Earnings Transcript for PUB.PA - Q4 Fiscal Year 2021

Company Representatives: Arthur Sadoun - Chairman, Chief Executive Officer Michel-Alain Proch - Chief Financial Officer Anne-Gabrielle Heilbronner - Security General Steve King - Chief Operating Officer

Operator: Ladies and gentlemen, good day and welcome to the Full Year 2021 Results Presentation of Publicis Groupe. For your information, this conference is being recorded. At this time, I would like to turn to conference over to Mr. Arthur Sadoun, Chairman and CEO of Publicis Groupe. Please go ahead.

Arthur Sadoun : Thank you Sakia [ph]! Bonjour and welcome to Publicis Group 2021 full year results call. I am Arthur Sadoun and I’m here in Paris with our CFO, Michel-Alain Proch and our Security General, Anne-Gabrielle Heilbronner. Steve King, COO of Publicis Groupe is joining us but remotely. As usual we will take your question together after the presentation, not during the presentation, but after the presentation. And after our call, Alessandra Girolami will be available to answer any of your questions offline. I will start this call by sharing the main highlights of our full year results. Then Michel-Alain will take us through the details of our numbers. After that I will share with your our strategic priorities for the year to come and complete with the outlook. Finally we will take all of your questions with [Inaudible]. Please take the time to read the disclaimer as it is an important legal measure. In 2021, the group ended the year strongly and ahead of expectations, exceeding 2019 level on all KGIs. We delivered 10% organic growth on the year, implying a 3% increase versus ’19, with a historically high operating margin rates at 17.5% and €1.4 billion in free cash flow. Thanks to our integrated model, our 2021 results demonstrate that we are emerging from this crisis as a stronger company. Let’s start with the highlights of our performance last year. First organic growth. Q4 was at plus 9.3%, above our graded expectations in October. This means we delivered on organic growth for the full year at plus 10%. Our activities were strong across all regions, both in Q4 and for the full year of 2021. In the U.S. organic growth came at plus 8.7% in Q4 and at plus 9.8% for the full year. In Europe our business grew by plus 8.7% organically in Q4 and by plus 9.6% for the full year. Finally in Asia, our organic performance was at plus 9.2% in Q4 with full year at plus 10.3%. Our model means we were best positioned to benefit from the structural shift in the industries towards first-party data management, digital media and commerce, which are accelerated during the pandemic. This is reflected in the global performance of Epsilon and Publicis Sapient, which came in at plus 12.8% and plus 13.8% respectively for the full year. These were record numbers for the group. Supported by an order increase in customer demand, which was fueled by cyclical recovery and government stimulus after a significant drop in marketing spend in 2020. That said, we take revives that our re-measure of our strength is out performance on a two year basis. That’s how we have been driving our versions throughout the year. In 2021 we exited 2019 level faster and most stronger than expected. At group level, we recorded 5% growth in Q4 versus ’19 and 3% for the full year, and our momentum versus ’19 accelerated in H2 at plus 5% versus plus 1% in H1. In the U.S. where our model is the most advanced, our operation were up plus 8% versus ’19 on the full year. Our second highlight is New Business. For the first time in the last four years we topped the New Business ranking with league tables placing us well ahead of the packs. In one of the most intensive every in term of pitch activity, we secured the vast majorities of our defensive reviews while converting a high number of offensive opportunity. Most of those major wins were Stellantis Global Media Business, the Global creative business for Infiniti and TikTok and the global media account of Eli Lilly and Meta. We also saw significant global wins starting in the U.S. where were won Walmart Media and Data and Planet Fitness integrated business. We were also awarded L'Oreal Media in China, Llloyds Media in the UK, Ferrero in Italia and in Australia, Toyota