Earnings Transcript for CAP.PA - Q3 Fiscal Year 2024

Operator: Good day, and thank you for standing by. Welcome to the Capgemini Q3 2024 Revenues Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today Aiman Ezzat, CEO. Sir, please go ahead.

Aiman Ezzat: Thank you. Good morning and thank you for joining us for the Q3 2024 results call. So today, I'll be joined by our CFO, Nive Bhagat; and our COO, Olivier Sevillia. So I would like to start with Olivier. It's Olivier's last analyst call. As announced, Olivier will be leaving the group after 34 years to pursue personal interests. He has been a key architect of what the group is today and I want to thank him for his contribution to the development of Capgemini as a leader in our industry.

Olivier Sevillia: Thank you, Aiman.

Aiman Ezzat: So coming back to our Q3, the group generated revenue of €5.377 billion in Q3, down 1.6% at constant exchange rates after bottoming out in Q1 2024. Our activity trends improved again in Q3, but only marginally. Bookings totaled €5.222 billion in Q3 so down 0.8% at constant exchange rate. The book-to-bill for the period reached a solid 0.97. Now over the quarter, we did encounter contrasted dynamics affecting us in different ways depending of course on our mix. If you look first from a sector perspective, our two largest sectors Manufacturing and Financial Services are currently moving in opposite directions. As mentioned at the end of H1, Manufacturing is slowing down and this materialized across most geographies. Q3 was at minus 3.4% compared to Q2 which was at minus 1.1%. So we can see the effect of the degradation in Manufacturing which is our sector. On the other hand Financial Services that we expect to recover through the year is really recovering with a Q2 at minus 5.4% recovering at minus 1.3% in Q3 and now an expectation of being back to growth in Q4. On the geo side Europe again demonstrated good resilience with growth rate either stable or improving. The UK saw good improvement returning to growth at plus 0.4%. Conversely, North America stagnated. And there's a slowdown in Manufacturing sector having offset the visible improvement that we have in Financial Services. Going to the businesses. The growth in Strategy & Transformation further improved to 6.5% year-on-year reflecting the strength that we have in our strategic positioning and also aligned with the dynamism of the market in AI and GenAI. Application & Technology improved again this quarter -- where cloud infrastructure services and engineering equally weighed. On the Operations & Engineering, we decelerated to minus 3.4%. When we look at client demand in Q3 it continues to be driven by operational efficiencies and cost reduction. And as anticipated we're not seeing any increase in discretionary spend. We have the right set of offerings to meet the demand in each sector and that lead to some noticeable deals in Q3. Just to highlight some of them we were chosen by an Italian manufacturer eager to leverage data to reduce development cycle for its core products, while modernizing engineering and production. We implement a forward-looking engineering platform and executed a complex program with multiple partners to lay the foundation of the new PLM system. And this project highlight the connection between physical and digital world our intelligent industry play emphasizing that digital continuity is central to product and process transformation. Another example for US conglomerate, we have taken over in a record time a complex and critical end-user managed services in the cloud for over 250 users – 250,000 users, sorry. The transition was smooth and we have been delivering live services already to the customer. The deal which is over €600 million in total contract value is a good example of our ability to shape and deliver very large deals. Another example for SZC, we are helping to set up a data and digital-centric equipment supply chain, supporting the construction of a new nuclear power station, which will provide six million homes with low-carbon electricity over the 60-year operational life. Our work there is focused on increased equipment traceability across the global supply chain enabling dynamic construction, schedule management to protect the critical path of the construction sequence. Through these digitally enabled techniques, SZC will be able to optimize the use of materials and resources in the construction of the power station. So our positioning as the business and technology transformation partner of our clients is well recognized. And we see solid traction for most of our focused value offers

