Publicis Groupe S.A. (PUBGY) CEO Arthur Sadoun on Q1 2019 Results - Earnings Call Transcript

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Earning Call Audio

Publicis Groupe S.A. (OTCQX:PUBGY) Q1 2019 Earnings Conference Call April 15, 2019 9:00 AM ET

Company Participants

Arthur Sadoun - Chairman, CEO & CEO, Publicis Communications

Bryan Kennedy - Chief Executive, Epsilon/Conversant

Jean-Michel Etienne - Group CFO & EVP

Steve King - COO

Conference Call Participants

Adrien de Saint Hilaire - Bank of America Merrill Lynch

Matthew Walker - Crédit Suisse

Conor O'Shea - Kepler Cheuvreux

Julien Roch - Barclays Bank

Thomas Singlehurst - Citigroup

Richard Eary - UBS Investment Bank


Welcome to the Publicis Groupe Conference Call on its project to acquire Epsilon and First Quarter 2019 revenue. Today's conference is being recorded. I would now like to hand the conference over to Arthur Sadoun, Chairman and CEO of Publicis Groupe. Please go ahead.

Arthur Sadoun

Thank you, Carla. Welcome and thank you for being there in such a short notice on a Monday morning. Today, we have actually two pieces of information that we want to share with you. The first is our Q1 revenue, which we published in advance to give you the fair picture of where we stand. The results were in line with expectation, and you will find all the detailed presentation on our website. If you have any question, we will answer them in the second part of the Q&A.

The second piece of information is, of course, the announcement that Publicis Groupe is acquiring Epsilon, one of the most advanced data and technology companies. I know this is an unexpected move, but it a one-time opportunity that will benefit the group, our clients and our shareholders and this is why. We will spend a good amount of time to explaining why. With the Directoire within the room and on the line today, we will share the what, the why, but also the how of this acquisition. Then we will be available to take all of your questions along with Bryan Kennedy, CEO of Epsilon, who is here with us today. Bryan.

Bryan Kennedy

[Foreign Language] Arthur.

Arthur Sadoun

Bryan is learning French. He has started 48 hours ago, but it's a good start. Before diving into the presentation, let's have a look to the disclaimer, as it is of course an important legal matter.

Okay, Epsilon and the acquisition of Epsilon is a major move for the group. So before getting into the heart of the presentation, I would like to start by sharing with you the three fundamental questions we ask ourselves before going ahead.

First, is Epsilon the right strategic step for us? We will demonstrate through this presentation that Epsilon is a perfect strategic fit for Publicis. It will allow us to fast-forward the execution of our strategy to become the preferred partner of our clients in their transformation and accelerate our organic growth, which is clearly our first priorities.

Second question, does this transaction create value for our shareholders? You will see that the financial terms of this deal are very attractive for our shareholders. It will be double-digit accretive on headline EPS and free cash flow in the first full year, 2020.

Third, can we integrate this business? Don't get me wrong. This question about integration is, for us, as important as it is to others. You will see that we are very confident for the following reasons. We know we can plug and play Epsilon into Publicis day one after the closing, as it fits perfectly in our strategies. The executive teams on both sides are fully on board already, and have been extremely supportive for the deal to happen, which is, of course, extremely encouraging, and honestly, was a very important point for us. I will not even mention something that you won't feel, of course, in this call, but you will see through the time is that with Epsilon, we are talking the same language. We come from the same marketing world. And again, this make us very confident about the future.

Now let's dive into the executive summary to give you a better idea of what this means. The acquisition will enable Publicis to become an industry leader in personalized experience at scale, which is a new imperative for our clients to continue to deliver profitable growth in this new world. Epsilon brings technology to on-board and structure client data, what we call first-party data, the largest repository of data assets across identities, behaviors and online and offline transaction, and a platform to build IDs and deliver optimized marketing campaigns.

Last but not least, and this is extremely important, Epsilon is recognized as a trusted partner with the highest standards in consumer privacy. This acquisition will, without a doubt, accelerate the implementation of our winning model. Publicis plus Epsilon will offer the most compelling suites of services, fully aligned with our client needs. Together, we will be perfectly positioned to accelerate on growth and gain market share in an enlarged $1.5 trillion addressable market.

From a financial standpoint now, the Epsilon acquisition will improve Publicis' financial profile and the long-term outlook. Jean-Michel, of course, will come back on this in greater detail later, but to give you just a quick overview to start this presentation. The net purchase of Epsilon is $3.95 billion after the acquisition-related tax step-up. This represents an 8.2x multiple based on the 2018 adjusted EBITDA, which, considering the qualities and the nature of the assets, is a very reasonable price. The transaction will be double-digit accretive to both EPS and free cash flow in 2020. We are expecting to close it by Q3 2019. Last but not least, Publicis and ADS signed a strategic partnership to foster collaboration and enhance future growth for both companies.

Now, let me tell you more about what Epsilon is, and how it drives value for its clients, and ultimately for shareholders. Epsilon is a technology and platform leader that maximizes the value of its clients' data at scale. This is what we call, again, first-party data. Epsilon generates roughly $2 billion of net revenue per year, 97% of which is in the U.S. It is made up 9,000 talents, with 3,700 data scientists and 2,000 delivery experts based in India brought together by what is clearly an outstanding management team. Epsilon has long-standing relationship with an impressive portfolio of clients. The quality of the assets and the strength of their relationship is clearly evidenced by the fact that they are actually growing 8% annually on their Top 50 clients on average over the last two years.

To highlight the strength and the power of those assets, I'm going to give you just a few key stats that you can find on the right of the chart. Epsilon is ranked first when it come to e-mail and loyalty platform, sending 71 billion personalized e-mail annually. They are able to identify 255 million 250 million consumers in the U.S. with 7,000 attributes, including the information of 173 billion of transaction, covering almost all the American households. All of that with a relentless focus on data privacy, which is, of course, extremely important. So this is in the nutshell who they are. Let me tell you know what they do. What is important to understand is that companies have a lot of first-party data, but they are not equipped to extract the full value of this data. This is where Epsilon is helping them at each critical step of the data life cycle.

First, Epsilon has the technological software to on-board, clean and structure the first-party data of its clients. Second, Epsilon enriches the first-party data with its own unparalleled sets of identity, behavioral and transactional data. Last, thanks to its platform, Epsilon does two things. First, it combines data to create unique IDs to inform segmentation and data analytics. This is where Epsilon AI capabilities predicts product sales at SQ level as well as purchasing behavior of consumers.

Second, the platform activates those profile and deliver personalized campaign at scale. Thanks to its measurements and closed-loop feedbacks, it can adapt in real time the message and channels to optimize campaign ROI. As you see, Epsilon expertise span across the entire data life cycle, which will make this asset - which make actually these assets incredibly unique.

