Ipsos SA (IPS) Earnings Call Transcript & Summary

Good morning, and thank you for attending this presentation of the half year results. We'll tell you about our main figures and achievements for the half year as well as the ramp-up of some of the initiatives taken as part of the Horizon program and then the outlook for the rest of the year. We will take a look at some of the key figures. Olivier Champourlier, CFO, will give you more details about that. Then we'll move on to recent developments with the Horizon program and then the outlook for 2026. And so let's start with the main lessons learned from the half year revenue for Q2 stands at EUR 615 million. So that's a total growth of 4.9%, compared with minus 2.4% in Q1 of last year. And then if we look at organic growth, and I don't know if you attended previous sessions, but that is the main criterion that makes all the difference, the differentiating factors or service compared to others is organic growth and 3% to be compared with minus 1.4% in Q1. And so this we're returning to growth. But what is noteworthy and Olivier will tell you more about that. If you look at all 3 geographical areas, the Americas, EMEA and Asia Pacific and indeed, in the main -- the 4 main audiences. We are growing on all 4 fronts, and that's the first time since I've been here, at least since 2023. But anyway, if you look at the numbers, though, so revenue stands at EUR 1.17 billion. So that's 1.3% up including 0.8% of organic growth. So this means throughout the first half year, we've been growing organically. If you look at sales, new orders, most of which will be performed this year. They were up 1.6% compared to Q2 of last year. And so if you combine that with Q1, which was up 1% compared to 2025, we're looking at a growth in our order book for 2026. Our order book is up 1.2% compared to the same period last year. The main growth drivers for H2 come to increase that trend. In Public Affairs, we're having rising demand in our orders and which shows the countercyclical aspect of public affairs, then there's significant traction with the CPG clients in -- we've seen it in Q1, and this is confirmed in Q2 and then a rebound in China as well in terms of orders. There are 2 boosters which were not as clearly seen in Q1 acceleration of business in pharmaceutical companies, and that applies both to syndicated service and indeed ad hoc surveys and end market surveys for anything to do with oncology and would call GLP-1. And then finally in the U.K., sustained growth in Q2, and this is all the more remarkable because our public affairs business in the U.K. is significant. And knowing the political instability in the U.K., including a change of 5 mines this year goes to show we have very resilient business in the U.K. I'll give the floor now to Olivier Champourlier will give you more color on these figures by market, by territory and indeed, the various items of our figures.

