use them also because sometimes clients are ready to take our own clean rooms. Sometimes they want to use a third party. By the way, every of those clean rooms are available to any of the peers in the market on an open mode. It is a commodity. What is even more important, and it comes back to what I was saying about the role of data and why data is such a differentiator that has made a big difference for Publicis, is that clean rooms alone is an empty shelf. I mean, if you do not power clean room with identity, you cannot find new sources of growth. If you do not add proprietary data that will bring to your clients something that they do not have, they will not find new sources of growth.
They won't be able to connect every individual to the entire media ecosystem, which is what I talked about with Influential. Today, we are in a unique position to go from one individual to several Influential and drive directly to commerce. I will say maybe the most important thing is that you can't truly measure performance because you have to measure it in every environment instead of in one. You definitely need this connected identity graph. As you know, through the acquisitions we have made, we are definitely number one in that. We have spent the last four or five years when everyone was debating, do you need data or is cookie enough to connect this identity to the entire media ecosystem? Thanks to AI, and particularly the one that we have built through Bolt-on and Sapient, we are now able to measure any business outcome.
By the way, we can do it in any clean room because, once again, it's a community. Just to close on that, as you're asking the question, I think that coming back to WPP, I would just make one comment, which is we have a very different strategy, it's clear. We have invested in Epsilon while they have been divested in Quanta, and it has led to very different business outcomes. Now, let's see what happens in the future.
Thank you, Arthur and Loris.
The next question is from Adam Berlin of UBS.
Hi, good morning, everyone. Thanks for taking the questions and very early morning for you, Arthur. Can you break down your implied H2 guide for 4%-5% growth? What is the impact from the Q1 wins inside that 4%-5% for H2? Are you making any assumptions about new wins that are on the cards over the next few months that could also help with H2 growth? That's my main question, but I just also want to understand why you're so confident, very confident about that 4%. Can you just say a bit more about why you're not worried about spending just falling off a cliff, particularly around creative in the second half of the year?
I mean, you talked a little bit about the need to invest, and I can understand why media spend would remain strong, but why are you not more worried that creative could come under a lot of pressure as we've seen in previous cycles? Thanks.
I'll start maybe by the second question, which is our level of confidence. We are very confident for a couple of reasons. First, we didn't wait for what has happened in the last weeks to factor in our guidance, some difficulties, because we knew it was coming even outside of what has been announced by the administration recently. It is not like we were not preparing our guidance for that. By the way, we said it very clearly during Q4. We said we have to be cautious on a certain number of items. This is why we're going to 4%-5%, and this is where we are. Now, we are not expecting things to fall out of a cliff for a couple of reasons. Number one, our client, as I said, knows that they can't just stop spending in terms of CapEx again.
We don't know how long it will take for CapEx to come back. This is why we have taken in our guidance for the 4% negative Sapient. When it comes to CapEx, we know that clients are going to continue to spend because they have to sustain, maintain their market share. The other reason why, it's not a client reason, it's our reason, is that what we bring to the market today is perfectly done for this kind of challenging time. You need identity to find new sources of growth, and our clients are not going to stop looking for sources of growth. You need Connected Media to make your media more efficient and be measurable. This is, of course, something that they will look a lot in detail as they go to their board to ask for the money to invest.
You need to make sure that you can leverage AI to reinvent your model even on the short term, and this is what we're going for with Sapient. We do not expect revenue to fall anywhere from a cliff, as you said. We are confident that our clients will be cautious but will continue to invest, and that our model will allow us to win the market share. Okay? By the way, let's be clear, our dynamic goes way beyond new business. New business is what makes us very confident to offset potential cuts that we could not have seen at the beginning of the year. If I want to cut the long story short, what has happened in Q1 is we had very good news with new business and incredible track record.
On the other, we had the bad news of the kind of lack of visibility created by those tariffs that could lead to cuts. This is offsetting. The rest is, you see the dynamic. Look at our number. I mean, high single digit in media, but also high single digit in creative. Let's be clear, this could slow down a bit, but it will be offset by new business and put us in a very good position for next year. Now, when you look at the impact of new business, I mean, obviously, it is too early in the year to truly determine exactly what will be the impact of new business this year. We are only in Q1.