Creative and Media, Johnson & Johnson, Commerce and Digital Accounts. What is more, we are starting the year on a high note with some significant wins, including McDonald National U.S. Media Business. It is actually worth noting that we have been awarded this important duty without a pitch. Thanks to the uniqueness of our model and the relationship we previously built with the brand on Data Analytics and Digital Marketing with Epsilon and Publicis Sapient. In 2021, we also continued to improve and strengthen our model by investing in targeted acquisitions and strategic partnership. We acquired CitrusAd to lead in the retail media and Tremend to scale Publicis Sapient capabilities in Europe. We also acquired BBQ in the U.S. To expand Publicis has clinical [inaudible] and complements its end-to-end value proposition. Publicis Sapient launched a Tech joint venture with Siam Commercial Bank in Southeast Asia and we signed strategic partnership with the TradeDesk, Adobe and Salesforce to expand the reach of our data and identity backbone. After spending nearly €300 million in 2021, in 2022 we will accelerate with €400 million to €600 million allocated to M&A to further expand our data and tech capabilities though new expertise and geographies. The fourth highlight is the trends of our final show KPI’s, thanks to our operating structures. Our margin rate was at 17.5%. This is 150 basis points increase versus 2020 and the highest margin rate ever for the group. On the one hand we entered the year with a very lean cost base. Thanks to our agile and flexible structure, which allowed us to adjust of course when the prices hit. This had a positive impact on our margin. On the other hand, thanks to the same agility and flexibility, we were also able to move fast to support our growth in 2021. We welcomed over 9,000 net additional recruits in the year and invested in reward and retention. Taking all of this into account, our operating margin was at €1.840 billion, an increase of €140 million compared to ’19. As a result, our headline EPS was up 17.6% versus 2020 at €5.02 per share returning to its 2019 levels. In 2021 we generated €1.4 billion in free cash flow before working capital, ahead of the upgraded objective of second €1.3 billion we communicated in the October. This is a €175 million increase versus ’19. This strong free cash generation allowed us to accelerate our deleveraging despite the crises. This means our average net debt returned to €1.5 billion, a broadly similar level to before the acquisition of Epsilon. With this we are in a position to propose a dividend of €2.40, corresponding to a payout of 47.8%. It is important to note that we will fully pay our divided in cash. As we have decided, together we evolve to remove this group upshare in order to strop any kind of dilution on our share count. Our fifth highlight is not strictly financial, but is vital important for our business. Two years after the crises hit, not only Publicis is stronger than ever, but we are also emerging as a better and an even more responsible company. The progress we have made across our ESG strategy is setting a clear industry standard. Our combined effort on this front have led Publicis to top the industry ranking with eight out of 10 leading ESG ratings agencies. Our last highlight is maybe the most important one. The outstanding commitment that our people have shown to deliver this record year in what has been a challenging time for everyone. We are the most rated in resilience, learning to live with the virus and spending in solidarity with each other despite the lack of in-person connection. We are faced in unprecedented business challenges and always put our clients’ interest first. To thank them and reward them for their dedication and determination, we have doubled our bonus pool versus ’19, but this is not all. We have decided that everyone who have been with us, since the beginning of the crises, fighting on our side, will receive a bonus this year. This includes 35,000 employees who do not have any valuable remuneration and will receive one week additional salary. I will now leave the floor to Michel-Alain who will provide further detail on the full year number and I will come back later to share our priorities and outlook for 2022.