Thank you, Jean Laurent. Good morning to all. Thanks for joining us. Let's start with the breakdown of revenue by region. Jean Laurent presented organic growth and revenue came in at plus 3% in Q2, a net rebound versus the Q1 negative at 1.3%. So we're ending the first half with organic growth of 0.8%. It's notable to see that all regions in return to positive organic growth. That's a significant improvement over the situation at the beginning of the year. EMEA is posting revenue growth of 5.6% and of which organic growth of 0.5%, that's accelerated because we're a 0.1% in Q1 and 0.9% in Q2. Total gross EMEA was positively impacted during the half either consolidation of The BVA Family. You'll recall that this is a group that we acquired last year and that was consolidated few days at the end of June in H1 '25 and fully so in the first half of '26, positive scope effect to the integration of BVA Family offset by the exit of Russia representing 4% of the region in the first half of 2025. Unfavorable ForEx, notably linked to pound sterling. Organic growth in the EMEA region is penalized by slowdown in the Middle East, but a limited impact of several million euros at the end of June. The Americas posting organic growth of 0.7% and in H1, Lat Am is solid, 6.3%. North America organic growth is stable at the end of the half. In the United States, we note several contract wins in public affairs driving recovery in the second half. Asia Pacific. This region is posting 2% organic growth. In the first 6 months of the year benefiting from a sustained recovery of activity in China. This uptick is driven by the spend of local clients in the tech and automotive sectors as well as major international clients for consumer goods. These geographies benefited from innovative offers developed in China that would be those that incorporate AI. Like the regions, we see the same momentum when we look at growth across audiences in second half, we see that all audiences delivered positive growth in Q2. All in all, we have growth during the half of 0.8%. Diving deeper, consumers clients and employees total growth of 0.6% in the Q1 and close 2%. In Q2, activities driven particularly by our service lines linked to innovation as well. optimizing marketing spend, reflecting corporate results to accelerate their launches and maximize the success of their investment our activities focused on satin is posting strong organic growth, close to 8% in Q2 driven by contract wins over several years. This performance confirms the contracyclical nature of the business. and the renewed interest of public and private decision-makers for a better understanding of citizens also Ipsos' ability to conduct large-scale complex days with robust face-to-face collection also through telephone interviews. Lastly, doctors, patients audience sharply up to with organic growth close to 3% in Q2, reflecting the good commercial momentum in that service line, the pharma sector is driven by oncology innovation, also in rare diseases. And GLP-1 obesity treatment too. And I'd like to recall that our Ipsos digital platform continues to record double-digit growth over the Q2 level, similar to that Q1 initiatives are underway to continue to grow the number of surveys conducted on this platform. We're going to enrich the platform with further functionalities in H2. Let's now move to the income statement. Having discussed revenue, I'd like to tell you about the gross margin, gross margin coming in at 67.7% on the half against 68.4% in H1 '25. And level almost equivalent to that achieved during full year '25. The drop in our gross margin of 70 basis points in Q1 is due to 2 things: dilutive effect of the integration of BVA family, leading to an impact of 30 basis points, but also effects linked to our business mix for 40 basis points. Indeed, growth was more sustained this year over last year through public affairs projects, whose order collection face-to-face by phone has a lower gross margin. Turning to operating costs -- costs up 1.2% and in the half due to acquisition, this increase remains slightly lower than that of revenue growth is continuing to adapt its cost structure with effects that were down 1% since the start of the year. General expenses down 2.2% on the half. This reflect savings achieved as part of continued cost optimization efforts. Lastly, you have other expenses in the income statement, a balance of EUR 10.9 million. That's essentially severance costs. So for H1, the operating margin comes in at 7.9%, down 40 basis points over H1 last year. As with every year, it's important to note the seasonality of this activity will lead to a markedly higher profitability in H2. Lastly, the operating margin below, you have other nonrecurring cost a negative balance of EUR 19 million, EUR 11 million, of which depreciation links to IT development projects that we've halted that's part of the reorganization of group CapEx focused on more tech initiatives as part of our Horizon strategic plan. It also includes EUR 6 million in reorganization costs following acquisitions and managerial change in conclusion, adjusted net profit attributable to the group, EUR 1.66, pretty much stable versus that of H1 '25. Turning now to free cash flow. EUR 145 million gross operating cash flow in H1 '26, up EUR 6.8 million. Change in working cap is negative to the tune of EUR 6 million in line with the seasonality of our activity. PPE intangible and financial assets, EUR 33.5 million. That's essentially IT infrastructure as well as tech infrastructure and then just to focus on net interest paid up by just over EUR 13 million reflect the payment of the first coupon of the bond issue that we raised last year. And the first interest payment was dispersed in January this year for EUR 14 million. To conclude, we generated free cash flow FCF, EUR 44.4 million, up EUR 4.6 million versus the same period last year. On the free cash flow, you have key financial items such as share buybacks for a total of EUR 54 million of 11.2% share buybacks for employee free shares and also EUR 43 million of share buybacks for cancellations. Turning now to the group financial position. Ipsos has a particularly strong balance sheet. Our net dead versus June 30, 2025 is reduced down to EUR 225 million. Our leverage remains very low at 0.5x EBITDA. The group continues to post excellent liquidity with over EUR 450 million of undrawn credit lines with maturities over 1 year and no major maturity for Ipsos before 2030. This financial structure is a key asset to drive the execution of our strategic plan horizon. Lastly, I'd like to conclude this financial presentation to remind you that our good financial performance goes to a record return to shareholders. We distributed a dividend of EUR 2 per share, up 8% over last year. In parallel, we continue to execute our share buyback program for cancellation. As at July 22, we've achieved half this plan for EUR 50 million. We're going to continue to execute this plan to reach EUR 100 million for FY '26, the shareholder return policy is made possible through the strength of our cash generation, the quality of our balance sheet and our low level of debt. Thank you for your attention. Back to Jean Laurent.