However, I mean, thanks to the win we just had, we are, and you know we gave a number, we are largely on track to deliver the 200 basis points of contribution to organic growth of 2025 and actually compensate, as I said, for every cut we can see. I will make two comments on that, is that when you look at a year in our industry, what you have not done in Q1 in terms of new business, the time you win it and trump up does not have a big impact on the year. We should not expect future additional win to have a real impact for this year. The good news is this is the same thing for losses. Whatever we could lose within the year, we will not have an impact before next year.
We are pretty set here, and this is why we put the J.P. Morgan chart here. What we love about the dynamic we're having at the moment is, yes, we're number one in new business, and that's great. More importantly, and I'm touching wood, we are not losing clients because this, for me, is the best demonstration that the model we have is actually bringing what our clients need for the future. If clients are staying, despite the fact that sometimes we have very long relationships that could lead to a pitch, it's because they know that what we bring is unique. This is why we call ourselves a category of one today.
Can I just ask one quick follow-up? The 200 basis points you just mentioned in terms of potential new business wins helping 2025, how much of that was done when you gave your full-year guidance, and how much has come in the last six weeks or so, which have been extraordinary? Can you give us just asking for the impact of the kind of last six weeks rather than the whole year? Because obviously, you had great wins going into this year as well before you gave your full-year guidance.
Loris, do you want to start with this one?
Sure. Maybe one way of looking at it is when we gave our guidance, you remember, Adam, we said 100- 200 basis points. Now we are obviously saying we're close to 200 basis points. That creates the difference of where we were and where we're aiming.
Perfect. Thank you very much.
By the way, Adam, if I can build on that, what we have won recently could start to have an impact, particularly in the second part of the year. What makes us very strong on our feet is the well-balanced revenue we have between H1 and H2. You have seen that we gave a clear guidance for Q2. We feel very confident because we are not too backloaded in the end of the year where we do not know what could happen. We do know that we have those wins that we just had that could offset any kind of cuts we could see in the second part of the year. This is why, again, we are so confident at the moment.
Thank you.
The next question is from Laura Metayer of Morgan Stanley.
[Foreign language] Arthur and Loris. Congrats on a strong quarter. I have a couple of questions on revenue visibility. Can you help us understand how cuts to advertising spend actually affect your revenue? For example, if you can give us a sense of what percent of your revenue is already contracted for the year, what percent can get impacted by cuts to advertising, I think that'd be really helpful. If you can touch on how the contracts work generally, what is fixed in advance, what is variable, that would be really helpful. Thank you.
Thank you. Loris, I'm going to let you start on this one.
Yeah. I mean, as you know, Laura, we don't go into specifics when it comes to client contract. What we can tell you is that if you put aside Publicis Sapient that is directly correlated to client CapEx, and that is very much a time and material business, roughly two-thirds of our business is retainer-based and/or with good visibility today. The second point is the rest being primarily projects, which are a combination of project fees and/or time and material. For those, we have not seen any material cuts.
Laura, if I can build on that, if I can build on that, as you know, as for a while, it has been now, I guess, a bit more than five years that we haven't missed a guidance and that we have always delivered the number that we promised. Again, the reason why we started the year pretty cautious is because we knew there could be some uncertainty. The reason why today we are so confident on our guidance, despite whatever can happen, is that the 4% include, to come back to your point, all the risks that could happen due to the impact of tariffs, due to this wait-and-see attitude for Sapient. As I said, Sapient is negative in our guideline for the moment at 4%.
We are factoring everything that makes us very comfortable for the floor, hoping that we will gain a bit of clarity in order to try to deliver more. This is everything that has been factored because we know how important it is, generally speaking, for you to have visibility on our performance, and particularly in this kind of uncertain time.
That's helpful. Thank you very much.
The next question is from Lisa Yang of Goldman Sachs.
Yeah, good morning. Thanks for taking the question. The first one is on Sapient. Could you maybe come back to the trends you've seen, like explain maybe the deterioration to the sort of downward signal in Q1 versus the flat in Q4? Maybe when did you start to see the deterioration? Was it more pronounced in February or March? And how much of that was maybe reflecting some of the government spending cuts? Because I think you have Sapient Government Services within that. Just wondering, when you think about Q2 and the rest of the year, could basically Sapient deteriorate even further? That's the first question. The second one is on new business. Could you confirm what was the contribution from new business in Q1?