Michel-Alain Proch: Thank you, Arthur, and good morning to all of you. I’m glad to be with you today. I will begin on slide 13 with the evolution of our net revenue for the fourth quarter and full year 2021. The group posted net revenue of €2,935 million in Q4, which is an organic growth of 9.3%. If we compare to 2019, we grew 5% organically in the fourth quarter. This means that our second half showed strong acceleration to 5% after 1% in the first half. Reported gross in Q4 was at plus 13.1%. This includes a €10 million positive impact from acquisition and disposal. This quarter the positive impact from foreign exchange rates was at €81 million, which is 3.1%, largely due to the USD to euro exchange rates. Full year net revenue was €10,487 million, which is an organic growth of 10%. This means that we exceeded 2019 organic net revenue levels by 3% in the full year, faster and stronger than expected just as Arthur said. After taking into account and you get a foreign exchange of €191 million under year mostly due to the USD evolution on the first part of the year, reported gross was 8% in 2021. Let's now move on slide 14, which gives the dynamics of our Q4 organic growth by geography compared to both 2020 and 2019. North America posted another very strong quarter. This was visible in the region performance on the one year and on a two year basis, at respectively 8.7% and 9.0% organic growth. Europe posted 8.7% organic growth versus 2020 and was very close to full recovering its 2019 levels in Q4. Asia Pac at 9.2% organic growth versus 2020 fully recovered its 2019 levels. Middle East and Africa and Latin America, both posted very strong organic growth at 15.3% and 22.6% respectively. When looking at organic growth versus 2019, both regions saw their performance improve in Q4 as they exceeded 2019 levels by 1% and 9% respectively. I will detail the performance of each region in the following side, and I begin with North American on slide 15. As I said, our operations in the region posted 8.7% organic growth in Q4, which is a broadly similar performance for both U.S. and Canada versus 2020. Compared to 2019 we grew at an impressive 9% organic, driven once again by the strength of our U.S. operation on which we now focus. In the U.S. our operating grew 8.7% versus 2020. Media continued to post the good performance, both in traditional and digital. Digital Media and CJ affiliate, both grew double digit benefiting from a solid demand from major clients for the former and a positive environment for the latter. Creative sequentially improved again this quarter with a strong performance with group clients in financial services and notably in our production unit with CPG client. Previously Sapient posted a 22% organic growth in Q4. It has come on top of a positive performance in Q4, 2020, thus a plus 23% performance compared to 2019. This is a strong sequential improvement in growth on a two year basis after 11% in H1 and 17% in Q3. Publicis Sapient benefited from both ramp-up of new client contracts in the year two motive and retail sector, both food and non-food, as well as incremental projects with group major clients in financial services and TMT. This performance demonstrates the relevance of the reorganization in 2019 by industry verticals and our ability to capture the shift in our client spend towards commerce, customer experience and digital business transformation. Epsilon posted a 6% organic growth in Q4 implying double digit organic growth versus 2019. This performance was achieved despite the expected lower activity in the U.S. car dealership due to the ship shortages. Epsilon Tech, Data and Digital Media activities, all performed very well in the quarter. Finally Publicis Healthy delivered its 7th consecutive quarter of double digit organic growth, with increase of scope of work at group major clients. Overall Q4 showed a very strong performance for the U.S. Let me add that as you remember in Q4, 2020, we recorded a positive 0.5% organic, so again on a two year stack the U.S. saw its growth accelerate to 9% in Q4 after 6% in H1 and 8% in Q3. Let's now turn to the performance of Europe on slide 16. As I mentioned earlier, Europe recorded an organic growth of 8.7% in the quarter and was very close to recovering its 2019 levels. The U.K. which represent 8% of group net revenue in Q4 posted an organic growth of 6.5%. All our activities in the country were positive this quarter, with a strong contribution of health and some restock at leisure and travel. Creative and Media together were mid-single digit, while Epsilon was a strong performer, although still on the small base. It's important to note that Publicis Sapient in the U.K. returned to positive in Q4, 2021 compared to 2020 as we had anticipated, although not fully recovering its 2019 levels as its activity remained impacted by some client cuts, particularly in the financial services sector. Thanks to its most recent wins which achieved our goal to diversify its activity towards our sectors in net retail. We are confident that Publicis Sapient will actually contribute to our growth in the U.K. in the coming quarters. Overall and excluding the activity of Publicis Sapient, the U.K. was up 3% versus 2019 in the fourth quarter. France, which represents 7% of group net review in Q4 posted organic growth of 11.5% compared to 2020. It grew 3% compared to 2019, although this 3% that showed a negative when excluding Media Transport and the Drugstore. Creative activity was stable and Media slightly positive after several quarters of solid growth. Publicis Sapient grew strongly, thanks to the ramp up of contract sign in 2020 in the B2B retail sector, outdoor media and the Drugstore rebounded significantly as the activities benefited from the full reopening of the economy in the quarter. Germany representing 3% of group net revenue posted 5% organic growth, but was down 6% compared to 2019. Creative activities were stable, while media posted high single digit and Publicis Sapient double digit growth. The decrease of 6% versus 2019 is due to the decision we’ve taken in 2020 to close down a low margin print production unit as part of the COVID action plan. This rundown is now completed and it will not affect 2022 performance. Finally, Central and