Well, thank you, Olivier. And so -- let's look at the latest developments in the Horizon program. Horizon is the name we gave to our strategy that we announced back in January. So it's been fully designed now, and it's been -- has been implemented for the past 2 quarters and looking at the past half year, we are already seeing some of the results, and we are now looking forward to H2. So we are implementing a strategy. This business is all about collecting, processing, analyzing data, and that very much involves artificial intelligence, which goes to show we are going to invest in analytical tools, either on behalf of our customers or our own production teams whose work is augmented by AI combined, of course, with the expertise of our own people. This is also due to the need to be fast and to complete most of our surveys in under fully ours. This strategic plan is also based on Ipsos' global footprint and in view of all the capital expenditure we've engaged in, but indeed all the work on surveys involving artificial intelligence. We were able to capitalize on such investment in all territories. I'll give you an illustration of this, and this is an area very much in demand on the part of our customers. And that is understanding, especially for clients, but there are other areas as well. This -- I mean, a large language models, such as GPT -- what these LLMs tell about their products or their brands, there's a company called Synthesio, which we acquired. It works on social media, and it is known for its ability to process data, and we have 1 area in particular for CPG clients and through these surveys, we -- well, we read the languages, but we see what questions are asked by customers of this CPG company. And finally, the answers that are produced by the LLM model. And based on that, we can see on what source these answers are provided, and we keep updating this for the customers so that at the end of the day, we can have -- we can bear some entrance to bear on the image of these customers. So what's being said about the companies on social media and LLM is also being used in the public sphere. So this is not just for the private sector. A case in point is the European Commission. We've been working with them. We've been supporting it in its ability to monitor in real time what's being said about it in social media worldwide. And so we use AI to listen, analyze and learn lessons as well as emerging risks related to this or that publication or the implementation of this or that regulation or indeed any other events related to European policies, but we combine this with the expertise of our people, people who are very much specialized in European policies with a view to providing a summary, which is then produced to the European commissioners so that they can see the results of the days development on the image of the commission and of the European institutions. And so we can produce results that are produced in real time every single morning we provide that report to European commissioners. And Ipsos is the platform that makes it possible to meet these speed requirements, but also which meets the differentiation requirements. And so now we are coming up with a new function, which is moderation with artificial intelligence, meaning when you run a discussion group on this or that product or this or that societal issues with human moderators or when we conduct interviews, not just asking questions and checking boxes but -- or quantitative answers, but actually an actual verbal exchange. Well, that -- which is now being done by human operators, we are also now using agent AI to do the same. And then we provided new functions in the assessment of commercials of advertising. So these functions make it possible to design faster new advertising concepts before prior to the aging. And then there's yet another development, we try and run communities of respondents that have a shared interest and indeed to enhance our ability to conduct surveys with our own customers, not just the Ipsos panels, which are automatically activated when we launched a survey through the Ipsos digital platform. In other words, we improve the offer of globally managed services, and these services are indeed rolled out globally. And to a large extent, these services are supported by the Ipsos digital platform. Now on product innovation, and so that's the processes, whereby new concepts or new products are created by our customers, but they want to test them out the new products or prototypes before they start mass marketing them. What we've done is in -- in Q2, we launched what is known as product studios. So this is a platform that speeds up the whole. I mean that's how we call the match between new products and customers' desires. We have statistical inferences in other words, we increased the number of responses from human responses. And then AI can generate summaries of what these tests arrived at, but also we can have more sophisticated cross analysis, and we make it possible for customers to discuss in natural languages, the data that we provide and all this is done in a much faster time and to a much more detailed level. And so this is an indicator of our transformation. Indeed, we've appointed 1 of our most experienced leaders. He was -- he was the CEO of Ipsos France, but he was 1 of our leaders in the U.S., and he had operating responsibilities there. So his name is Alexandre Guerin and he is in charge of this acceleration program, which is basically transforming the tools we provide to our people and which we use for our service to reduce the lead time to less than 48 hours to complete surveys in under 48 hours. So this is being launched. We finalized the charter. We have a road map. And we know exactly how we will in H2 2026, indeed, in 2027, how we will meet our objectives under Alexander's stewardship. And so the outlook for 2026 then clearly, the first achievements of H1 resumption of growth. We now expect a stronger business in H2 than in H1. And Well, first, because the initiatives have just illustrated with a few examples from the Horizons program. These will be scaled up. We will be rolling out globally managed services worldwide because we have all our teams and all our territories working on that. We've also enriched the functions of the digital services, but we also significantly promoting this commercially, so as to support and speed up this double-digit growth solutions provided by AI, give you a few examples there, but there are new initiatives making it possible for all our staff to have tools that using AI can improve productivity. And then there are specific initiatives for China in particular, we're using AI there. But we're also using it in the U.S. where we capitalize on the way that business model is being technologies. And then we have -- this will result in terms of improved order book for H2. And we also expect that we we'll be spending more time with our large accounts. So all of this means that we expect our business to step up in H2 in a market environment, which -- well which has been hampered by the protected conflict in the Middle East and the uncertainty as to its outcome. We have seen here and there a wait and see attitude on the part of our customers. That was not the case at the beginning of the conflict. But now we have seen some programs being postponed. It's not very significant as yet, but there has been a downward revision of growth outlook by the IMF from 3.33%, so 30 basis points right there with a significant increase 1.1% in H2. So this means that for the whole year, we're looking at organic growth about 2%. And we may remember that initially, we were looking at between 2% and 3%, but with keeping costs under control, our operating margin should be similar to what it was in 2025. So that's what I had to say about the outlook for H2 2026. On 23 October, we will present the numbers for Q3. And now if you have any questions at all, this is your chance to ask them.