Let's take a look at their core capabilities. Epsilon technology practices are widely recognized as being best-in-class, thanks to regular benchmarks. They have three proprietary software to manage CRM, loyalties, and direct e-mail; and a Software-as-a-Service model with consulting services built on top. Crucially, thanks to decades of investments and partnerships, Epsilon has built up three type of data in an impressive scale. Identity data from more than 250 million consumers in the U.S., and 535 million mobile devices reach, behavioral data from 178 observations per consumer per day, and very importantly, transactional data from 173 billion online and offline transaction, covering almost all the U.S. population. We are talking about 56% of all noncash transaction in the U.S.

So Epsilon is about technology. It is about unmatched data assets, but it's also about platforms. Their platforms create ID, use AI to build audiences, and transparently and safely activate them across online and also offline channels with outcome measurements in real time.

I am really sorry to highlight in such a short time so many technical numbers, but we thought it was important to give you an idea of the power of Epsilon capabilities. Of course, Bryan will be able to answer any further question you might have after the presentation.

As I said in my introduction, acquiring Epsilon will allow us to go deeper, further and faster in our strategy to become the preferred partner of our clients in their transformation and improve our organic growth, which is our first priority. Together, Publicis and Epsilon are actually uniquely positioned to deliver personalized experience at scale. We know it is a new market imperative, a lot of companies talk about it, but no one else will be able to practice it at scale with precision consistently.

Our clients have never been so challenged, and need new capabilities to thrive into today's data-lead marketing environments. They are facing radical shifts in consumer expectations, affecting how they feel, think and shop for brands. They need unparalleled data assets to create unique IDs that cover who consumers are, what they say, do and, of course, buy. They must navigate a complex technology landscape and streamline operation. They need consumer centric platform for greater efficiencies. Their brand loyalties is under threat from the mainstreaming of DTC brands and new disruptive player, DTCB, and direct-to-consumer-brands.

They need two kinds of tools: first, access to transaction data to unlock new growth opportunities and drive business performance; and the ability to predict behavior, thanks to AI capabilities. Finally, they are confronted with increasing regulation requirement on data. They need a technology to manage their first-party data in a compliant and transparent way.

Epsilon will arm Publicis to face these marketing imperatives in today's data-led digital first world. Publicis plus Epsilon creates a unique positioning to win in a $1.5 trillion addressable market. If you look at today's landscape, we have gathered the right assets to answer our clients' current and future needs. On the one hand, you have the holding companies, whose core activities go across advertising, marketing strategy, media and market research, and are making moves into the data world. On the other hand, you have the consultancies who are trying to diversify their activity by getting a foothold in the creative agency world to actually gain access to CMOs. Epsilon operates in the sweet spot that connects marketing and business transformation, which is, of course, the core of our strategy. With Epsilon joining, Publicis Groupe will have the ability to partner with its clients across the entire value chain, building a unique end-to-end offer.

Epsilon will fuel all of Publicis Groupe operation and help improve our organic growth. It will fuel Publicis' communication by using richer customer insights to improve ideation and power our dynamic creative engine. It will fuel Publicis Media using AI to activate, manage and optimize campaigns. It will actually also fuel Publicis.Sapient with technology to deliver data-enabled digital business transformation. Putting Epsilon at the core of Publicis delivers, of course, a quantum leap in our strategic game changer, driving greater organic growth. But the benefits of this acquisition is actually a two way street. Publicis will definitely unlock Epsilon's full potential by elevating access to the C-Suite level to enlarge U.S. client base, extending its U.S. activity to international markets, beginning with Europe, where Publicis has a very strong reach, replicating its outdoor practice success story where Epsilon has designed a tailor-made marketing platform for dealers and car manufacturers to other vertical such as financial services, health, or retail, to name a few.

In a nutshell, Epsilon is a perfect partner to extend Publicis Groupe capabilities and drive long-term organic growth. It completes our offer and positions us as the true end-to-end player in our industry. It puts us where our client needs to be, to future proof their business in challenging conditions. It strengthens our commitment to remain at the forefront of data privacy and ethical standards. Epsilon is definitely an outstanding accelerator for our strategy of being our client-preferred partner in their transformation.

Now I will let Jean-Michel take you through the details of the transaction.

Jean-Michel Etienne

Thank you. Thank you, Arthur. So we have a few slides detailing the financial aspects of the transaction, and we will move first on Page 16, where you will find the transaction highlights. To start, the purchase price of $4.400 billion implies a net value of $3.95 billion as the transaction structure will enable us to benefit from $450 million of tax assets. I remind you the mechanism; this is a well-known mechanism in fact. The transaction is for 97% U.S. tax asset deal, which allows us to create an amortizable goodwill for tax purpose only. Amortizable, since this goodwill is amortizable on a 15 years period. The net present value of this asset represent the $450 million mentioned before.

The transaction multiple is 8.2x 2018 Epsilon EBITDA, which has been adjusted for €60 million of cost reduction, already identified and these cost reductions are part of a plan already in progress within Epsilon. Overall, we believe this is a fair price considering the quality of the asset of Epsilon.

If we take into account the low cost of funding, this transaction is highly accretive to our diluted headline earning per share and even more for our diluted free cash flow per share, as we are introducing in the cash flow the impact of the tax benefit. Overall, it has a double-digit positive impact in the first full year after closing, which is 2020. I will come back on this later on, of course.

The objective is to keep a very strong balance sheet, and it will be even stronger over time given the significant cash flow generation of the pro forma combined group. We aim at maintaining our BBB+ or Baa2 current ratings unchanged over time. Overall, we expect to fully deliver our balance sheet four years after the completion of this acquisition. Regarding the timing of the transaction, we expect the closing during Q3 2019, as it is subject to customary approvals.

On Page 17, regarding the acquisition financing. We already obtained a firm financing commitment from Citi and BNPP, which have underwritten a 12 months bridge loan that can be renewed for two additional periods of six months. This bridge loan will be refinanced as soon as possible with long-term financing sources and partially with cash already on our balance sheet for $650 million. The refinancing will be implemented with a view to extend our debt maturities, and therefore, we can expect an increase of our weighted average cost of debt as a result of this extension of maturity profile. Our model has been built on a conservative assumption using a 4% interest rate on the new debt. Most of the funding is expected to be raised in euro of which a significant portion will be swapped into U.S. dollars in order to match the currency of our cash flows.

Finally, let me comment on our financial policy. We commit to an unchanged dividend payout ratio of 45%, and following the Epsilon acquisition, we have decided to put on hold our share buyback program.

On Page 18, we have built pro forma KPIs based on 2018 public information. We have converted Epsilon financial metrics into euro at an exchange rate of $1.18, which was the average rate prevailing in 2018. At the operating margin level, the adjustment column takes into account a number of items detailed in a slide, which is presented in supplemental information of the presentation that you will find at the end of the presentation. These adjustments are: first, the additional cost supported by Epsilon to operate on a stand-alone basis; then the cost of share-based compensation to be included in EBITDA to comply with Publicis' reporting approach; and €60 million of cost reduction on a run-rate basis, part of the plan currently being implemented at Epsilon, which is expected to fully ramp up by 2022. Restructuring cost to achieve these savings are estimated at €50 million to be spread over the three year period. I will come back on that on the next slide.