Eastern Europe continue to post very strong growth with double digit organic in both media and creative. Poland, Russia and Romania were extremely dynamic and the clear engines of growth in the region. On slide 17, let me give you a bit more color on our performance in the rest of the world. In Asia Pac representing 10% of group net revenue in Q4, we delivered another very solid quarter. The region grew 9.2% organically, which notability an impressive performance in China at 17%. In China it's worth noting that we benefited from the ramp up of our various new business wins, particularly in the non-food consumer products and automotive. As well in the region the performance was more diverse, affected by local lockdown situation. India was flat this quarter, Australia up mid-single digits, while Singapore was down this quarter due to some delayed contracts. Thailand on the other hand doubled its net revenue in the quarter driven by Publicis Sapient. In the Middle East and Africa we posted 15.3% organic growth, reported by continued strong performance in the Middle East particularly at Publicis Sapient. Latin America posted a 22.6% organic growth in the quarter, which was 9% growth versus 2019. The performance was mainly driven by the Media. All countries in the region were positive with notable 22% in Brazil, our largest country in the region. Let's now turn to slide 18, which summarizes organic growth by region in the full year. North America posted regular and strong performance throughout the year, leading to 9.7% in 2021 versus 2020 and as I said, 7% versus 2019. In Europe our activities were up 9.6% for the full year, not fully recovering the 2019 levels yet. Excluding Publicis Sapient U.K. though, Europe was nearly flat versus 2019. Middle East and Africa saw its revenue grow 11.9% organically and almost recovered its 2019 levels in the year. Latin America was up 16.8% organically in 2021 and thanks to its strong Q4, was up 1% versus 2019. On slide 19, you will find the group performance by industry verticals for the full year. This is a based as usual on analysis of our main clients representing 91% of our net revenue. It also excludes Media Transport and the Drugstore. In 2021 all our clients industries were positive. Health posted the strongest growth over the year at 17%. It also grew double digits in Q4 on an already strong performance in 2020. Automotive grew 11% in 2021, despite some slowdown in the fourth quarter due to the supply shortages as we anticipated it. The financial sector was slightly up on the year at 5%, but nonetheless did decelerate in Q4. TMT retail and non-food industry posted double digit growth for both the full year and in Q4. Public sector, I'm sorry engine and manufacturing and leisure and travel, all accelerated in the fourth quarter compared to the nine first months. Moving now to Page 20, our consolidated income statement. Our net revenue in 2021 was €10,487 million and EBITDA was €2,317 million, up respectively 8% and 7.3%. Operating margin was at €1,840 million, which is a margin rate of 17.5%, up by 150 basis points year-on-year. This actually represents a historically high level for the group for both 2019 levels by 20 basis points. I will provide more details on this in the next two slides. Headline group net income was €1,264 million in 2020, an increase of 22% versus last year. Headline net financial expenses came as expected at €160 million, while income taxes increased to €407 million on the basis of a higher taxable income. After adding non-cash items, group net income was at €1.27 billion in 2021, doubling compared to 2020 and up 43% versus 2019. Let me now get into more details for each of this aggregate. First, operating margin, which improved by 150 BP versus last year reported and 160 BP, that’s just a comparable at constant perimeter and foreign exchange rates. Our personal costs were up 10% on the year. After a 6% increase in the first half, this reflects the acceleration in our investments in talent in the second half to attract, retain and reward as Arthur mention previously, with a significant rise in our bonus pool and over 9,000 net recruits in 2021 to accompany our growth. But we managed to maintain personnel costs at 62.8%. Restructuring costs reached €53 million, down as expected by €121 million prior to – just as to prior year. I will detail as I did in H1, the evolution of the lines of the P&L in the next slide, which shows a bridge between the 15.9% compatible 2020 and the 17.5% we posted in 2021. Let me take you through our bridge of operating margin from the left to the right. I will begin with the 20 basis point increase in personnel cost that they just talked about. Consistent with what I told you at our H1 earnings, the evolution derives from three different elements. First an improvement in fixed personnel costs corresponding to 160 basis points, which materialized mostly in the first semester due to a low cost base exiting 2020. Second, an increase in people incentive by 110 BP in order to both reward and retain. This includes a 50% rise in bonus pools versus 2020 and Arthur said it already, doubling the level of 2019. It also includes the exceptional, additional one week's salary bonus that the group decided to award to 35,000 people who do have a valuable rumination and were with us throughout the last two years. Finally we increased our freelance resources amounting to 70 BPs to help us adapt to the rise in revenue in the second part of the year. Then the decrease in restructuring costs in line with our anticipation that I previously mentioned represent an improvement of 130 BP. Cost of sales increased by 110 BPs, consistent with H1 and mainly reflecting a charge that used to be accounted for in depreciation and related to the short term extension of two French outdoor media contracts. This impact will be reversed in 2022, as we actually renewed at the end of last year, those two contracts for our respectively five years and 10 years. Half of the decrease in depreciation of 170 BPs is explained by the same technical point I just mention. The other half is a result of the reduction of real estate footprint that we have carried over in the last few years, our all in one program. Other operating expenses posted a slight