Operator: Order 2026 revenue conference call. The speaker today is François Laroze, Chief Financial Officer and Chief Operating Officer. Please note this conference is being recorded, and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing #5 on your telephone keypad to register your participation at any time. Please note that three questions are allowed for each analyst. I will now hand you over to your host, François Laroze, to begin the conference. Thank you.
François Laroze: Good evening, everyone. Thank you for joining us and for taking time. Welcome to Havas Q3 2026 revenue presentation. I am with Delphine Maillet, Group Head of Investor Relations. Just a rapid second to ask you to take a moment to read the disclaimer as usual. During this conference, I will cover three topics: the Q3 and nine months financial performance, the key business highlights during this third quarter, and finally, the outlook with confirmation of our 2026 guidance. Then we will have the usual Q&A session at the end of this conference. Let us start with the performance of the third quarter.
François Laroze: Havas delivered a net revenue of EUR 72 million, representing a reported growth of 7.2%, coming from 2.4% for the organic growth, which is fully consistent with our full-year guidance range and which demonstrates clearly the resilience of our business model despite the uncertain environment that remains quite uncertain. The acquisition contributed 3.2% to the growth, reflecting the continued execution of our bolt-on strategy. Concerning the Forex, for the first quarter, we are in positive figures, with 1.6 positive contribution of the Forex to the growth of the group. Therefore, this quarter illustrates the balance of our model, combining resilient organic growth and disciplined execution, in a more favorable currency environment during this third quarter. Let us have a look at the performance of the organic by region. North America, they had a very solid quarter with the organic growth of 7.5%.
François Laroze: Both Creative and Media continued to benefit from the client budget wins that you have commented earlier. Nevertheless, during this quarter, healthcare growth was weaker than the other business, impacted by fewer new molecule launches. Europe posted an organic growth of 1.7%, supported by France, Spain, and Poland, when UK was slightly below the performance of the other countries. For this reason, we have recently implemented a new London Village leadership organization to strengthen a little bit more the cooperation and execution among the different agencies. Asia Pacific and Africa declined by 6.7%, reflecting the weakness in China and the continued impact of the geopolitical situation in the Middle East. During the third quarter, the performance of Middle East deteriorated a little bit compared to the H1 2026, notably in Saudi Arabia.
François Laroze: Latin America was down by 4.3% due to Mexico and Peru performance, while Brazil and Chile remain strong. Overall, we are quite satisfied by the very strong performance of our main region, in this Q3, and we remain confident for the region that has underperformed during the quarter. Now, let us turn to the first 9 months performance. The revenue growth is 3.1%, including 2.5% of organic growth, in line with the level achieved during H1 2026. The scope contributed positively by 2.5% also. For Forex, we are still in the -1.9% figures, despite the very favorable impact observed during the Q3 that I have just commented. At the end of September, we are in the middle of the full year 2026 organic growth guidance, in the range from 2% to 3%. Similarly, verified by region, with North America still very strong in cumulative figures, 7.1%.
François Laroze: Europe, 1%, with a gradual improvement over the course of the year. Asia Pacific still negative at -5.5%. I give you some few words on the Middle East. As you know, the exposure of Havas in the Middle East is quite limited, and we confirm that the events have no material impact on the financial statement of the group. Nevertheless, the ongoing conflict continues to clearly affect the activity in the region and will somehow create uncertainty for other agencies serving Middle Eastern clients, agency based in France, in UK, or in China. If you take the performance of the region Asia Pacific during these first 9 months, we need to remind that roughly the half of the counterperformance come from the evolution of Middle East, the other half coming from China performance.
François Laroze: Nevertheless, we have to remind the very good performance of India since the beginning of the year. India is our first country of the region, ahead of China, which was not the case before. Latin America, despite the softer Q3, remains in positive figures for the cumulative 9 months. Moving now to the Q3 business highlights. We have made a selection of our recent bigger wins over the Q3. The business momentum remains very solid during this Q3, as it was during H1. We have reminded some nice wins in creativity with CaixaBank in Spain, with Peroni, the beer in the UK, and Monoprix, the retailer in France. We are also NordVPN, which is a software company in the US and Europe, but also ACE Switzerland in the UK, Lionsgate in Europe.