[Operator Instructions] Question number 1 comes from Marie-Line Fort from Bernstein. Please go ahead.

Yes. I hope you can hear me loud and clear. right there. I -- regarding your order book, it has been growing at end of June. How does that translate in terms of revenue expected for the full year? And then question number 2 is about the development of ancillary activities. You mentioned that during Capital Markets Day, where do you stand now? Where are things going. We're looking also at possible acquisitions in 2026. And then question number 3, regarding the share buyback program. Part of that is targeting -- well, will be for the benefit of employees and others will be canceled. When do you propose to cancel the shares that you propose to buy back?

Well, thank you, Marie-Line, for these 3 questions. I'll answer question number 1 and number three. Regarding the order book, we did point out that the increase stood at 1.2% at end of June, and that accounts for 75% of our annual revenue. You can do the math. That question -- answers question number one. Regarding the share buyback program as of 22 July, we've -- we're halfway through. We've purchased EUR 50 million worth of shares. And by the end of the year, we propose to buy back the rest, the balance. And so we propose to cancel all these shares by year's end. As to the question regarding external growth and acquisitions that might enable us to strengthen our ancillary activities. Well, we started an acquisition strategy well, this was a message heard by a number of companies that might be targeted. We've been talking with intermediaries and bankers. So we have a deal flow we've been looking at some -- I mean, talks are underway. But of course, before anything, happens, I cannot divulge too much, but these are the main categories of acquisitions are technological bricks that will enable us to buy where we will not be able to build ourselves to implement our augmented -- well, strategy using artificial intelligence and other technological tools. And then there are other acquisitions that enable us to go to neighboring markets, in particular, anything relating to data analysis and the integration of multiple sources for our customers, sources not just provided by Ipsos itself, but our customers first-party data and indeed external sources from other origins. And then the third type of acquisitions are those that look like Ipsos but in markets where we propose to broaden our footprint by acquiring companies that are engaged in the same business. Regarding the ancillary activities and indeed, that's what refers to data integration and analysis. So we don't even have to have acquisitions because we've already strengthened that business using data labs with data scientists and AI experts who work on behalf of our customers and this has improved our ability to provide predictive services based on analytics in a number of areas.