We said you assume was between 100- 200 basis points, and you would expect a ramp-up, so more mature contribution in H2 to get to the 200 basis points for the full year. That is the second one. The third one is if you can also comment on the current environment for marketing pitches. It is fair to assume in an environment of greater uncertainty, there will be fewer pitches this year. Just thinking like how you are thinking about the opportunities for new business wins and potential risk for the rest of the year. Thank you.
Thank you very much, Loris. I will leave you the new business question. I will start with, no, no, the Q1 question, impact on new business on Q1. I will take on pitches, but I will start with Sapient. Again, we have to be very cautious because we know that CapEx spend will not resume very early. We expect that this could take time. I want to be clear, we are not expecting Sapient to deteriorate further. Okay? By the way, for a factor or reason, but what is important, if you take a bit of a step back, what you realize is that Publicis Sapient has been a growth driver for us when you look at the last five years. We have roughly moved from EUR 1.5 billion- EUR 2 billion.
To come back to your point, Lisa, we have seen in Q1 an acceleration of this wait-and-see attitude from our clients that has led to a negative performance for every IT company this year, including Publicis Sapient. It is reflected in our guidance. As I said, we are not expecting further deterioration, but we do not know yet exactly when it will come back to growth. I will just make a couple of comments that I think also answer your point about the perspective and how we envision Publicis Sapient, I would say in the midterm, is that we believe that Publicis Sapient will be a significant growth engine for us in the near future for mainly two reasons. First, every one of our clients will need to transform their business model with the help of AI. There is no doubt about that.
This is the beauty about Sapient, is that although they are going through a challenging time as every IT consulting company, because again, clients are being cautious on CapEx, there is no way they are not going to transform. Sapient possess some of the most advanced capabilities in AI and in business transformation. By the way, maybe it's not in our number today, but it's definitely also in our new business track record. Because when we pitch for any piece, particularly on media, we don't only go with media people. We go with data, we go with technology, and they are making a difference.
The second point that I tried to put in my video, although it was a short one because I did not want to bother you for too long, is that what is very important is that all of our clients, when they start to resume CapEx, are wanting to do it and to do business transformation in a cheaper and faster way thanks to AI agents. What does it mean? Because I think it is important for you to understand that is that it will be AI agents versus labor-intensive solutions and thousands of people put onto an account. That is going to play directly on Sapient's unique strengths and model because they are leaner, because they are more agile, and they are organized in a way that is very different from these massive labor-intensive IT consulting peers. They have the product, they have the model.
Our client will resume CapEx at one point, and again, we feel very confident for the midterm. I will let you take the new business impact question, and then I'll finish with the pitches.
Yeah, I'll take the new business question and your question on government cuts when it comes to Sapient. Lisa, just to let you know, government contract is less than 1% of our revenues at group level. You're right, it's primarily concentrated in Sapient. What we've seen is the normal CapEx cuts that we see across the other industry. We have not seen any meaningful cancellation of these contracts. In our exposure, as I said, it's very limited. On Q1, on new business impact when it comes to Q1, you will remember that in our February communication, we talked about going into the year with some good tailwind in new business. Roughly in Q1, it was around 200 basis points.
Last but not least on the pitch activity. First, the least we can say is that at the moment, there is still a very sustained activity when it comes to new business. We have a lot of pitch going on at the moment. By the way, there are some that are public and some that are not. There are even some clients that have decided to move to Publicis without truly doing a pitch, but just a couple of weeks to kick the tires because we are coming at a moment where everyone is coming with a data solution. Everyone is claiming that you have the best. When you start to kick the tires, the reality comes to the surface and is translated into the new business track record, to be clear. I mean, we can all say that we're great.
At the end of the day, it is a number that talks. Again, if you look at the J.P. Morgan reports, you understand a lot, is that exactly the number, but you see the dynamic. I want to be clear on one thing. We talk a lot about new business in that call because it is going to offset any kind of cuts we could see. You should feel very confident about our guidance. Most of our growth is not done by new business. Most of our growth is done by the implementation of our model on our existing clients, which is why we are making good retention. This is why we are also growing with those clients. You need to understand that we have invested in new capabilities that have increased our addressable market.
We're able to grow, and this is what we're planning to do this year, between 4% and 5% when the average market is going to be below 1%, not only because we win new business, it's 200 basis points, but also because we are able to develop new addressable sources of business like influencer, like CRM, like commerce, like production that allow us connected through identity to truly help our clients find the growth. Again, this is the reason why I'm in Chicago this morning. I don't have one client that doesn't want to know more about our capabilities at the moment we are having to consolidate. If you look at the kind of pitch we want, there were a lot of consolidation and go with one partner that can truly help them navigating in the uncertainty we're going through.