negative 10 BPs to the margin rate performance. Within operating expenses, it's worth noting that G&A in percentage of revenue continued to decrease year-on-year as some expenses like travel have not yet fully restarted. As a result, our operating margin rate in 2021 amounted to 17.5%, again an increase of 160 BPs compared to 2020 on a comparable basis. Let's move now quickly to our headline net financial expenses on slide 23, which is at minus 160 million versus 189 million last year, down by 29 million. This decline is mostly due to two anticipated evolution. First, a decrease in interest on net financial debt by €18 million derived from the deleveraging of the group, and I will get back to that while commencing the evolution of the group average net debt. And second, the decrees of €7 million in interests on lease liabilities, which is a direct consequence of the continued reduction in the group real-estate footprint that I just mention. Now on slide 24, income tax. Reported income taxes on €307 million increased along with the rise in profit before tax. To calculate the headline income taxes of €407 million, we are adding the non-cash elements of our P&L, i.e., the tax effect on amortization of intangibles on impairment and real-estate consolidation, as well as non – also a non-cash item. Effective tax rate reached 23.4%, which is down 130 basis points compared to 2020 and an improvement versus our expectation of 24.5% rate. While the ETR is obviously the reflection of our regional and business mix, it was positively impacted in 2021 by a non-recurring deferred tax asset in France that we accounted for when we renewed the two French outdoor media contract I mention earlier. Taking this into account we expect our ETR for 2022 to be at around 24% in the current tax environment. On slide 25 our headline earnings per share fully diluted increased by 17.6% year-on-year to €5.02, returning to its 2019 levels. This is obviously directly related to the increase in our operating margin, decrease of our financial cost and the variation of our share count. Moving to slide 26, free cash flow. Our free cash flow before change in working capital was €1.427 billion euro in 2021. It is a 20% year-on-year and it's 14% compared to 2019. This improvement of €237 million versus 2020 derived from the following major evolution. First €168 million in EBITDA consequence of the 160 BPs increase in operating margin. Second, a reduction of €96 million in our lease liabilities reflecting the benefit from our all-in-one real estate plan and the reclassification of the depreciation of the French outdoor media contract that I already mentioned. So the €19 million reduction in our CapEx for the year, mostly driven by the lower spend we had in the first half, plus the €33 million reduction in our interest paid, consistent with group deleveraging. And finally an incremental outflow of €69 million of tax paid. Let’s now move on to the next slide, our use of cash. In 2021 the change in working capital represented an outflow of €216 million. This is a better outcome that the €300 million to €500 million reversal we initially anticipated, after the recalled €1 billion inflow in our working capital in December 2020. At December 2021 we now consider that the working capital at the group balance sheet is normalized. Acquisition net of disposal and including earn outs and buyouts reached €283 million, at the top end of the bracket of €200 million to €300 million envelope for bolt-on that we mentioned during the year. This notably includes the payment of our acquisition of CitrusAd, Boomerang, Octopus and BBK. Other non-cash item was plus €192 million, resulting from two main factors. First 119 positive impact from ForEx adjustment and change in fair value of swaps. Second, a €56 million positive impact from the non-cash change in earn out and buyouts. In total, we decreased the group closing net debt by €767 million in December 2021 compared to December 2020. Moving onto slide 28, the net financial debt. The reduction in net debt I just described led to a closing net debt of €76 million at the end of 2021. But you know that the debt KPI, which is the most important to judge the leverage of the group is the average net debt. Our average financial net debt in 2021 was €1.5 billion. This is slightly better than the latest guidance I gave you in October of €1.6 billion. As you know our priority for 2021 was the deleveraging of the group after the Epsilon acquisition. Thanks to this, we did reduce the group average net debt by a full turn of EBITDA, 1.6x – that’s 2.6x in 2020. Before handing over to Arthur, let's focus on our 2021 dividend and our cash allocation for 2022. First on slide 29, our dividend. We are pleased together with the Board, to announce the dividend per share of €2.40. The dividend will be submitted to the shareholders votes at our next AGM in May. This represents a payout of 47.8% and an increase of 20% versus 2020. It is actually $0.10 higher than the 2019 dividend that we were planning to pay in 2020 before the crisis hit. Thanks to our strong cash performance, we have decided with the board to remove this group option which had been in place since 2012. As a result, our 2021 dividend will be fully pain in cash. So, let's now summarize our cash allocation for 2022 on slide 30, which Arthur and I commented on in the previous slides. First, we are grading our dividend policy to a 45 to 50 payout ratio versus 45% previously. The 2021 pay out of 47.8% is a good illustration of this. Second, as I just mentioned, we've decided to cancel this group dividend option in order to stabilize the number of group shares in circulation. This means an outflow of around €600 million, that means €300 million more than in 2020. Third, we are accelerating our bolt-on acquisition strategy by allocating to it between €400 million and €600 million in 2022, which is twice the envelope of 2021, to continue strengthening our capabilities in data, tech and commerce. Fourth, we will use the remainder of our free cash flow generation to pursue the deleveraging of the group with the aim of reaching an average net debt of €1 billion by the end of 2022. This concludes my financial presentation and now I give the floor back to you Arthur.