With regards to the free cash flow before change in working capital, we have added the tax benefit deriving from the transaction structure. We have added also the interest expense related to the acquisition financing net of tax. The combination of Publicis and Epsilon will have generated, on a pro forma basis, in 2018 €10.6 billion in net revenue and more than €2 billion EBITDA leading to a 17.1% operating margin rate under Publicis format, and a free cash flow of around €1.4 billion, enhancing our high margin and cash-generating profile.

On page 19, you have a slide detailing the accretion of a headline EPS diluted and free cash flow per share diluted. As you can see, this acquisition is very accretive as headline EPS diluted is increased double-digit by plus 12.5%, and free cash flow before change in working capital per share diluted is even more increased at 18.3%. On this last one, we are very sorry because on the press release, we had the typo, but you will find a revised version of the press release indicating this is 18.3% and not 16.7%, as indicated on the press release of yesterday. So let's look at the site version.

Let's move to Page 20. Here, you will find additional details on the cost-reduction items that we introduced in the previous pages. With regards to these ongoing cost-reduction measures that we are very confident to achieve, there is a plan in progress at Epsilon, which will ramp up in the next three years. This plan has been prepared with an external consultant, and we, as Publicis management, have considered this plan as reasonable. This plan is an integration plan at the level of Epsilon itself based on work streams, which have not been tackled yet by Epsilon on a stand-alone basis. This plan will generate €60 million of savings on a run-rate basis in 2022.

It is only this ongoing cost-savings plan, which have been integrated in our model and which is part of the multiple calculation, as Epsilon will have delivered it anyway. You will find in the supplemental information at the end of this presentation a slide showing the pace at which the €60 million savings will be delivered and the related restructuring costs. The main work stream of this plan relates to product engineering, which includes further development of offshoring. Then we have the optimization of procurement, the optimization of facilities and the technology as well as a first step in reorganizing the support function.

Let me be clear, we have taken a conservative approach as we have not included revenue synergies at all, nor our cost synergies that will be realized when we combine Publicis and Epsilon. We have already identified a few routes to generate synergies - cost synergies from the combination, which will be mostly the optimization of the data offering at group level, the connection to our shared service platform, the system rationalization, the procurement benefits coming from the combination of Epsilon procurement volumes with all the Publicis, and of course, further real estate benefits. We will update you on these synergies after closing. Again, the multiple calculations that we present earlier does not include these synergies.

Thank you, and Arthur will present now the integration plan.

Arthur Sadoun

Thank you, Jean-Michel. Now let me give a first look at how we are going to execute the integration plan. As you would expect, we have done a very deep review of Epsilon operations, actually, more than 50 meetings, 5-0. This has been a great opportunity to validate our accretions on the business, to start thinking about how to integrate it, but also to spend time with the outstanding management team.

On data and technology, we had extensive session here in the U.S., but also in India with our local Sapient expert to assess areas of compatibility and opportunities to leverage them. We concluded that Epsilon capabilities are unique. While a lot of our competitors are chasing either datasets, technology to build ID or platform to activate mass personalization, Epsilon was the only company that can deliver across all of these at an unparalleled scale as you have seen in the numbers. We spent a lot of time on data privacy and cybersecurity, as it is one of the most critical points when you look at the nature of Epsilon activities. We were reassured by the maturities of Epsilon privacy-by-design approach, which is well embedded into its business offering and ready for any needed adaptation, to meet future requirements in the changing global privacy and security landscape. Again, Anne-Gabrielle and Bryan will be able to tell you more later if you want.

Growth synergies were also a critical point. We did something fairly unprecedented in this kind of acquisition. We brought key leaders from the Publicis Groupe Management Committee and Epsilon together for an entire day to make sure the internal dynamic is at the level of the challenge. I have to admit that it was after this very long meeting that I was fully convinced by the value this acquisition can bring.

When it comes to cost synergies, we identified potential for consolidation area across our operations, spanning from consolidation of data offering, IT, real estate to other usual support functions. As you have seen, for the moment, we have been very conservative as we have only taken in our model integers Epsilon's ongoing plan to reduce costs.

At last, far from it, following price attention around the deal, many of our clients proactively contacted us to offer their point of view on a potential deal. Their feedback was extremely positive and most of them, it was pretty outstanding, consider that Publicis plus Epsilon will be a game changer in our relationship, and a real competitive advantage for them in this new landscape.

Spending so much time, deeply entrenched in Epsilon proposition with the first, the second, but actually also the third layers of management helped us to set up the first principle of our integration. That obviously will have to be refined. But let me give you a quick overview.

We will integrate their data, technology and platform practice as a stand-alone activity, irrigating the entire group under the leadership of Bryan that will report directly to me and join the group Executive Committee. Some selected Epsilon assets will naturally benefit from Publicis Groupe core solutions. Their CJ Affiliates and agency practices will be strengthened and nourished by proximity to our global media and creative assets. We have designed a road map to quickly and effectively drive cross fertilization through our Client Leaders by offering Epsilon's clients access to the full range of Publicis Groupe product and services, and by putting Epsilon at the heart of our new business initiatives. Finally, we will leverage our experience in integrating support function, and of course, drive synergies. We will also integrate Epsilon and Publicis operation in India.

[Foreign Language]. Acquiring Epsilon is a major move. Epsilon is a one-time opportunity to acquire the only technology platform at scale with unparalleled data assets. It allow us to go deeper, further and faster in the implementation of our winning model, at the moment where our clients vitally need to deliver personalized experience at scale. Putting Epsilon at the core of our operation will actually fast-forward our strategy and will position us as a preferred partner in our client transformation.

So if we come back to my three opening questions. Yes, Epsilon is the ideal accelerator for Publicis' strategy. Yes, this transaction will create value for our shareholders. And yes, we have a clear game plan for integration. But the best variation that this is a right strategic move comes from the outstanding feedback we have received from our clients in the last 24 hours. We now need to finalize the deal, go deeper into the integration plan, and be focused on how we will accelerate on organic growth.

We will come back to you following the closing of the transaction to give you more detail on our organization, our way to go to market, and our mission for the years to come.

Thank you very much for listening. And now we're ready to take all of your questions with the Directoire and with Bryan Kennedy.

Question-and-Answer Session


[Operator Instructions]. We will take our first question from Adrien de Saint Hilaire of Bank of America.

Adrien de Saint Hilaire

So I've got a few please, if you don't mind. The first one is, just to make it very clear, I'm not sure I understood where Epsilon would sit in the Power of One organization. So will this be another leg added to the business? That's the first question.

The second question is what are the incentives for Bryan and his team to stay on board at Publicis? Are there any earnout mechanisms? And when do they do roll over? Third question is how much accretion do you expect on Publicis' organic sales growth going forward? Or put it another way, what should we should expect for Epsilon organic sales growth going forwards?

And then the last question about trading. So minus 1.6% or minus 1.8% in Q1, do you think you can get back into positive territory for the first half of 2019?