That's very helpful. Maybe I just have a very quick follow-up. Based on what you said, Q2 shouldn't be too different from Q1, so we should be toward the upper end of the 4%-5% in Q2?
We are definitely going to be within this bracket. Loris, you want to say more because I see that you want to say more. As you know, we are not in the same room. We have to connect. Loris, you want to say something on this one?
Yeah, only to confirm that we said we're guiding Q2, 4%-5%, and same for, I guess, the second part of the year, which is what Arthur said earlier, which is extremely homogeneous performance for us throughout the year on a quarterly basis.
When you look at the increased uncertainty, honestly, being well balanced from one quarter to another, I think is a fantastic strength. By the way, which is an important point, it allows us, sorry, I'm going to insist on that because we're talking about the short term here, but this uncertainty creates also a lot of opportunities when it comes to talent and clients. We talked about the clients and how we are gaining market share because we have the model, but it's true also on talent. People want to be in a place that is growing, that is innovating, that is gaining market share. They don't want to be in a place that is either declining or reorganizing.
The difference we can make at this stage is that as we have a well-balanced revenue for the year, we can plan on our costs in the right way. Someone is out of mute, so I do not know exactly what is happening. I do not know if I am the only one who heard that, but that is a very important point. Being balanced between the two quarters should give you the reassurance that we are work solid. It is also a way for us to continue to invest properly in the people and the capabilities that will sustain the momentum we had for the last five years.
That's great. Thank you.
The next question comes from Conor O'Shea of Kepler Cheuvreux.
Yes, thank you. Thanks for taking my questions. And congratulations on the results as well. Just a few follow-ups. One, thank you, Arthur. You mentioned obviously you couldn't rule out some sectors' spend slowing in the rest of the year. I'm just wondering if you have, at this stage, you see any sectors more vulnerable than others to cuts on an underlying basis because of the macro situation. The second question, just wondering if you've made any changes, again, due to the deteriorating macro conditions in terms of your hiring policy going into Q2 at Sapient or other parts of the business. The third question, maybe for Loris, can you just give us an estimate if FX rates remain unchanged for the rest of the year, what the potential Forex translation impact could be for the full year? Thank you.
Thank you, Conor. Look, on the sector, I think you will agree with me as it is changing by the day. Just look at the more recent President Trump announcements on automotive and before on tech and mobile. I think it's way too early. As I said, everyone is being very cautious, but also very combative and trying to manage it by the day, hoping that we will have more visibility that, by the way, we will definitely need at one point. The question you're raising about have we changed our policy, particularly on hiring? There is a reason why we have by far the best margin. Actually, there are two reasons. Reason number one is we have a product that has more value and recognized being more valued through our clients.
I think it's very interesting to see that over the last five years, we have been able to increase our margin materially while winning a lot of new business and growing. It shows that what we bring to our clients has a premium that is justified. We are also very well known to be very cautious on our costs. As you know, we have those large platforms with resources that allow us to manage our resources very tightly. To be clear, when it comes to the hiring policy, we are being cautious, but I want to say also we are being very ambitious. We are clearly going for every strong talent that wants to join our journey.
The good news about what is happening on the market at the moment is that if you look, let's say, at the top three leaders, we have very different journeys, and we're able to explain to candidates why joining Publicis could be a great place for them to progress collectively and individually in the year to come. On one side, we are being cautious, as we've always been. On the other, we are being very ambitious on our ability to attract an unfair share of talent at a moment where our dynamic puts us in a very good place to retain our best talent and attract, of course, the best.
On the FX, Conor, if you assume that today's FX rates or the spots are applied to the remaining nine months of the year, this will have an impact of roughly 250 basis points, a negative impact of 250 basis points for the full year of 2025.
Okay. Very helpful. Many thanks.
Thank you.
The next question is from Julien Roch of Barclays.