Arthur Sadoun : Thank you, Michel-Alain. In 2020 our industry went through historic lows. In 2021 it rebounded to reach new heights at every moment. Thanks to our model, we were able to face the challenges and seize the opportunities. We are now emerging as a stronger company, with three clear priorities for 2022, leveraging our unique assets in data and technology, giving our people more opportunity to progress, delivering growth that is both profitable and responsible. Let me break that down. Our first priority is to continue to leverage our unique assets in data and technology, to help our clients win in the platform world. In the last year we have shifted our organization from an emerging company to a platform. We have put in place a country model and helping us to connect our creative brand, our media clouds and all of our digital agencies locally, to seamlessly deliver omni-channel creative experiences that drive real business outcomes for our clients. But we did not stop there. We acquired and integrated Epsilon, to take clear leadership in personalization and scale. And we have well positioned Publicis Sapient around digital business transformation and industry vertical. There's been a lot of work and for some years it has been around our short term organic goals. But today we are in position to lead the three major marketing revolutions that our clients are facing. It starts with privacy led identity. In a soon to be cookie less world, we have clearly lost shape in building, enriching and activating trough active data, fully respecting the highest privacy on the apps with Epsilon transaction based data and identity solution. This led to products, mainly Epsilon as a leader in loyalty solutions, powering Publicis to the top of the ranking meter follow digital service, and it was a key contributing factor to the media rating [inaudible], providing Epsilon the industry’s first accreditation for outcome based delivery, for its ability to leverage data to in digital media, to online, but also offline consumer purchasing behavior. Next is the shift in investments toward new digital media channel. By leveraging our media leadership and capabilities, we are helping our clients lead in this rapidly changing landscape. Let me give you just two concrete examples. To meet the exponential demand in advanced series, Publicis Media and Epsilon successfully launched PMX Lift in the U.S. and with CitrusAd, that product was justified as a leader in retail media. We will lead the next generation of identity led retail media solution. Last but not least, drive in direct-to-consumer that has exploded during the pandemic. We have the technology and 18,000 engineers and developers to build the platform and digital ecosystem our clients need to create direct relationship with our consumer and accelerate on commerce. To address the drastic shift from paid to owned channels, not only do we have best in class product in this front as organized by [inaudible] in this important [inaudible] provider. But we also have the consulting and engineering services to deliver business transformation, be it around customer experiences. Last year GAAP net reports rated Publicis Sapient higher than all competitors on that matter, including Accenture, Deloitte and CapGemini. The data included drive innovation, reducing time to market, improving business process agility and driving revenue growth. Let’s be clear, everyone in our industry will claim that they can deliver omni-channel creative experiences. But even if we all share the same core capabilities in creative and media, very few have been making the necessary investments to really transform and adapt to the new imperative of the platform world as we have done in the past and none of them have done it at the same scale we have, with the acquisition of Publicis Sapient and Epsilon or the same level of integration with the consumer there. The best way to concretely measure not only how attractive, but also how differentiated is our model, is new business and retention rates. When it comes to new business, we have been number one for three years out of four in the rankings and as for our retention rates, over the past four years we are first in terms of net billing. Thanks to our team to win significant new clients while maintaining and reinventing our relationship with existing ones. Our second objective is making our people progress in an hybrid world, by giving them more opportunity to grow than anywhere else - to do that we have Michel. We have today an adoption rate of 90% across the group. We have designed it to become the best in our growth platform for everyone at Publicis. It is a following with more than 30,000 online classes available. Last year on average 13 pluses were taking by each of our 85,000 employees. If you look for the place to find development opportunities with on average 2,000 applications to job engaged each quarter. We have added new content of building programs and partnership. More recently we strived globally to equip our teams to lead the change in an hybrid world. We are bringing direct access to personalize progress dashboards. That taps into our profile intelligence, so that everyone in the group is now empowered to manage and track every step of that [inaudible]. What is more, we are reinventing the future of work by offering unprecedented experiences like ‘Work your World’ to attract and retain the best talent. More than 13 million people viewed the launch season for ‘Work your World’ and it lead to 14,000 new application to the Publicis Groupe sign-up page. Last but not least, our sales objective is delivering profitable and responsible growth in 2022 and beyond. We have built structures that enable us to deliver the best financial KPIs in the industry. Our country model, our group support functions, including our global delivery center and our shared resource and platform mean we are confident in our ability to continue to deliver industry leading financial rations, while investing in our people and future facing capabilities. At the same time, because growth cannot be sustainable without being responsible, we are taking the lead in putting our environmental and social commitment as the core of everything we do. We continue to build the most diverse, inclusive and equitable working environment by bringing 40,000 of us together around the world on Marcel for second product function there to evaluate, implement and advance on our G&A initiative. We went further in creating a responsible marketing environment through initiative like Once and For All coalition and the Roll-out of the A.L.I.C.E. tool to measure the cabin impact of companies. And finally, in the fight against climate change, we became the first holding company towards our ambitions objective of carbon neutrality by 2030 validated by SBTi. As I said earlier, all of this mean we topped industry ranking with eight out of 10 leading external agencies, and we will continue to double down across all of our ESG progression together in the years to come. Delivering on those three priorities and assuming no major deterioration in the ad situation, we aim to deliver between 4% to 5% organic growth in 2022. This means sequential acceleration versus the two stack of 3% in 2021. Mainly driven by the trends of our model and new business wins in what is still a positive environment for advertising and business transformation. We expect the group Q1, 2022 organic growth to land slightly above this full year guidance range due to Q1 more favorable comps. When it comes to operating margin and free cash flow, we intend in 2022 to achieve the same level as in 2021 at share count 17.5% and €1.4 billion respective as efficiency of our structure will allow us to both invest in talent and absorb the impact of inflation. Well, as you would have seen, we ended 2021 with a strong Q4, delivering record numbers for the full year for Publicis. We are emerging from this crises stronger, both financially of our KPIs exiting 2019 and commercials, once again topping the new business ranking. We are entering 2022 with confidence, thanks to the robust foundations we have put in place. We are committed to accelerate on organic growth versus our three year stake, while continuing to deliver industry leading financials. We are focused on exhibiting our plan and delivering for our clients, who we would like to thank for their partnership. Thank you for listening and now to the director, we will take all of your questions.