Arthur Sadoun

Thank you very much, Adrien. If you don't mind, we're going to park the question on trading, and we're going to come back later. But we will address it a bit later. We want to start with Epsilon, and we are going to start with your first question, which is where does it sit? I mean, I'm not going to come back through the entire flow of the presentation, but what we know is that if we want to deliver personalized experience at scale, which we all know by the way that is the new imperative on this market, and the future growth for company like ours, we believe that today, we have the creative and media firepowers.

We believe that we have the business transformation capabilities with Sapient. What we are we doing with Epsilon is actually fast-forwarding on data, platform and technology, and making sure that it's going to irrigate all of our operations. So to come back to your point, first, Epsilon will stay as a stand-alone operation. And, believe me, we have spent a lot and a lot of time to understand exactly how this should happen. I mean, we have a lot of experience from what has happened with Sapient, and we have been very clear that we need to keep very clear leadership, and this will be Bryan that will lead the team. They have to have clear responsibility, the scope is pretty clear. And by the way, we will move into Epsilon all our data capabilities that we have in this time, starting with People Cloud that will be at the core of group. And we will make sure that Epsilon is at the center, under the supervision of Bryan that will report directly to me, working seamlessly with Publicis Communication, working seamlessly with Publicis Media, and doing the same with Publicis.Sapient.

The point I want to make about that is what we discussed when we were in this meeting with all the managers, when I talked about the dynamics. Let's be clear, we would have not made this move if the first line of our management didn't feel it was the right thing to do. I guess, in a way, the same for Epsilon, and maybe, Bryan will tell you a word about his own management. But I decided that either of the team feels that having Epsilon at the center, working seamlessly with them was making sense, or we shouldn't do the deal. And at the end of the day, it was after this day that we understand how things could work.

I don't know Bryan, if you want to add a word about your team. And then, I will move on the incentive, but I think it's important.

Bryan Kennedy

Yes, absolutely. Thank you. I think Arthur is describing the meeting very accurately that brought together the senior leadership of Publicis Groupe with the senior leadership of Epsilon to envision what the future could look like, and how all these pieces fit together. And for our team, the opportunity to have access to the vast portfolio of Publicis' clients and specifically the, sort of, C-Suite relationships that Publicis commands today was something very attractive, which would enable our team to take our assets, our data, our technology, our platform capabilities and then allow them to play and be elevated on a much larger scale than what we do today. And we believe that those assets are built for scale, and what they simply need is the kind of distribution that Publicis can bring to us. So our team is very excited about the future.

Arthur Sadoun

Maybe also if you don't mind, it would be good to hear Steve King, our Chief Operating Officer, that is also running Publicis Media and was in that room and in many of the meetings about this point because it's a critical one, how Epsilon is going to be at the core, and how it's going to irrigate all of our operation in a very strategic way? Steve?

Steve King

Yes. Thank you, Arthur. I think, as we know, over the last 15 months, since we've really been trying to focus our capabilities in terms of data around the Publicis People Cloud and in terms of building platforms, I think it's evident the success that we've had with converting many of our local and global wins. And in fact, as people on this call will know, Publicis Media last year led the new business rankings with the largest wins in the U.S. with Fiat Chrysler, and the largest global wins in GSK. And we very much had our ability to connect with consumers at the center of that - those propositions.

I mean, what Epsilon now does is really accelerate that strategy. It allows us to connect datasets and to build these IDs, and therefore, to build all the entities to really maximize in the media buying world through real deliverable return on investment. And in today's business world, that's exactly what our clients are wanting us to do.

And then we can use artificial intelligence, which Epsilon, I think, leads the market in, to really help us reach consumers through various channels, not just online, but also off-line channels as well, and allows us to measure and optimize campaigns in real time.

But it's just not in the media area. It's the way of actually helping us to give a much better insight about customers and consumers. And although the more obvious benefits are perhaps in the area of media, I think in time, the real benefit of coming with Epsilon and the abilities they give us to connect with consumers to get a much better deeper understand of consumers, which allow us to inform the ideation and creation of really impactful relevant campaigns. And once you've got that, the objective is to deliver personalization at scale, to build a dynamic creative engine, which allows us to adapt in real time the context for individual consumers.

So I think the strategy we've been pursuing the last couple of years, I think it's been verified by the new business success we've had. I mean, Epsilon, for us is without question, the biggest leap forward that we can make. The talents and the capabilities and the resources that they have and the proven track record, as Bryan and Arthur were saying, across data, across technology and across platforms, is a really exciting proposition and entirely additive to the capabilities we've been building inside Publicis.

Arthur Sadoun

Thank you, Steve. Maybe a last point on that because again, it is a key question, is what has been quite amazing is, of course, we knew that Epsilon would turbocharge Publicis Media, and by the way, will turbocharge Publicis Communication, because personalized communication, at scale, is what will make the difference for Publicis Communication.

What we did not anticipate in such a scale is how much Epsilon will actually turbocharge also Sapient. Because what is interesting to see is that if you compare with most of the competitors, Sapient will have, at its disposal, consumer understanding to drive business decision for their clients in a way that is pretty unique. And because any business transformation has to be led through consumer behavior, the way it can articulate is extremely stronger. And it was fun to see in the room when we were all together, the kind of bridges and I guess Nigel Vaz was in the room, has been extremely well welcomed by your team, where they could start to build together, which will be a big differentiator, compared, for example, with an Accenture.

So if you don't mind, I'm going to move to question two, which is incentive. Adrien, of course, we are making an acquisition in data, in platform, in technology. But we are bringing on board an outstanding team, and this has been a critical point for us, is the more we were scratching at every layer by the way, the more we were understanding, the richness of bringing in one day, the day of the closing, so many great talents in the company. The question you rightly asked, Adrien, is how do we make sure that we don't lose it? And so what we did is we defined the list with Bryan of the 10 top executives that not only are very important for the future, but also are the leaders that are taking care of the rights of the organization. And Bryan, myself, Anne-Gabrielle Heilbronner, and Emmanuel André, our Chief Talent Officer, have been spending one hour with each to understand how they get the plan, how this is our future, and how can we put together the kind of retention plan and incentive plan that will actually boost the way they want to work together.

And maybe Bryan will confirm that, but what was very important for us is that, I guess, there is no doubt that the entire leadership team was really - that team, sorry, was really in favor of going with us versus the other offer, or maybe I will let you say a word about this.

Bryan Kennedy

Sure, yes. I think you have a very motivated leadership team at Epsilon. One of the things that Arthur mentioned earlier, which shouldn't be taken lightly, is that we speak the same language, and have a very similar shared culture around serving clients and doing the very difficult things that the greatest brands in the world demand of us. So at Epsilon, you've got a team of people that is motivated by that opportunity. And again, the opportunity to build and to elevate our assets to operate at scale is a big driver for our team.

Arthur Sadoun

So clearly, we will, with Anne-Gabrielle, develop a plan to make sure that the retention is there. But more importantly, that this is something motivating to accelerate on organic growth.