Yes. Good morning, Arthur. Good morning, Loris. Last of my questions have been asked, so just three numbers. If I look at page six, how much of your intelligent creativity is production, and what was the gross rate of production in Q1? That's the first number. The second one is how much was media up in Q1 using the old definition so we can compare your media performance versus peers? So percentage of production in intelligent creativity, gross of production, and gross of media. [Foreign language]
I'm going to let Loris give you the number, Julian, but maybe I'll make a couple of comments. I think what is very interesting in our offer is that as we have put data and tech at the core of our media and creative operation, we don't think they could be compared with peers anymore. This is the reason why we are winning as we are winning with our category of one, which is clients see our product and see our services differently from our competition. It doesn't mean that they will choose us every time. It means that they know that it's very different. It's getting more difficult to distinguish, is my point, one with the other.
What is true between Epsilon and Publicis Media, honestly, it's so intertwined now under one P&L with the data of Epsilon at the core of the media operation that it's impossible, but maybe Loris can give you just a sense of that. I want to say the same with production. Disconnecting what we call ideation, finding idea with production makes no sense because what our clients want now is not only a good campaign. We can come with a great idea, but if it's not adapted to this kind of fragmented media landscape, it's totally useless. You need to have both that are connected. It is the same people that are taking care of both. We are not making any arbitrage between where we should spend. We make sure that we do what is right for the clients. It is truly intertwined.
Loris, I don't know if you can give me a bit more color on the numbers.
Sure, Julien, to give you more texture on the numbers, starting with production. Production is roughly slightly more than 25% of intelligent creativity, obviously varies across geography. At global level, it is up slightly above 10%, consistent with 2024, so double-digit performance. On media, as we said in February, it's harder now to give you the separate performance of media as media and Epsilon are very intertwined. What I can tell you is if you look at connected media, which is roughly 60% of net revenues, it is driving high single-digit growth in Q1 2025, and we expect that this will continue throughout the year.
[Foreign language]
[Foreign language]
The next question, gentlemen, is from Christophe Cherblanc of Bernstein.
Yes, good morning. I wanted to come back on the shrinking competitive landscape you were describing. We know the impact on new business will take place in 2026. In 2026, your value proposition edge vis-à-vis your peers will be the same. If I add the two drivers, would it be fair to expect a new business contribution in 2026 to be above that of 2025? Would you give me a pushback to that assumption? Related to that, on the global pitches, which are highlighted as an important issue, what is the share of global pitches within the revenue base of Publicis and the competition, please?
I'll start with the second one. We have, of course, fewer global pitches, but the revenues are way more material. A global win means a lot of very small wins. Do not get me wrong, the small wins add, and this is why there is something that I love about our performance, is that we are performing well in every region. This is because we are growing our clients in every region, and we are winning new business in every region. The global wins are the ones that are really having an impact on our revenue for the year to come. What I mean about the shrinking competitive landscape is that today, when you look at global pitches, as I said, more than 90% are won by the top four.
We are going to find ourselves in a position that there will be only three global players allowed to truly cover the entire world with capabilities at scale. It will definitely, as I said, create more opportunities because mechanically, we will have one player less. It will change client mindsets. I think it is a great thing because they are also going to have to adapt to conflict. They will have to understand that conflicts are part of our business, as it is with McKinsey or Accenture. Most of them already did, but it will be even more present here. Now, will it help us win next year? Statistically, yes, but that is the magic of new business. Never know how things will go. Again, as you have seen, we had a great quarter.
The reason why, honestly, I'm very confident on new business is not the shrinking competitive landscape, it's the quality and the uniqueness of our offer. I mean, to come back to that, there are only three reasons why we're winning. It's pretty simple. Whether there are three or four players at the moment, we're winning anyway. The reason why we're winning is the following. We have data and tech at scale. Everyone can say everything apart from a few players that have been invested in the last years. No one has the capabilities we have acquired and integrated. The second thing that is even more important today, particularly in this uncertain time, is that it has been hard, but we have integrated those capabilities within our media and creative. This is what I explained earlier, and now it's working.
There is a third factor that we do not talk enough about, and which I think is a very big reason why we won so much in Q1. We have a management that is consistent, that is stable, that are the people that built this company under the vision of Maurice Lévy for the last eight years, I would say, and that they are here to stay. When you are a client, you have the best of the capabilities you can expect. They are integrated into what you are pitching, and it is done by a team that has made the transformation of this company and is here to stay for the long run. Those three reasons are the reason why we are winning, not because there will be four versus three players, but hopefully, it will also help.
Thank you.
The final question, gentlemen, is from Jérôm Bodin of ODDO .