François Laroze: We are also very proud of the awards we have won during this period. Especially with D&AD, in which Uncommon got a Black Pencil and has been awarded Creative Agency of the Year again. At the London International Awards, Havas received 48 awards, including 3 Grand Prix. Just to remind you how important the creativity is in the Havas strategy. We are very pleased to have had this success during the quarter. In terms of M&A, our bolt-on acquisition remains very active. Since the beginning of the year, we have completed 8 acquisitions, including 1 during the Q3, which is SportVibes. This strengthened the pre-strategic capabilities such Havas Play and H/Advisors, as you see on the chart, with 4 acquisitions coming in the Havas Play vertical. As usual, these acquisitions expand both our expertise and geographical footprint, while bringing highly entrepreneurial management teams into the group.
François Laroze: As we have previously communicated, this strategy contributes around EUR 40 to 50 million of annual revenue and is generally executed at profitability level above the group average. M&A remains an important contributor to the future growth, but also to the future margin expansion of the group. An outlook on the full year guidance and the roadmap of the group. I will enter into detail in the roadmap, just reminding you that new business retention and cross-fertilization of the existing client is really at the core of our model. During the last months, we have really accelerated in cross-selling around the new core services, such as Havas Play that I already commented or Prose on Pixels in the production. The second pillar is the dynamic bolt-on strategy focused on targeting acquisitions. Since the beginning of the year, our scope is at 2.5% impact on the growth of the group.
François Laroze: Ahead of our 1.5% target we gave earlier this year. The EBIT margin of the acquisition is in the range of 15% to 25%. The third pillar is still our cost management, with continued focus on headcount control, efficiency across the group, and the leverage of investment in tool and AI. The monitoring of the headcounts remains a priority, and at the end of Q3, the headcounts of the group are declining organically, which confirm a very good performance of our productivity at group level. In short, we remain focused on the same priority around organic growth, accretive bolt-on strategy, and management of our cost seriously. In terms of guidance, to conclude this presentation, we confirm the guidance with an organic growth between 2% and 3%.
François Laroze: We confirm the adjusted EBIT margin improvement with a target between 13.2% to 13.5%, which is an increase by 30 to 60 basis points, and the dividend payout ratio around 40%. We also confirm our midterm objective for 2028, including the adjusted EBIT in a range from 14% to 15%, and keeping this payout ratio around 40%. I thank you all for your attention, and now I am ready to answer any of your questions.
Operator: Ladies and gentlemen, if you wish to ask a question, please dial #5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial #6 on your telephone keypad. Note that three questions are allowed for each analyst. The next question comes from Annick Maas from Bernstein. Please go ahead.
Annick Maas: Hi, thank you for the call. My first question is on M&A. Can you give us an idea of how many deals you are currently working on, which should still feed through in this year, please? Second one on North America and the Horizon JV. Can you just give us an indication of how much actually of the Q3 or nine months performance is coming from co-pitching versus you guys doing it by yourself? Then the third one is on the Middle East. I guess you said performance has deteriorated over the third quarter. You had some major plans to expand in the Middle East. Midterm, have you already revised those, or you are still on track to expand despite the uncertainties that we are seeing at the moment? Thank you.
François Laroze: Thank you, Annick, for your questions. On M&A, as I said, we have finalized eight acquisition during the first nine months. We still have some of them in the pipe. We should finalize some of them before the end of the year. We have also some acquisition that should take some more time and that we could close during the Q1 2027. I would say that the pace is as before and our mission is still to be around 10 acquisition during this year, which will be, in terms of revenue, one of the record years. We have many operations under study. On the US, the Horizon JV, there is nothing really new compared with our previous communication. We have won several small and mid-size clients over the last few months.
François Laroze: One bigger one that we commented, and we are still working today with two global clients which are on the review at the JV level, and also a US client which could complement. Compared with the previous communication, we have no major wins in the JV, but we have quite an active pipe, and we are very confident and pleased with the performance of the JV, and we should have more wins in the coming quarters. Concerning the Middle East. Middle East today for us, it is roughly from 60% to 70% coming from Dubai, the remaining coming mainly from Saudi and to a lower extent, Oman and Israel. What we saw during the third quarter is quite strong deterioration of the Saudi performance, but also a heavy resilience of the Dubai operation.