Nive Bhagat: Thank you Aiman and good morning everyone. Let's start with our quarterly revenue growth. As highlighted by Aiman, our activity trends improved again in Q3, as expected although, at a marginal pace. This was due to more contrast in sector evolution compared to Q2 something that I will come back to in a moment. In Q3 2024, revenues declined by minus 2.1% on an organic basis. This is a 20-basis-point improvement from Q2 2024. Accounting for scope impact of 50 basis points, growth at constant currency is minus 1.6%, which represents a 30-basis-point improvement on Q2 2024. Lastly, FX had a negative impact of 30 basis points in Q3. As a result, reported growth is minus 1.9% for the past quarter. At this point in time, we expect FX to have a neutral impact for the full year 2024. Now, looking first at revenues by sector. As Aiman has already said, Financial Services confirms their recovery with a 410-basis-point improvement on Q2 growth rates. But as anticipated, Manufacturing also slowed down significantly though from minus 1.1% to minus 3.4% in Q3. Beyond this, the evolution in the other sectors was varied. Public sector remained quite dynamic with a small sequential improvement in growth rates at plus 3.9% year-on-year. TMT improved significantly in Q3, although, it is still declining by minus 3% year-on-year. Energy & Utilities and services were virtually flat as activity trends deteriorated a little bit versus Q2 2024. Lastly, Consumer Goods & Retail further declined in Q3, with a revenue contraction of minus 5.2% year-on-year. Moving on now to revenues by region. Now, I'm going to do this slightly differently today. I will not go into each year-on-year growth rate for Q3 in detail and we'll let you look at this in the press release. Instead, I will comment on the Q3 year-on-year growth rates compared to the ones reported in July 2024. In our three largest regions Q3 2024 growth rates at constant currency were pretty similar to those of Q2. Rest of Europe posted a growth of plus 0.6%. This is a 20-basis-point improvement over Q2 despite the visible headwind from the weakening Manufacturing sector. All other sectors actually improved over the period most notably Financial Services. In North America, the recovery in Financial Services is tangible. However, the weakening Manufacturing sector created a headwind of more than one point. Overall, though in North America, Q3 growth was minus 3.9%, 20 basis points below Q2. Revenues in France decreased by minus 2.5%. This compares favorably to the minus 2.7% reported in Q2 thanks to the improvement in Financial Services. To note, France also saw a degradation in the Consumer Goods & Retail and Energy & Utilities sectors. Moving on to the last two regions. United Kingdom and Ireland returned to positive growth at plus 0.4% driven by the recovery in Financial Services combined with a resilient Manufacturing sector in the region and an acceleration in Energy & Utilities. Lastly, revenues in the Asia Pacific and Latin America region were down minus 2.2%. The strong acceleration in the Public sector on top of the recovery in Financial Services did not fully compensate for the degradation in the Manufacturing and services sector. Moving on to revenues by business. Our management consulting business, Strategy & Transformation further strengthened in Q3 with total revenues up plus 6.5% year-on-year. This reflects continued demand for our strategic consulting offers including AI and GenAI. In Applications & Technology services, Capgemini's core business, growth rates improved by 170 basis points compared to Q2 2024. Conversely, total revenues in Operations & Engineering services further decreased in Q3 with a contraction of minus 3.4%. This was primarily driven by a decline in cloud infrastructure services and to a lesser extent in engineering services due to their larger exposure to the Manufacturing sector. Moving on to the bookings evolution. Q3 bookings amounted to €5,220 million, slightly down year-on-year at minus 0.8% constant currency. The book-to-bill ratio reached a solid 0.97 in Q3. Now, moving on to the headcount evolution. Total headcount increased over the last three months to stand at 338,900 employees at the end of September. It is still down by minus 1% year-on-year, but up plus 0.6% since the end of June 2024. The offshore leverage remains at 57% stable since the end of last year. Lastly, attrition has been stabilizing at the current level, which is 15.4% on a last 12-month basis. On that note, Aiman, I hand back to you.

Aiman Ezzat: Okay. Thank you, Nive. So, while the group is seeing improvement across a number of sectors geographies and business areas, the market is really not what we were expecting a few months ago as exemplified notably by Manufacturing. So, I did mention a set of targeted measure to further increase focus on growth. And with the ongoing transition to digital economy, we do remain confident in our ability to deliver our 7% to 9% constant currency, CAGR ambition. So let's now open the Q&A. [Operator Instructions] Operator, could you please share the instructions?

Operator: Thank you. [Operator Instructions] We will now take the first question from the line of Balajee Tirupati from Citi. Please go ahead.

Balajee Tirupati: Thank you. Good morning all. Balajee Tirupati from Citi. Two questions from my side if I may. Firstly, at this point based on the pipeline and targeted actions you are taking, how do you see growth prospects for 2025? That is, what would you need for the group to have organic growth in 2025? And the follow-up is, if you could share additional color on targeted actions the group has launched. When you mention stronger emphasis to growth, does it change a more balanced growth to margin approach group has had till now? Thank you.