Thank you for the third question about Epsilon organic sales growth. Because I have been already reading a lot of things, and I would like to make things clear. And again, I'm going to do it, then, Bryan, if you want to complement, but it's a very important point. I have here - I have read here and there that Epsilon is a declining growth business. I want to be clear on one thing. Epsilon is not a declining business in terms of growth. First, 2018 was an exception. And believe me, we spent time on that. We actually thought maybe we should put that on the chart, and we decided that we will leave it for the question. But the reason why growth has been negative in '18 is due to some very well explained one-off events, like client bankruptcies or M&A. And it's important to know that the usual historical growth rate of this business is around mid-single-digit. This is what you have found in the past year. I mean, this is something that we have taken very seriously.

Second, and we can't go into too much detail, but when you take a closer look at Epsilon business, the business which are the - of most interest for Publicis are actually the one that are growing the fastest. And it's true that some of those are facing challenges, but we strongly believe, and we spent time on that again, that they are the one when we can reverse the trend, would it be only through our commercial forces.

I gave a number that is extremely important for us. It is the fact that on their top 50 clients, and despite the loss by the way, they have been growing by 8% on average over the last two years on clients where we, Publicis, see a lot of attrition. And so we see a complementary move here between what we can lose in the transitional advertising, because at the end of the day, when time matters, people are accelerating on activation and consumer knowledge, and making sure that the balance could be there. Of course, we couldn't go into details because we have to close the deal before looking at this. But there is an obvious strategic fit in term of organic growth, between what we do.

Now we believe that we can help Epsilon grow even faster. And if I have to make a long story short, I mean, and again, I just have to look at the reaction of the client we have for the last 24 hours, there is no doubt that giving access to Epsilon, to our client, and the C-suites, mainly CMOs, is going to be an incredible leverage. And although we won't start by that because we're going to focus in the U.S. at the beginning, our ability to bring Epsilon on board, and we already have demanded that we will have to turn down, will also give us a unique opportunity where we have obviously a fantastic global reach.

So to make a long story short, and finish with your question, Adrien, I will say that we have the combination that with Publicis, we can bring back Epsilon between 5% to 10% growth on an annual basis.

I'm keeping the question on trading, but we will come back on that for sure. Maybe we will take the next question.


Our next question comes from Matthew Walker of Crédit Suisse.

Matthew Walker

Just a few questions please. The first one is when you report this business, will you be reporting it as a separate line item or a separate division? The other thing is does this contribute towards your 4% growth target? Will we be able to see what is the old Publicis and what is the new Publicis? Is organic growth from M&A included in your 4% target? And if so, would you like to change it?

Secondly, you mentioned you'd like to get the business back into 5% to 10% organic growth. When exactly is the business going to hit - when is the business going to hit that range? Is that going to happen as early as 2019, or is it 2020 or is it '20 - or is it '21? And then if you could also just say, Epsilon claimed that the acquisition or the divestment multiple was around 10x for this business. Is the difference between the 10x that they're talking about and the 8.2x that you're talking about, solely the €60 million of adjustment for the cost-cutting plan that Epsilon has put in place that you've, sort of, captured and brought forward and put into that multiple? Or is there some other difference between the 10x that they're talking about and the 8.2x that you're talking about?

Arthur Sadoun

Thank you very much, Matthew. I propose that we take - Jean-Michel, do you want to take 1 and 4, separate line item and multiple, and I'll come on the growth?

Jean-Michel Etienne

So Matthew, as always, we will not disclose after the acquisition the separate performance of Epsilon for many, many reasons because the integration will make - the contribution of Epsilon with the help of the Power of One and so on, it will be very difficult to understand precisely what is Epsilon stand alone; what the group is bringing to Epsilon; and what Epsilon is bringing to the group? So it will be very difficult to do that. And there is some rules in France, and according to the way we are reporting our numbers, which will conduct us to do not show Epsilon on a separate - as a separate division. This is the Power of One. To come back to the previous question, we're fully in the Power of One. Epsilon is justified by the Power of One.

Coming back on the multiple question. The 10x that you are quoting - the 10x multiple that you're quoting exclude the €60 million of cost reduction, which is already currently implemented by Epsilon, which is something which will have happened anyway without - with or without Publicis. So what is not included in the calculation are the synergies of bringing Epsilon and Publicis together. This is something, which will come later on.

In terms of the multiple that we have also calculated at 8.2x includes the €60 million, but include also the $450 million of effect of the tax step up, which is a benefit for us, which is absolutely clear, which is on the - calculated on a discounted basis. This is net present value of the benefit that we will have over 15 years.

Arthur Sadoun

So I'm going to take the question 2 and 3. First of all, when it comes to combined organic growth and the growth of Epsilon, again, we have been doing a few things, yes, and we feel extremely confident, but you're going to have to give us a bit of time for a very simple reason, is that we have not been able to go in detail with them before the closing. So there is a limit of what we can do. And what is certain is that we will update you after the closing and after being able to work with the team on the plan.

Having said that, I want to be clear on one thing. We are doing this deal because it fast forwards the transformation for only one reason, which is deliver better organic growth. And so, if I can spend a second on that, to be clear is, we believe first that the Publicis business will benefit from Epsilon in term of organic growth in two clear dimension.

First, boost our existing clients, and it's not a small thing to be able to start working with our clients from the first data, enriching this data and build the platform. As you may have seen in our Investor Day, this was already the core of our strategy. But the way we can do it at scale, and you know that what matters for us is scale now, because we have those three strategic game changer, that are growing by 28% - again, 27%, actually in Q1, and the question is how can we accelerate this to accelerate organic growth? So it will boost, of course, and obviously, at our own client growth in every dimension. And by the way, in terms of new business, it puts us in a great situation because, as Steve explained, it is an asset that will be a differentiator. So we'll see some opportunities that are - will be immediate after the closing, and we will give you more details.

And as I said, when it comes to Epsilon, we want to move to 5% to 10%. You have to know that this won't be in our organic growth before one year after the closing. So there is a bit of time before we can benefit from that, but we see a clear path. And again, give us just a bit of time to do things properly and make sure that we don't break any rules of a deal that needs to be completed. And we'll come back to you with every detail. Next question please.


Our next question comes from Conor O'Shea of Kepler Cheuvreux.

Conor O'Shea

Two quick questions from my side. Firstly, can you just say how this acquisition will fit with your, sort of, client initiatives in terms of building data profiles through People Cloud and also the media buying side, Spine? How that will fit going forward?

And then the second question, just in terms of how this fit sits with your competitors who have acquired, in recent years, digital consumer platforms into public acquiring Acxiom and Aegis buying Merkle? Can you talk around the differences of what Epsilon offers relative to Acxiom? And where this puts you on a competitive footing with - versus your agency peers?

Arthur Sadoun

Thank you very much, Conor. Great question. Maybe I'm going to ask Steve to take the first one about data profile, and how it does fit with our current strategy, and what we're already doing. And then Bryan will talk about competition.