François Laroze: So we are quite pleased by the ability of Dubai to really protect their revenue and EBITDA during this crisis. In Saudi, as you may know, we have some clients which are directly impacted by the crisis, especially in tourism. As you can imagine, tourism today is struggling in Saudi, and therefore we are not extremely confident on the coming quarter. Nevertheless, to answer which I think it was one of your questions, our ambition remains totally the same. We consider that Saudi will be an area of growth in the coming years, and even if they could struggle during the coming weeks or months, we consider that we will keep on invest in Saudi as we do in Dubai and other Middle East countries. Yes, Saudi will struggle and will bounce back, and we want to keep on investing in this region and in Saudi especially.
Annick Maas: Thank you.
Operator: The next question comes from Conor O'Shea from Kepler Cheuvreux. Please go ahead.
Conor O'Shea: Yes, thank you. Good evening. Three questions from my side as well. First question, just on coming back to the performance in North America. You mentioned, François, that the healthcare activity grew below average again this quarter, but I think that's a US heavy activity in terms of concentration. Can you just give us a little bit more color on the drivers of growth in the US by activity, Media versus Creative, and maybe the contribution already from new account wins this year or in rough terms? Secondly, could we have on the recent acquisition of Canal+ shares. What's the thinking there? Following on from the similar amounts invested in New Year share, could we see more of that in Q4? The last question, just on the healthcare business. As you said, below average growth in Q3 again.
Conor O'Shea: Are you expecting any change in that in Q4 or into 2027 in terms of catching up on growth at a group level? Thank you.
François Laroze: Thank you, Conor, for these questions. One and three will be, maybe I will answer both questions in only one answer. Give you some flavor of what happened in North America, which is very strong performance during the quarter. Very strong performance on cumulative figures, coming mainly from our creative business. You may know that we have acquired Uncommon in the UK two years ago, which have launched operation in the US one year and a half ago, and which is doing very well. We have attracted new clients, some of which we cannot disclose for confidentiality reasons, but they are really doing very well. Same for our New York operation with the wins we have commented, which are some integrated wins which contribute to the performance. First, in US creativity, second, the media, which is doing well, as well.
François Laroze: As I did, for Health, it has been more difficult during this quarter mainly due to some launches of new molecules which have been stopped by some of our clients. As you may know, these molecules, the process is quite long, and there is the day when the label decide to go to FDA or not to go, depending on the performance of the test they have made with the data. Unfortunately, this year and this quarter also, we have faced some decision of major label, including Sanofi, but not only, not to go further for some molecules. Reminding that the launch of new molecules is, I would say, an important business for Havas Health roughly representing, let us say, 20% of the business of the division. That is clearly what explain this performance.
François Laroze: To answer the third question you make around Health, the performance of Q4 should be in line. We do not see any strong bounce back during the first quarter. For 2027, it is too early, but we are working hard with the teams to mitigate this negative impact of the molecule which have not been launched, but it is too early to confirm the performance of Health in 2027. Now I come back to question number two, which is question around Canal+ and LAG. To remind you that we have purchased EUR 43 million of shares in LAG for 2.6%. We have acquired very recently for EUR 30 million of shares of Canal+ for a little bit more than 1.2% of the capital. Clearly, these are opportunistic financial investments. Because they operate in sectors that we know quite well around broadcasting, publishing, media.
François Laroze: Clearly, this investment can be made because Havas is in a very, I would say, healthy financial position and can afford this kind of investment. Nevertheless, we have to remind that these investments are absolutely no impact on our ambition in terms of M&A. As I commented earlier, we have many agencies under review to acquire in the coming months and quarters. This has no impact at all on the M&A and the clear focus of Havas is to really its priority to continue developing its existing business, its operational. Let us sum up telling that it is a really opportunistic and financial investment that we have decided to do without any impact on our existing strategy. To answer your question on the future, I cannot elaborate on the future.
François Laroze: These are public companies, and we do not disclose and have not made any decision on the new acquisition we could do in the coming months.
Conor O'Shea: Okay, fair enough. Very clear. Thank you, François.
Operator: The next question comes from Adam Berlin from Goldman Sachs. Please go ahead.