Aiman Ezzat: Yes. Thank you. Two very good questions of course. Thank you. So, first on the returning to organic growth in 2025. Yes, I mean, we do expect to return to organic growth 2025. If you look at the -- at how we envisaged the year initially was basically nullifying the headwind which was pretty stiff around the TMT, which is what's happening bit by bit; a recovering Financial Services sector, which again is happening bit by bit and it will be positive in Q4, a bit slower than what we expected, but it's definitely happening. And in a certain way, no more bad news, because we seem to have stabilized at the beginning of the year. The problem we had is really the deterioration that we have seen in the Manufacturing sector notably which has been pretty heavy, which a big switch from growth in H1 to now, a pretty stiff headwind in H2 and some bad news coming on the French side with the political environment. So, again, we do expect that the recovery that we have said we have been seeing in TMT and in financial service will continue. So that will support the positive action, and that some of the Manufacturing headwind we're seeing at the end of this year are stiffer than what we'll see in 2025, notably because we consider that some of them are very short-term action taken by companies more linked to preserving the end of year. I mean some of the discussion we have with some of the clients is saying, yes, it's pretty tough right now but we have to revert to investments next year. So that's what for me put us in a better position, as we look into 2025, because we consider that some of the actions that are pretty stiff in some areas notably in a number of manufacturing sector are more short-term actions and that investments will have to revert to some extent next year supporting the return to growth. On the targeted actions, again I just want to clarify and of course, I expected that question. In a period of slowdown you see opportunity to change a number of things. And here what we want to do is the following is really we want to simplify somewhat the organization. As you grow fast, you have plenty of things you create a bit of complexity. I really see an opportunity over the coming months to really simplify streamline decision processes empower more to basically increase really the agility on the front end of people in terms of making decision and being able to adapt very quickly to a continuous evolving environment. So it is not a bit transformational thing like that but there are opportunities that we see today to be able to simplify the way we operate and to be able to streamline decision-making and really accelerate the reactivity we have on the front end in terms of pushing for growth.

Balajee Tirupati: Very useful. Thank you.

Aiman Ezzat: Yes. And just sorry to follow-up on the rest of your question, it doesn't change the balance. I mean we continue to focus around how to – notably, through the portfolio and also some operating actions to see how we can continue to improve our margin bit by bit. We're not giving up on the margin at the expense of growth. But we definitely find opportunities. We think there are opportunities for us to be better on the growth front and to react more quickly to some of the evolution in the market.

Balajee Tirupati: Thanks a lot, Aiman.

Operator: Thank you. We will now take the next question from the line of Sven Merkt from Barclays. Please go ahead.

Sven Merkt: Thanks. Good morning. Just a few questions from me as well. So you said, obviously the emphasis has shifted a bit more towards growth. You have clearly increased also the investments in sales and marketing in H1, and yes, already have put some actions into place. When do you expect to see a more material impact from this on growth? And considering that you now took margin down for this year and yes, the outlook for next year is still uncertain, how should we look at the 14% margin target for next year within this context?

Aiman Ezzat: Okay. So listen on the action, to be frank, the action is ongoing. It's not like suddenly we stop and we're making – I think the action have been ongoing. We have already put in place certain things for Q4 to try to maximize the top line. I think there will be a few more – a bit heavier process changes and others to be able – to be put in place over the next three to four months. But it's definitely impact that we should see in the course of 2025. On the margin front, we have trimmed down the guidance. It was 13.3% to 13.6%, so we trimmed it down to 13% [ph] to 13.4%. And yes, I do consider that today based on the exit rate we have in Q4 that the 14% margin cannot be achieved next year. But we still aim to see some improvement in margin next year compared to 2024.

Sven Merkt: Thanks. Thank you for the detail.

Operator: Thank you. We will now take the next question from the line of Frederic Boulan from Bank of America. Please go ahead.

Frederic Boulan: Hi. Good morning, Aiman, Olivier and Nive.

Aiman Ezzat: Good morning.

Frederic Boulan: My question is around visibility you have on the business in the short-term and then a follow-up on more longer-term. So in July you flagged a number of points around A&D slowdown in auto. You actually said you don't really see a deterioration unless clients want to I think you said impact the operations. So what has really changed to drive the kind of reduction in outlook for Q4? Is it what you were mentioning before clients really holding back investment in the very short-term? But it's interesting that, you kind of in July flagged a lot of points which seem to have happened and still it's a fairly meaningful change in your view for Q4. And then follow-up on to midterm, I mean you mentioned several times that 7% to 9% growth ambition. So interesting commentary in the context of what we're seeing right now, so what kind of timeframe do you have in mind to kind of see those normative levels coming back in the business? Thank you.