Regarding prices, the rates do you propose to find that rates are going up. Is that an impediment? Or in fact, do you believe that this is a chance for you to sees pricing opportunities.

Well, this varies from case to case. And you have to remember that Ipsos is an extremely broad company in terms of services that they are 16 business lines, indeed, 70 separate types of offers, but on highly competitive markets. There is pressure on prices. But where we have engaged in a significant capital expenditure and when that investment has been scaled up we have found that our ability to provide services faster and cheaper in terms of unit prices. This usually is, of course, compensated by higher volumes because, of course, if customers may have us on more markets, more detail on brand perception. Well, then they turn to us if they want higher volumes. And a case in point with the Ipsos Digital, when we find that Ipsos digital makes it possible to have lower unit cost, unit price in terms to your question, I'll say the increased volumes more than makes up for these lower prices.

Next question, Emmanuel Chevalier from CRC.

A few follow-up question, just return to the to the audit book. You said that it's accelerating in March. When we look at the order book, we have the impression that we remained on the March level. But when I read the release, it seems to be accelerating further. Can you give us color on the trend, April, May, June? Second question, would be to return. Could you explain what the EUR 11.6 million of depreciation linked to IT projects, but just to kind of illustrate and give us some illustration type of project because the amounts are quite sizable on the projects that were halted and the final quite more on the use of cash on this half, we see a decrease in CapEx seems to me that in your plan between acquisition of CapEx, we're looking at stability of CapEx versus the previous pace. Does that mean that your AI CapEx is more in OpEx and CapEx, if we could add some color on that.

Fine. We're not -- we give information on the order book in the Q1. We gave some in Q2. The commercial dynamic is good across the quarter. We're not going to give monthly numbers. Otherwise, it become too specific. And it's not very relevant because our business is a degree of volatility. The only thing I would repeat is perhaps more over the past 6 weeks, we're seeing markets in which clients are beginning to say, shouldn't we wait a bit. It doesn't mean that all in all, purchasing decisions are canceled, but there's a former wait and see. However, we consider that full year. We'll be seeing an H2 that will fare better than H1. So it's a positive dynamics. Secondly, regarding depreciation, of course, without going into the detailed but, essentially, it's 1 project that we noted would not be delivering expected results; and two, tech assets of a smaller size that ceased to be utilized at scale, and we considered it would more reasonable to hold them. That was the technical side and therefore to depreciate. As to CapEx, OpEx of investment in AI, Olivier?

Well, I'll discuss this section. Indeed, the CapEx level in H1 is lower than last year. Now there were 2 factors to be borne in line last year there was a kind of one-off effect we acquired a plant for so that for this year. So half of the drop is a one-off effect of a purchase. The rest is also linked to our redeployment of our tech strategy. And so we paused a number of programs that are currently being redeployed. And so this CapEx drop H1 doesn't reflect what will happen over the coming quarters. And so in H2, we'll return to a CapEx level in line with last year's.

Concerning AI investment, indeed, there are a number of costs such the token costs that shift to OpEx and debt not capitalized. Perhaps a word more generally on the work undertaken as part of Horizon focused on AI solutions and tech platforms, we've done a substantial per work with the Nathan Brumby as Chief Technology Officer to revisit everything. We worked with the Board. These substantial investments and now have a strategic framework to know exactly where we're going to be redeploying too and what is a lower priority. We have increased clarity to redeploy our investment and to leverage or move to OpEx, depending on the nature of the expenditure.