Operator: Thank you. [Operator Instructions]. Our first question today comes from Lina Ghayor from BNP Paribas. Please go ahead.

Lina Ghayor: Hi! Good morning! Lina here. Congratulations on the results! I have three questions if that's okay. The first one is on the top line outlook for ’22. Can you explain a little bit, what portion is related to the business, what is Publicist specific and what is more industry specific? The second question is around the lodging outlook. You're guiding for certain margin, could you just give a little bit more color on the moving parts. How much of that leverage do you expect, by how much inflation and talent investment offset that. And thirdly, on your client behavior, Facebook published last night, it also mentioned that inflation and supply chain disruption have impacted advertising budget. Have you seen anything similar on your clients, apart from the automotive clients and how do you factor that in your guidance? Thank you very much.

Arthur Sadoun: Make sure about your third question, because we didn’t hear very well. It’s about inflation and supply chain shortage no, am I right?

Lina Ghayor: Yes correct, following Facebook comments last night.

Arthur Sadoun: If you don’t mind, I’m going to start with the number one on our 4% to 5% and then I’ll pass on Michel-Alain for the margin and come back maybe for inflation and I’ll close with it. So again, looking at 2022, we definitely expect organic growth to be between 4% to 5%, which again is going to be a sequential improvement versus a two year stack of 3% and on the back of 2021 at 10% growth. If I want to spilt a bit what is industry versus Publicis specific, I would say it’s everything. I would say that we have three assumption to get to this growth of 4% to 5%. The first is the strength of our model, and we know that both Epsilon and Sapient will be accretive to our growth and when you add to that, and this is a very important point, what they bring to our overall model, this is Publicis specific for sure. The second thing that is Publicis specific is the roundup of our strong new business win in 2021. It has been a year with an increase of 50% of activity in new business. We had a great run and this of course has a lot of do in the 4% to 5%. What is not Publicis specific, but needs to be factored in is actually the positive of demand that we are seeing for [inaudible] that is going to be true to our peers. That also which is most specific to us in terms of business transformation, because I think you have to separate what you can hear about Media from what we bring today, which is how can we really help our client transform. So there is an industry specific about the fact that it looks like we’ll have so far a positive environment for advertising. You have the business transformation and you have the business three fields that make us confident. Now, let’s be clear, we believe that this is a strong number and there is lot work to do, but we are all focusing on that. Michel-Alain, you want to take the margin.