Aiman Ezzat: So what has changed compared to July? What has changed is some of the bad news of Manufacturing has even accelerated furthermore. And you see what changed is that our predictability is based on the predictability of our clients. So we have intimate relationship with clients. So they share with us their plans. And based on that we are able to predict what we expect to deliver. Remember, we have a good concentration on the large client, which represents a good part of our revenue. So this intimate relationship with these clients is what comforts us in terms of the prediction. The challenge we have is that our clients themselves cannot predict. So they come with surprises that themselves, are not planning and they have to react to. And that's really what the challenge is in the short-term is our own clients have little visibility in a certain way and little prediction in terms of some of the decisions they're going to make. And this is the part that we cannot anticipate. So it is a degradation compared to what we saw in July. But based on the fact that our client visibility has -- in a certain way was not, good and they have to react further. Short-term -- that's why I think it's important. It's short-term reaction to a change in the environment to be able in a certain way to preserve the year-end. And there is as we can imagine always some flexibility on trimming down some of the services and that's what we have seen as being an impact. I'll give another example. We were in growth in Manufacturing in the U.S. and this has changed. It has changed, because we had a number of events in the environment in the U.S. at our clients that end-up turning into negative news for us going into Q4. And I promise you it's not something we could have predicted, because these events were not predicted by the client. There are some clients who were in growth. We suddenly have basically a pretty negative impact in Q4. We know its transition. We know it's not going to last for a very long period. But in the meantime it does have an impact for us on Q4. On the mid-term my view around the market in terms of the potential in the market linked to the move towards the digital economies increased spend the push we have done in intelligent industry is there. Even if clients are slowing down because of their own problem in the short term the change and the transformation that has to be driven is still there. This is not going to go away. So in the short-term it does have an impact. And again, the impact is higher than what we have predicted even a few months ago. But I'm completely convinced about the fact that because that's the discussion we have with them this transition they're going to have to do them. And that would require the investment to be able to move towards the digital economy which will fuel that growth. So my point around the 7% to 9% is that, the fundamental of what's driving the fact that we can return to 7% to 9% haven't changed. The asset that we have built and the pushing we have taken to be able to drive that has not changed. However, the headwinds in the short-term because of the environment that our clients are facing, is really what is impacting that gap between where we are today and where we expect it to come back to in the mid-term. And as Olivier, specified the funnel continues to be up. So it's building up to the fact -- if the funnel was really crashing especially on the strategic deal and the digital transformation deal I would be saying the same thing. But when I see what's in the funnel, it comforts to believe that it is in clients' plan. It's something that's going to happen. The delays we are seeing and some cuts in areas where we don't expect in the short-term is really what's driving the current environment. And that's where we need to create a little bit more agility because there are some opportunities in the short-term that we should be able to address.

Operator: Thank you. We will now take the next question from the line of Laurent Daure from Kepler Cheuvreux. Please go ahead.

Laurent Daure: Yes. Thank you. Good morning all. Also one question and a follow-up. The first question is on the US. If I remember you well, you were ambitioning to have probably a pretty decent exit rate in the US. So I understand the manufacturing was a headwind of one point. But did you see something else happening during the quarter in the US? And how do you conciliate your performance in the US versus some of your peers? Is it just a mix? Or did you win did -- or did you lose a couple of opportunities? So any additional granularity on what's happening in the region would be very useful. And my second question is if you could come back quickly on a few management changes that you announced last week? Thank you.

Aiman Ezzat: Okay. So US, if you look at peers, it's a bit all over the map. Remember we have some peers who are still pretty -- I'm not talking about the global peers some peers, which are still declining maybe a little bit less than us, but they are declining and we have some peers who are some growth. So I don't think there's a uniform view today around the US market. It remains a challenging market. The mix plays. Probably our lack of exposure, compared to some of our larger peers to the federal government or health care basically weighs unfavorably for us. But again I think we can do a bit better than what we are doing. And, yes, we probably can push a little bit more in the US in terms of improving a little bit more our top line. On the management changes, I think the -- I mean Olivier is next to me and I think we commented specifically on that before. It's a decision in terms of pursuing some personal interests that Olivier consider it's a time to be able to move on to do something else in life. And I think the other thing are thing that are basically opportunities in terms of basically moving some people or the -- one of the big changes is naming Anirban Bose who's somebody who has a lot of experience in the group who has been running financial services for many years to lead Americas. I do believe that Anirban will bring a lot following Jim in terms of Jim brought a vision. I think Anirban will be able to accelerate the implementation some of the transformation we have in the US. And we did promote Kartik who was one of our very experienced leaders in financial services, global leaders who have been running banking throughout financial services. It's a natural succession. And of course some other changes following Olivier's departure notably to have Jerome Simeon who has been really -- who used to lead one of the SBUs in Europe as you know to basically take in charge of the front end as Chief Revenue Officer. And, of course, we'll be working very closely with Jerome on the top line growth because that will be his key focus is basically focusing a lot more around basically driving the top line.