Yes, good morning. Very three quick ones for me. The first one is on working capital. Have you seen any move or change regarding the current situation, especially on payment delayed in the U.S.? Could you make an update on the possible inflow, outflow for the year? The second one is on M&A. You did a lot on data and around Epsilon for the last three years. Do you see an opportunity around Sapient now regarding the fact that the market conditions have changed and some of your IT consulting peers could suffer in the future, particularly in the U.S.? Does it make sense to increase your critical size on that market? The last one is a bit more general.
Do you feel that the lack of visibility, that the lack of economic visibility in the U.S. since a few weeks leads advertisers to increase the demand for more targeted advertising solutions and therefore your data solution versus traditional offers? Do you perceive the link between the economic advertising uncertainty and the possible increase in the demand for data to be more efficient in terms of arbitrage? Thank you.
Thank you very much. I'm going to leave you question one, Loris.
Sure. Jerome, on the working capital question, you will remember what we said in February, which is our objective when it comes to working capital is to reach neutrality in 2025. Our focus is really more on the average net debt because of two main factors. The first is, as you know, we have a very high seasonality in the first half of the year with some more significant cash outflow than in the second part, as we saw in Q1, again, fully in line with our expectation. As always, the cutoff on working capital at the end of the period can be impacted by some very short-term swings in client collections. Those have no impact on average net debt, which we confirm our guidance around EUR 900 million for the average net debt.
On your M&A question, as you know, we are focusing on bolt-on, and we have a very disciplined approach. In 2023, things were too expensive. We did not reach our envelope. In 2024, we found great opportunity. We went a bit above this envelope. In 2025, we are in the range of the EUR 800 million-EUR 900 million. We invested with Lotame on data because we clearly said that we want to strengthen our identity graph outside of the U.S., which we definitely did. I would say that on identity now, we are in a very good place. We have accelerated in influencer marketing because this is a place that is booming where we are leading, and we are reinforcing on commerce.
To your question on Sapient, yes, we could be interested in bolt-on acquisition, only bolt-on acquisition, but honestly, not that much in the U.S. where we have a very strong position, maybe outside of the U.S. with smaller firms that could complement what we have. Again, very disciplined, bolt-on in areas where we can increase our addressable markets. I thank you very much for your last question because it gave me the opportunity to wrap up. You are making a very important point with, does the lack of visibility change client needs and behavior? The answer is yes, definitely.
I think one of the reasons why we had a strong March, honestly, and such a new business track record in Q1 with a lot of wins coming at the end of the quarter is that clients at the moment, and I guess for a while, are going to be looking for different solutions. Sorry to say it simply, but that will help them differentiate. This is why owning your data is so important. If you come with things that everyone has, it makes no sense. If you bring something that can make them unique and grow, it makes way more sense. They are going to focus on three areas in this kind of uncertain time. First, they want a communication that is more targeted. Again, this is why we bring with our identity, which is 91% of every adult connected to the internet globally.
They're going to look for more connections because don't get me wrong, one thing is to reduce your budget. The other thing is to hope for the same outcome. To do that, you need to connect everything you're doing. This is why it's so important for us to invest in media's area like influencers that we can connect with our pain. They will look for more targeted. They will look for more connected, and they will look for more measurements. This is also a place where we're winning because we are radically changing our relationship with our clients. Again, that's the reason why I'm in Chicago today. We can say to every other client today, and we are saying to every client today, "Mr. Client, don't judge us on our marketing output, i.e., how well our campaigns are working.
Judge us on our ability to deliver business results for you. Those three things, a more targeted approach, a more connected when it comes to media, leading on measurements, is why we are delivering such a strong quarter. I know that now you are used to seeing with us this kind of good performance, but I think it is always important to put it in perspective, perspective with our peers, perspective with the market in general. This is a very strong performance. We feel very good despite this level of uncertainty that is raising by the day to deliver our guidance because we have this kind of new business track record that shows again the power of our model, but also will help us offset any potential cuts. We have the capabilities. We have the revenue mix.
We are in a market that is growing, and we feel very confident, not only this year and beyond, to continue to outperform our industry. We just have to do one thing, which is to do exactly what everyone does at Publicis at the moment, focusing on our clients, focusing on what we bring, and help them grow in this very uncertain world. [Foreign language]. I say [Foreign language] . I think we're done. The good news is the technology worked. I think hopefully you have heard us well, and see you very soon. Merci beaucoup.
Ladies and gentlemen, thank you for joining. The conference is now over, and you may disconnect your telephones.