Steve King

Okay. Thank you. Yes, so it's good that you are aware of the success and the position that we've had with Spine, and then within Spine, which is the organization which leverage all of our data assets within Publicis Groupe. We obviously have Publicis People Cloud, which is our existing platform for gathering data IDs around individual consumers. And that proposition, and I won't repeat the success that we've had in terms of business development, we actually have quite a unique approach in terms of the way that we build this and we deliver this to clients.

What Epsilon will do, will really allow us to really - provide really strength and capability. I think some of the other assets that have been available in the marketplace really are very much in a single data vertical, and what Epsilon have got is not just 30 years of building data assets and not just in terms of individual perspective on consumers, but of course, right up to transactional data results, as I said at the beginning.

But of course, they've also got the proven experience of having a technology platform. They've shown a proven track record in merging that with CRM Digital and then the creation and delivery of a platform and really makes them the market leader, which is why this was such an attractive proposition with Bryan and his team, that ability to link that together. And so this is really going to - having seen the success that we've had in our own right building and coalescing our data assets, Epsilon's ability and technology in data and platforms is really going to provide a huge fillip and acceleration and, I think, a market-leading differentiation to our clients.

Arthur Sadoun

And again, as I said, we have a very strong talent and very good platform with People Cloud, but we don't have the scale. So we're going to put that at the core of Epsilon, and Bryan will be in charge to make sure that we take the best out of both worlds. This is how also we have seen this acquisition. Every time we are looking at the charts, and talking with people of Epsilon, what we have in mind is pretty simple: we have the right winning model, because when you start to build IDs, that you're embodied in the right platform, and you take every marketing and business decision, thanks to that, this is how we won. The problem is how do you bring scale, and this is what we have seen with Epsilon along the way. But maybe, Bryan, you can answer point two about competition, maybe on Acxiom and Merkle?

Bryan Kennedy

Yes. And this will chime in with much of what you just heard from Steve. I think first of all, you look at Epsilon from a scale perspective. We have considerably more scale than many of the companies that you've mentioned. And I think secondly, we have a different portfolio of offerings, meaning a much broader portfolio of offerings that we've already talked about in this call, data technology platforms.

Specifically, just to drill into that a bit, we have a portfolio of cloud-based Software-as-a-Service solutions that are ready to go. And if you look at the portfolio of Publicis clients to date, every single client is looking for a more effective way to activate their first-party data, organize their first-party data and drive value out of that first-party data by driving deeper customer relationships. So to come with a set of proprietary IP in our technology platforms that can be offered and rolled out to those clients is something very attractive, and which is distinct from some of the other competitors that you mentioned.

Specifically, Epsilon really grew up in the loyalty and CRM space, meaning how do you focus on that first-party data first and foremost, as opposed to the other side of the marketing spectrum, which is around acquisition and finding new consumers? So that's in a world that we think of as marketing technology.

But if you flip over into what we think of as digital advertising technology, I think we become even more distinct from many of the competitors that you mentioned, because we have a massive-scaled digital advertising stack today that's delivering billions and billions of personalized media impressions to consumers at a very, very granular level. And that's an important component of what Epsilon brings to the table because the reach and the efficiency with which we can drive digital media and personalized media impressions to people give us an understanding of those consumers as they interact with our digital media.

And that, ultimately, is a big part of our business model and is also distinct from some of the other players that you mentioned, which is a huge portion of our business is driving digital activation, and ultimately, delivering return on investment, which is something you heard Steve talk about, to our consumers, to our clients, meaning how do we verify for them that every dollar that they are spending in the marketing spectrum is driving a deeper relationship with the consumer and a better return, because we can measure that through the power of transactional data and that's the - I think the distinctive that Epsilon brings to the table.

Arthur Sadoun

I mean, now just to finish on that, because it's a critical question is what strike us. And by the way, I think it's important to be clear on one thing that I forgot to mention, that I should have mentioned is we didn't wait on Epsilon to be on sale to look at Epsilon. We started actually many years ago, and we thought that it was exactly the kind of asset that will fit extremely well in our strategy, but not for sale. But we knocked on the door a few times, and when it came on for sale, the reason why we've been looking, first of all, is for the reasons that Bryan just mentioned.

It is an end-to-end model. And it's very important to understand that because I'm not going to mention any of the competitors, but it is actually the sum of every competitor and provider. You have on one side our ability to bring together first-party data to create ID and to enrich it. This is highly technological, and they have these capabilities that is core for us, and that is done by part of the competition. They have these amazing datasets, and we won't insist enough on the transactional data, because this is one of the most - actually, one of the best reaction we had from our clients.

You have to understand now, coming back from CPG that direct-to-consumer brand are getting around 10% of market share today. The only way to fight is to make sure that you have the right knowledge about how people behave, who they are, and what they buy. And this is what we can do with this.

So the technology to build IDs, these datasets, and then the platform, boosted by AI, in an incredible way. And to be honest, we feel that maybe in term of design, there are things that we can take from the people club, that we do a bit better, because we're good at that. But we believe that taking the power of Epsilon and bringing it to a platform that will be one of the most, if not the most, powerful of the markets, you have those three assets. But again, to come back to what you were saying, can be compared in a way or another to a fragmented offer in the competition that will make all the difference.

I'm sorry, it is very difficult on a Monday morning to get so technical, but we think it's important to get into these kinds of things. And again, to come back to the question, where before, believe me, once the deal is closed, we're going to take proper time to explain exactly what it brings, how it fits, and what kind of organic growth we can expect, hopefully beginning of Q3. Hopefully, I look at as we do it. Sorry, next question.


[Operator Instructions]. We'll take our next question now from Julien Roch of Barclays.

Julien Roch

My first question is what percentage of Epsilon revenues are their top 50 clients? My second question is my understanding is that Epsilon has five business: one, Dotomi, retargeting network; two, ValueClick, an ad network; three, a CRM auto business; four, loyalty digital platforms; and five, traditional ad agencies with AT&T as the largest customers. Do you agree? Number one. Number two, can we get a split of '18 revenue on this basis? And three, how integrated are these business within Epsilon? I would think they're quite separate. But maybe, Bryan can give us more color. So two questions with the second question in three parts?

Arthur Sadoun

The first question is the percentage of revenue of the top 50 clients. Is that right because we didn't hear you very well?

Julien Roch

Yes, yes. That's right, yes.

Arthur Sadoun

It's around 56%. So that's a great question because at the end of the day, what is outstanding about Epsilon is the long-term relationship value with their clients. And more importantly, the ability to grow while some of those clients are going through some difficulties because again, it accelerates. And you can see the comparison with us when it comes to attrition. So again, we believe that if we can bring Epsilon to other clients that are suffering, but needs to activate data, understand better the consumer and shift faster into personalization at scale, there is massive opportunity. On the second point, there were so many questions in your question, that I don't know if, Bryan, you need a bit more of information before answering it.

Bryan Kennedy

Yes, Julien. If you could just rephrase that question, so we make sure we know what you're looking for?

Julien Roch

Yes, sorry if the line is not very good. So my understanding is Epsilon has five different businesses: number one, Dotomi, retargeting network; number two, ValueClick, and that's an ad network; number three is CRM auto business; four, loyalty digital platforms; and five, traditional ad agencies with AT&T as the largest customers. Do you agree that those are the five businesses of Epsilon?