Laurent Daure: Great. Thank you.

Operator: Thank you. We will now take the next question from the line of Mohammed Moawalla from Goldman Sachs. Please go ahead.

Mohammed Moawalla: Great. Thank you. Morning. Hi, Aiman, Nive and Olivier. Two for me. Firstly, Aiman as you go through the budgeting process or your customers start to go through the budgeting process for next year, is there anything you could say around shape of growth or perhaps seasonality given the significant cut we've seen in the very short-term this year? Does that change how perhaps the shape of next year looks? Or is it going to kind of exhibit the usual kind of more back-end loaded nature? And secondly, one for Nive. I noticed that you haven't really changed your free cash flow guidance. Can you remind us again, of some of the kind of the levers that you have there and perhaps the buffers to manage against some of the kind of revenue growth slowdown and obviously the protection on the margin bit, how you kind of manage the free cash flow? Thank you.

Aiman Ezzat: So, listen, I think on the budgeting, I think frankly, it's a little bit early, because as I just mentioned, even going into September, we have seen some clients revising quite a bit the spend for the end of the year, because of events that themselves did not expect. So I think it's -- I would not -- I don't want to speculate at this stage about the shape of next year, of what our clients will do. The general consensus there should be some increase in spend. But as we know, the events during the year do have an impact, on how clients spend their money. So -- and frank, I would reserve that a little bit for the full year, when we have better visibility of how Q1 is starting and what the client spend. But the general noise we have is, some increase in spend of next year. And as I say, some very steep reaction that we have seen this year are really corrective action for this year, and spend will have to resume in a number of areas next year, and again supported as well by what I think about the pipeline and the strategic deal in the pipeline. And probably, the momentum of GenAI starts really to have an impact having €600 million of bookings excluding data on GenAI. It's 3.5% of our bookings and that should continue to increase. So, there are some of these some areas where there is momentum, return to Financial Services, which basically put us in a positive spin going into 2025. Nive?

Nive Bhagat: Mo, thanks for your question. As far as organic free cash flow is concerned, we have enough flexibility, if you like that's been built into that number. Now having said that, it is a tough environment and we are doing everything internally across a number of different areas. So whether it is a strong cash mobilization plan, whether it is working capital management, whether it is cost discipline, et cetera, we're doing a number of these different things to make sure that we're able to hit that target.

Q – Mohammed Moawalla: Great. Thank you.

Operator: Thank you. We will now take the next question from the line of Charles Brennan from Jefferies. Please go ahead.

Q – Charles Brennan: HI. Thanks for taking the question. I was wondering, if you could talk about competition more broadly. I think as you remarked earlier, if we look at global peers, they're probably delivering slight growth, whereas you're delivering a slight decline. Do you sense any change in your win rates versus competitors? Or do you just think you're not active in some of the pockets of demand in the industry? And is that something that you need to address strategically? Thank you.

Aiman Ezzat: Good question. Of course, we look at competition, and we look at the performance, and we try to understand basically where some of the gaps are coming from. I would say, we deal with a little bit unfavorable mix compared to our competitors. Our big bet on intelligent industry is the right one, and it's continues to be the right one in the midterm. But this has increased our exposure to sectors like auto and aero. And these are not the ones currently that are increasing their spend. So, it has a bit of unfavorable mix here. And I did mention the fact that we expect a slowdown in France. Again, I don't think we have any of our competitor that has 20% exposure to France, in terms of their revenue. So, I think the mix is unfavorable. But as I said, this is why we're launching some targeted actions. I do believe, that we can do a little bit better, and there are in terms of reactivity in some pockets. And that's why, we're doing some of this action around streamlining, a little bit some of the aspect in terms of operation and empowering people more to react faster to some shifts in the market.