Adam Berlin: Yeah. Hi, François. Thanks for taking 2 questions, if I could. One is, you upgraded, I think, the guidance on M&A contribution for this year. Can you just talk a little bit about what has happened this year? Has it just been able to close deals faster than you expected? Is there quite a lot of pipeline, people selling? Why is it that you have been able to do more M&A than you expected through this year so far? Do you think that continues going forward? Secondly, can you just give us a view on where you think you are in terms of wins and losses for 2026 versus where you think you are going to be for 2027 based on the wins and losses you have had year to date?
François Laroze: Thank you, Adam, and welcome to this conference. We are very happy to have you in charge of Havas with you, Goldman.
Adam Berlin: Thank you.
François Laroze: Yeah. Why so many acquisitions? I think I would say that it is more a phasing. As you say, we have been able to close quite rapidly, and the pace of Q4 won't be the same than the first three quarters. That is why you can't elaborate, and the pace will be lower during Q4. Today, even it is a bit too early, our forecast that we should be in the around 2% of overall impact for 2026, being at 2.4% today. We have many operations which have been closed rapidly, and the one we are reviewing today will take a little bit more time. So it is more around saving. In terms of wins and losses, as I said, we have had some nice win of Uncommon Share.
François Laroze: The main losses we have already commented it with during the previous call, was the Sanofi media assignment, which remains a pity, but we have to deal with it. Clearly, we are working hard with the teams, and I refer to the new UK organization. I could have commented also the appointment of a new CEO in Italy that will join Havas early November for supervising the whole operation in Italy. So more and more we have a region manager and we will ask them to focus on cross-fertilization, on integration, creative and media. I would say the ambition in terms of new business is really attracting this new integrated client that give to Havas all the assignments from media to production, including creativity, data, PR, or event.
François Laroze: That is clearly the ambition, and that is the pipe we have today in terms of new business we should have in the coming quarters. Again, as we always comment, we put, I would say, the ambition in terms of cross-selling at a higher level, maybe than our competitors. Cross-selling is our first priority, and we focus as much as possible into fostering it in the coming weeks.
Adam Berlin: Okay. Thank you, François.
Operator: As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Davide Amorim from Berenberg. Please go ahead.
Davide Amorim: Hello, François. Davide from Berenberg. Thank you for taking my question. Three for me, please. Looking at your new business in Q2 and then pipeline, how confident are you that you can offset the loss of the Sanofi US media account in 2027? Secondly, you have been very active on M&A this year. How do positions compare with the rest of the group in term of profitability, and do they have any impact on your full year 2026 guidance? Thirdly, in Latin America, we are seeing a sequential slowdown compared with Q2. Could you explain a bit more what is going on there, and should we expect the same trend for Q4?
François Laroze: Thank you very much. Yes, on the Sanofi, yes, obviously, we are working hard to mitigate in terms of billing. That is not an easy one because it was a big client. But we have had some recent win, and we commented Farmers Insurance, and we have some other. I am quite confident that we will be able to mitigate, maybe not in a few months, but at least in a few quarters, the impact of Sanofi. On the M&A, as we always comment, the agency that we acquire, most of them are more profitable than the other group average, because they are at a different moment of their life, I would say. That contributes really, it is part of the explanation of our ability to keep on increasing the profitability ratio quarter after quarter.
François Laroze: The impact on the guidance, I confirm again the guidance on which we committed for the EBIT ratio, and we are very confident. Yes, we can say that these acquisition have been part of the explanation, but not only, but we are extremely confident on this 30 basis point that we can consider as rock solid. On LATAM, the performance is low on the quarter, still positive in cumulative figures. Let us remind that we have lived over the last few years, a very strong growth of our operation in Latin America. It has been double digit growth several years in a row, and today we are a little bit plateauing. We have also suffered some, not losses of client, but some decision of clients to withdraw, as Telefonica did. As you may know, Telefonica withdrew from the Latin American continent. They sold part of the agency.
François Laroze: They closed some others. So we have been impacted by the Telefonica decision. We have been impacted by the very solid growth of the previous year. But we remain very confident in Latin America. Mexico is doing well. Brazil is doing well, and the secondary countries are doing well. So I think we can be confident on the future growth of Latin America.
Operator: As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to François Laroze for any closing remarks.
François Laroze: Thank you for your attention. We remain with Delphine at your disposal if you have any follow-up question in the coming hours or days. We wish you a nice evening, and thank you again for having been part of this conference call. Bye-bye.