Bryan Kennedy

Yes. Some of that is historic data that no longer really applies to the way that we have the business today. So maybe I could just give a brief explanation. The way that we see the business today is certainly similar to the way that Arthur has laid it out. We have data, is a major operation for us. Technology is a major operation for us, what we call a practice. Within technology we have the Software-as-a-Service platforms that we provide to clients. And those are long-term recurring revenue relationships for us and for which we have a lot of view into client spend and those are multiyear relationships. And then we have a digital advertising, digital media business, which consumes several of the brands that you mentioned. You mentioned Dotomi and ValueClick, et cetera. Much of that came to us through the acquisition of Conversant, which was in late 2014. And that's really the personalized digital media platform for Epsilon.

All of that together, we have embedded into our automotive business, which you also mentioned, which is a complete verticalized, if you will, end-to-end integration of all of these different assets that I just described. So those are the main components of Epsilon. We do have some agency capabilities and services. We do have an affiliate business, which is a very unique digital advertising business as well. But that's the way that we see it today.

Arthur Sadoun

I think that it's a great question because when you look from outside, you can say, okay, maybe we can do this and that. But actually, the beauty of what they have built is that it's a very well - well, pretty well, let's say, integrated model. And although there are different business units with very clear leader, you can see that data is at the core for everyone, and it's infusing everyone. Technology is shared.

If I have - if I may, Bryan, I will say that cross-fertilization on clients, maybe we can still do a bit better, which is something that we have learned with the Power of One. So again, this is why we see opportunity.

Now let's be clear. There are some business that are growing better than others. And our feeling is that this is something, again, that we can help when it comes to bringing them closer from some of our operation. And within their business, we see also two things that are interesting. The first is that the out of practice is really in itself the demonstration of the convergence of everything they do in an end-to-end model with outstanding client feedback and by the way, growth, so this is something that we will replicate.

The second thing is that there are activities that can, we think, be very boosted by growth immediately like the CG affiliates operation. I mean, when Steve looked at that, he was pretty interested on how we can help them, and the agency business that have several offices, but the main office being in Chicago, it makes a lot of sense with what we are doing there. So again, you're right, it's 6 different practice, but at the end of the day, combined in a way and integrated in a way that is in term of technology and capabilities pretty strong and pretty integrated, maybe some progress to do in planned integration. A great practice of integration with auto that we will copy/paste. And some business that will immediately benefit from a proximity with our own operation.

Julien Roch

If I can have a follow-up question. Where do you put the loyalty program, I guess, in technology Software-as-a-Service platform? And then, what do you mean by data, because that's - that can mean a lot of thing, data?

Bryan Kennedy

Yes. So this is Bryan speaking. The loyalty solution that we offer sits within the technology practice that we call it. That's where we have Software-as-a-Solution services. We offer that to clients with a full services wrapper when they choose to use Epsilon to help them manage their first-party loyalty programs. When we talk about data, I think it's important to step back for a moment and think about Epsilon overall. The majority of our business is focused on helping clients manage their first-party data. So we act as a steward of their data. That means that we are regularly audited and really managed by our clients because we are helping them manage their most cherished asset, which is their first-party customer data. And then, we help them activate that data across all addressable channels.

In addition to that, because clients have a limited view into their own consumers, there are additional data assets that Epsilon brings to the table that allow them to enhance that understanding of their first-party consumers. So that's both the sort of digital behavioral assets that Arthur was mentioning earlier, meaning how do consumers navigate the Internet, where do they consume media, on what kind of channels or what kinds of time frames? Those are the sorts of insights that we can bring, as well as what their spending patterns are, which allows us to predict future spending behavior, and really drive better ROI out of their marketing campaigns. So those are the two pieces that are, I would say, central to the data assets at Epsilon.

Julien Roch

And maybe then a last question on that data, which does - sounds very interesting. But what percentage of revenue would that be outside of auto and the loyalty programs, which I think are quite stand-alone businesses?

Arthur Sadoun

Again, this is something that we can't disclose at this stage, more importantly, on the call of a company that we haven't acquired. So I promise you that we will come back with every detail on that after the closing. But I want to be very cautious on the kind of information we are giving. We have been extremely cautious so far. As you can see, it is something that we believe is really a game changer for us, and we don't want to make any mistake. And more importantly, we want to make sure that we move fast into the next steps. So I've got Anne-Gabrielle looking at me, telling me that I shouldn't tell too much. So if you don't mind, we're going to stop there about this, but we'll answer every of your question at the minute we can. Thank you. Next question?


Our next question comes from Tom Singlehurst of Citi.

Thomas Singlehurst

Tom here from Citigroup. Congratulations on the deal. I had just a couple of maybe easy ones, we'll see. The first one was on that point about client exposure. I mean, obviously, you've talked about auto extensively. Is there any split of revenues that you can give us on the sort of split by sort of client, sort of end-client segments? And is there any particular aspect of the sort of shape of client exposure that there's a particular opportunity? I mean, how are we looking relative on things like FMCG?

The other question was within the People Cloud, I think you had talked about buying in third-party assets, data assets where you needed it. Is there going to be a saving there in some way, shape or form? And then a final question. Is there any reliance on continued support from the vendor in terms of access to transaction data and how do you secure access to data if there is?

Arthur Sadoun

Well, I am going to take question number one. Steve is going to take question number two on data asset savings and somewhat about the vendors, I'll let you see how we want to do this. I'm not sure I got exactly the question, but we will come back to that in a second.

First, on client exposure. Thank you for the question because it's at the core of what we are doing and shows how our complementary we are is when you look at Epsilon, they are less exposed to FMCGs than we are, which industry is very interesting for us. They are more exposed to things that have to do with retail, financial services, automotive, things that - I mean, I would say businesses that are more advanced in first-party data and how they need to manage it. Now, and this is the point I was making, and this is where it get complementary, and extremely interesting in term of organic growth, the big battle tomorrow and today, actually, is how those brands that for the moment have no direct access to consumers because they've got to go through a retailer, can go direct. And this is why first-party data is becoming increasingly important for the CPG world. And this is where we bring an outstanding answer. And it was good to see the feedback we had that the financial clients, financial services clients that we shared were extremely happy to see that we will be able to build an end-to-end model. And the CPG client that we don't share that came to us, saying this could be for us - for the client a game changer in our ability to connect with our consumer, and this is why by the way the transaction data are so important.

So we see here two good news, the first, less exposed to CPG, which balance a bit our portfolio, and you know that this is one of the reasons why we are having the difficulties with organic growth today; second, the mix of activities that will help us to be more complementary.

On the data asset savings, although I want to make a point that is very important before I give - maybe I will let Steve talk and then I will give you my point about the savings. Steve, your call.

Steve King

Okay, so I'll look at the points, and then I'll talk. So Tom, thank you for the question, and thank you for your congratulations. You're right; this is a really exciting moment for Publicis. And the point you're making about the way that we've built Publicis People Cloud, you're correct in your assertion that we are building this with the support of third-party agreements with - to help us build data assets, which we can then build for individual clients.