Charles Brennan : Can you just say a word on pricing as well? I hear pockets of pricing pressure. Is that something that's giving you any cause for concern?

Aiman Ezzat : No. I mean, as you see -- I mean, I think one of the positive things that you have to take out of what we see is that the resilience of the group is very good. The margin, yes, we have trimmed a little bit the margin guidance, but we are still within our guidance for the full year, and we're still maintaining the health of our free cash flow, which means we have -- we are able to resist quite a bit some of the pressure in the market. But is there pricing pressure? Yes. In a market that has slowed down for the last eight quarters, you can imagine, there is pricing pressure. But we're also doing a number of operational changes, pushing productivity up to be able to contain some of the impact of some of this price pressure. So, I think the resilience of the group from that perspective has been extremely good and being able to address actually the pricing changes, and of course, the mix which continues to improve, which we should not ignore.

Charles Brennan : Perfect. Thank you.

Aiman Ezzat : Thank you, Charles. Next question, please.

Operator: We will now take the next question from the line of Toby Ogg from JPMorgan. Please go ahead.

Toby Ogg: Yes. Hi, morning and thanks for the questions. Just thinking about the indications earlier that you can return to organic growth in 2025. Just to check does that mean you think you can grow organically in 2025 overall or at some point in 2025? And could you talk through just some of the drivers of your confidence and sort of visibility on that number as organic growth for the full year would imply a bit of a pickup in the sequential growth from the Q4 exit rate? And then just one more just on the French tax impact. Could you give us an update on what the implications are there for Capgemini? Thank you.

Aiman Ezzat : Okay. So I'm not guiding for next year yet. So, yes, we will return to growth, but we'll give more precision, I think, when we talk about the full year guidance in February. And listen the confidence always come from the same. It comes from the strength that we have in the pipeline, the discussion we have with clients and where we have seen headwinds, and we expect them to start resolving. I mean, that's what we expected this year and the headwind -- where we expected recovery to happen has happened. The part that we didn't expect a significant deterioration in sectors like Manufacturing, which to be honest was not predictable. And going into Q4 the fact that we'd have such a deterioration in France again that's not something that was expected at any moment in the year. And it comes -- the bad news come gradually and we have to absorb them and move on. So, the change going to next year is, yes, we don't expect a huge bad news again coming affecting us, because I think we pretty much hit all what we could see as bad news.

Nive Bhagat : Toby on the French tax reform, the impact on the CIT, we expect will be anywhere between 2% to 3% on the EPS for 2024 and roughly about 1% to 2% in the EPS of 2025. Now of course, as you're aware, there's still to be debated in Parliament. So we'll see what comes out of it once the debate actually does happen. And of course, as you also recollect, this is only expected to be for the short term so 2024, 2025. So that's what we think at this moment.

Toby Ogg: That's great. Thank you.

Operator: We will now take the next question from the line of Ben Castillo-Bernaus from BNP Paribas. Please go ahead.

Ben Castillo-Bernaus: Good morning, Aiman and Nive. Thanks having me on. Question the generative AI bookings number. So firstly nice to have that KPI in there. The question really is it feels like we're moving now from the discovery phase in generative AI to deployment phase. My question is how has the pace of that development played out versus perhaps your expectations 12, 18 months ago? And then my follow-up would be, are you seeing customer generative AI budgets incremental? Or are they sort of tightening that or offsetting that in other areas to keep overall budgets broadly flat or even slightly down? Thank you.

Aiman Ezzat : I think again two good questions. First, I mean, GenAI, it's a positive evolution. As I said now that customer expectations have been set at the right level and they understand that they need to drive quite a bit of change in investment if they really want to get the benefits and the maturity has increased to be frank. From a technology from our side, we really start to see more impact. So is the pace what I would have expected 18 months ago? Yes, because I thought it would take time before we land back on us and really get to work. And I think this is what's happening. And I do see now more positive traction coming from GenAI, which I believe, over time, will drive additional spend. Now is there an arbitrage at some clients? Yes. I mean clients who are under budget pressure, if they invest in Gen AI, they are cutting a little bit somewhere else for those who are under budget pressure. But overall, I do see GenAI as being something that will be incremental because it brings additional value. If they're cutting things, that means there's no value in it. And I think some of the other technology spend is also required in terms of driving value. When we talk about digital call, you talk about cloud, you talk about software product engineering, GenAI will not come at the expense of these. So it is incremental in terms of spend because it's bringing incremental value to clients.

Ben Castillo-Bernaus: Perfect. Next question?

Operator: Thank you. We will now take the next question from the line of Michael Briest from UBS. Please go ahead.

Michael Briest: Good morning. Thanks.

Aiman Ezzat: Good morning.

Michael Briest: Just in terms of the 14% margin target, I appreciate you said it's not deliverable next year. But is it still an ambition for the group? I think for me, at least, it feels as though there's a pivot and sort of emphasis towards growth and getting back to the 7% to 9% trajectory. Does that have an impact on margins? Maybe you can sort of talk about the balance of the two over time. And then just a follow-up on the actions you mentioned in terms of trying to sort of help with that acceleration. Can you quantify the sort of cost? Is this a restructuring program? Are there going to be people leaving the organization? Does this impact the sort of typical 1% of sales budget for restructuring this year or next year? Thanks.

Olivier Sevillia: For me, it's not to first, the 14%, yes, it's still achievable, of course. I mean, the premise of what's driving the 14% and the margin improvement are still there. It doesn't change. But as I said, next year, it was really linked to a good operating leverage coming from the growth acceleration based on the exit rate. I cannot say that we're starting the year with a boom in terms of growth. So the premise of how would -- what made the 14% achievable next year are not there. So by definition, it's not achievable anymore. Now is the 14% still there in our plan in terms of what can be achieved over the next two, three years? Of course, it is still there because I think the margin progression and the underlying reason why we can improve the margin have not changed linked to -- it's only linked to the current environment. And the balance -- there's always a balance between growth and margin that you have to manage. But I think for me, you have to do both. You cannot just do growth at the expense of margin because structurally, you're kidding your business bit by bit. And at the same time, margin, you cannot just push for margin and stop investing just to grow. So you need to keep that balance. But I'm coming back to your next question. This is not about a big restructuring program. This is really about speeding up the way we react and speeding up the decision and empowerment and streamlining a bit some of the processes behind some of the decisions that we make in the organization to enable faster enablement on the front end. And it's not about driving a big restructuring program.

Michael Briest: Okay. Thank you. All the best for the future, Olivier.

Olivier Sevillia: Thank you. Appreciate it.

Operator: Thank you. We will now take the next question from the line of Nicolas David from ODDO BHF. Please go ahead.

Nicolas David: Yes. Good morning, Aiman, Nive and Olivier. Thanks for taking my question. A follow-up. The first one is regarding the -- it's good to see that you are back to positive net staff hiring in Q3. But I would like to have a feeling on where those recruitments carried out fully on purpose and well managed throughout the quarter. And were you -- or were you actually surprised by the deterioration of the demand during the quarter which means that those hirings were a bit higher than what you should have done and this is amplifying actually the action you need to take to adjust your operation? And my follow-up is about -- to get more sense about the buffer you have taken in your Q4 guidance regarding notably US and the potential impact of the wait-and-see attitude from clients on the president's election. And also the client behavior regarding their end-of-the-year budget, do you expect now a furlough as severe as last year? Or you're still expecting that clients may behave a bit better than last year? Thank you.

Aiman Ezzat: Thank you. So headcount growth, no, no. It is not, we did headcount growth big mistake. Now that things are deteriorating, we're going to have to cut. No, no the headcount growth as I said will resume at one moment. And at this stage, the headcount growth has resumed I said in India and I said it continues to grow in India and we continue to see positive traction and growth driven by India. So I think that's -- there's no revert back in terms of the plan based on what we have done. It's not a surprise that we have to address. And I think, I know you all love headcount growth as a leading indicator. So yes, headcounts are growing again. On the -- on Q4, of course, we built some cushion on Q4. I think things like furlough et cetera is discussion we have had with clients. We are end of October and we don't expect surprises. But even that we have built some buffer for potential surprises, but remember the difference is that, we are -- there's a few weeks left in the year. So, we can have very bad scenario, but I do think that we have built enough buffers for the remaining eight weeks of the year. Remember, we did not have a big surprise around Q3. To be frank, the big shift had happened in Q4, not in Q3 really. Q3 was very close to where we expected it. So it's more the Q4 swing that changed -- drove us to change the adjusted guidance for the top line. So I think, we feel pretty comfortable about where Q4 is.

Aiman Ezzat: And this was the last question. Thank you all. Looking forward to interact with you over the coming weeks. Have a great day.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.