Clearly, as I think, you're suggesting, what Epsilon gives us is a huge data scale. You've heard some of the scale mentioned earlier: the number one in number of mobile devices reached; 71 billion e-mail messages, personalized, et cetera. So if the - so you're absolutely correct in saying that once we've gone through an integration period, we can anticipate a scaling, and some cost efficiencies at the way that we can utilize our ability to reach consumer. So the point of your question was correct.

Arthur Sadoun

More generally, on savings, just to confirm the point is, as Jean-Michel said, Epsilon is putting in place $60 million planned saving that by the way is backed by a consultant, extremely rigorous, and on his way. The reason why we wanted to be conservative on that is pretty simple. We see resource of saving for sure, but when you have such a company, such an engine at a time where technology is moving fast, there is no doubt also that we will have to continue to do investments. So we want it to be reasonable on the savings not because there is no more savings but because we want to invest in our future growth and we want to make sure that we will save there, could be invested in a part of the others. So again, we will give you a clear plan as soon as we can get into it and gets our hands into the business, but we need a bit of time, maybe just one word?

Bryan Kennedy

Yes, I think on the question about data, probably the important thing to note is that Epsilon has been building a business centered on really understanding consumers and gaining consumer insight and building those sort of data profiles for the last 20 years. So we're very confident in what we have. Much of it is, obviously, proprietary. Nothing changes going forward for us in that nature. And I think that's demonstrated by the company that we keep with the kind of brands that we have today.

Arthur Sadoun

This is why we called it a fast-forward mover is that at the end of the day, we are gaining a lot of time of what maybe we could have built alone over several years. Thank you, Tom. We go to the next question.


Our next question comes from Richard Eary of UBS.

Richard Eary

Again, congratulations on the deal. I apologize if you have answered these questions in some other way, but just I want some clarity. But first of all is that obviously, as this is a U.S.-centric business, how confident you being able to take the data IP and actually deliver it on a global basis to leverage parts or the other parts of the Publicis business? So I'd just be clear just to understand how you think you can do that.

The second thing is just - and I presume you have mentioned it, is just the revenue for '18 on the Epsilon business. How much of that was a one-off for - due to bankruptcy issues? And how confident are you that you'll get back to where the growth rate was pre basically '18, at that sort of 5% level? Just those two clarity points would be helpful?

Arthur Sadoun

Thank you very much. I'm going to take the one - the first one, and Bryan will take the second one. Yes, it is clearly a U.S. business where, by the way, we have more than 50% of our activities and where the leverage is going to be, honestly, outstanding. The reason why we are confident in our abilities to bring it starting with Europe, is several fold. First, I think it's very important to understand that what Epsilon is bringing, is the ability to bring value to fist-party data, through technology to put it together, through other source of data to enrich it, and through the platform. And if you looked at what we could do tomorrow in France, in Germany, in the U.K., first their technology to onboard and put together first-party data around individual IDs is something that we can export. And don't get me wrong, we are not starting from nowhere. We have already teams in place in those countries that will work together. And by the way, to come back to the point I was making about the teams and how we met, some of the people that were in the room when we did this meeting with all the management were people coming from Germany, U.K., and France to make sure that the technologies they have in term of first-party data, could be exported, point number one.

Point number two, when it comes to data property, of course, the incredible richness of the data they've got in the U.S. can be extrapolated in France, in the U.K., and in Germany or further in Europe, but first again, we have our set and second, this is something that we'll have to build over time.

And last, but not least, the conversion platform, which is at the core of our strategy, which is to have a platform that help us, find sources of growth, defining sites, trigger to purchase, and maximize the way we communicate, is something that we will be able to scale.

So to make a long story short, I'm not going to tell you it's going to be easy, but most of the tools are exportable. We have an incredible reach with our people based there, with most of those countries' leadership on media and with Sapient on technology. So we believe that we will be able to do the bridge. On revenue in '18, I will let Bryan take the point.

Bryan Kennedy

Yes, so in 2019, Epsilon really returns to the growth that it had shown historically prior to '18. '18 had a number of onetime anomalies that was just mentioned in passing earlier in this discussion. In particular, without going into great detail, we had a number of clients in the retail sector that had bankruptcy events or consolidation, meaning acquisitions that eliminated clients for us, and that was a significant hole in our number in 2018. We don't have those same events in 2019, and we have a very strong backlog of new business that we won towards the end of '18, and that we've already won in the beginning of '19. So we're confident in our outlook.

Arthur Sadoun

Thank you very much. I guess there is no more question on Epsilon at this stage. Again, just to conclude on those Q&A, we're going to take the necessary time in the week to come to really go into detail, explain what we do. It's a very important move for us, and we believe that the more time we can spend with everyone to explain what we are doing could make a difference. Just to come back to the first question asked by Adrien, and if there is other question about Q1, I'd be happy to take them. The first thing is Q1 was exactly as expected. We were exactly where we think we would be. And actually, the reason why we are on those numbers is pretty simple. On one side, and there's a good side of it, new business continues to ramp up, and our game changer are still growing by 27%.

But there are two main factors that needs to be taken into account. First is attrition on traditional advertising, mainly in the U.S., impacting us in a very severe way, and it has been the case in H2 2018; it is still the case in '19. And hopefully, we have been clear with some of you that we have met since Q4, this is something that we need to address.

And second, we are, at the moment and in Q1, suffering from the loss we had in Q3, which as I say is a small loss, but it started in Jan, and so this, of course, is adding to the performance. Now, based on all the indication we have today and, by the way, based on the fact that in Q4, we had two incredibly major wins with FCA on one side and GSK on the other, we have all the indication to believe that we will return to positive territory in Q2.

What is difficult in this conversation is that commenting on the quarterly guidance trend has not been easy so far, and creating a lot of volatility. And this is why again, we are focusing in what you have seen in communication on the full year, and again, we are on track and on plan to deliver in 2019 an organic growth that will be higher than '18.

Now, if there is more specific question, I've been told that no, we're going to stop there. I'm just going to thank you again. Sorry for this news on a Sunday, but you know how these things happen when you have to close a deal, and we didn't want to lose any time with you to inform you about what was happening.

Hopefully, we have started, and we will continue in the days and weeks to come to convince you that Epsilon, believe me is the right fit for Publicis in term of strategy. It will fast-forward our execution. And when you see the kind of success we can have in new business, when we link dynamic creativities, technology through data, we know that this is going to be a huge accelerator.

Jean-Michel went through that, and we can go into every detail, but it's truly bringing shareholder value from the first full year, which is 2020, and we are focusing on the integration with one thing in mind, which is how we're going to use this acceleration in our strategy to deliver the organic growth that we own to the market, and that we own to our people.

I will thank you very much and looking forward to have discussion in the coming weeks. Thank you very much.


Ladies and gentlemen, this concludes today's call. Thank you all for your participation. You may now disconnect.