Michel-Alain Proch: Yeah sure. So I take the margin supply chain issue. I begin maybe with supply chain issue that was mentioned yesterday in the Meta call. Maybe Lina Ghayor as you may remember, we told you back in October that supply shortages may affect some industry verticals in Q4, and in particularly auto. We were right, it did materialize, but it was softer than anticipated, because we were able to help clients redirect spend towards existing inventories and brand building. So now when we look at 2022, we see these supply chain issues lingering in the first semester, but overall progressively being resolved. We see that we are on the right path to resolution. This is what we have factored in our four to five growth guidance for the year and as Arthur mentioned, with Q1 lending slightly above this range. Now if I move on to your question about the guidance, let's first remember that the 17.5% we have achieved in 2021 is an all-time high for Publicis and this 17.5% of 2021 is based too on the very particular H1, as I’m sure you remember, where we entered into H1 with a very low cost base and then had the revenue dumping in. So what we are guiding to is a 17.5%, yes it’s the same number, but we are transforming something that was a bit exceptional in H1 as we said, to a more recurring margin. So now in term of dynamics in the P&L, we have the operating leverage of the 4% to 5% exercising the strength on the other operating cost of the group. So i.e., cost of sales, deprecation, and other operating expenses. What we plan here, what we estimate is that in BPs of revenue it will be a decrease of about up to 100 BP, and then we will have an increase of our goal estimate cost, including hiring obviously to sustain the 4% to 5% growth, incentive I think Arthur and I mentioned it several times, retention packages and obviously increase in salary, reflecting inflation. So that’s the plus 100 that we get out of other operating costs, materializing the operating leverage of the group, which is matching this 100 BP more group personnel cost. So all together, in a round number, altogether 17.5% for the year.

Arthur Sadoun: The problem is that Lina touched the most old topics and a tough question, so maybe I’ll just recap and then we’ll move on to the other one. But when it comes to the top line, we are confident to deliver between 4% to 5% for three reasons; the trends of our model boosted by Epsilon and Sapient; the ramp up of our new business wins in 2021; and the overall positive environment for advertising and business transformation. And to come back to your point, this include positive supply chain shortage that could come in H1 and then linger over time. When it comes to the margin, we are maintaining the same margin as 2021 for three main reasons, Michel-Alain said it. We enter 2021 with a lien cost base, which is a big difference. We are anticipating to mitigate inflation that will be there, and also very importantly we will continue to invest in our talent to sustain our growth, because again we believe that when you are already at the best margin of the industry and the best margin ever for the group, what matters the most is to sustain our growth, and here again inflation is including and supply shortage are including into those numbers.

Lina Ghayor: Very clear. Thank you both.

Operator: Thank you. We now move on to our next question, which comes from Lisa Yang of Goldman Sachs. Please go ahead.

Lisa Yang: Good morning. I had three questions as well, and the first one is a follow-up to the question on the full year guidance. I’m just wondering given how the nature of your business has evolved with maybe more project base while at Sapient, more data transformation work. Like what percentage of your 2022 revenue you feel that you have visibility on today? Just like if you can just help us understand like you constructed that 4% to 5% will be helpful. The second question is regarding Sapient, where we are seeing a great accelerate again in Q4 in the U.S. And again just wondering if you can maybe give us a bit more color in terms of the pipeline of work there, and should we expect a continuation of the double digit growth rate in 2022 to basically hit your guidance? And the third question is on capital allocation and I think your projects for 2022 are very clear. I think you know most people I’ve spoken to this morning was you know why do you want to be so conservative on the balance sheet. Is it you know you want to keep pushing for larger M&A and at what point you thought considering buy backs of any kind, that would be helpful as well. Thank you.

Arthur Sadoun: Michel-Alain will probably take one and three and I’ll take two of it.

Michel-Alain Proch: Yeah, sure, sure. So on the dynamics of the 4% to 5% guidance we are giving for 2022, I mean several things we can say. First, in terms of activity, Epsilon and Sapient will be accretive to the group overall growth; that’s as they have been in 2021, they will be in 2022. This is a good assumption and this is a good thing we see is media being strong contributors with continued strength in digital. So in this 4% to 5% we are counting on a contribution of creative, which will be modest in terms of organic growth. So you see, having said all of this, you need to look at our business as a whole as Arthur was saying in the first part of his presentation, because each is playing a key role in driving overall growth in our integrated platform model. Arthur?

Arthur Sadoun: Yes, maybe I’ll add one and that is these trends of our model today lies on our capability to have that scale and it’s important to set scale, data, creative, media and technology to really transform the business of our client. And while we are generating value and maybe we talk about the smaller acquisition we have been made later, but just to take a concrete example, well we are really adding value. It is our ability to connect those expertise through the power of one. This is where not only we’ll generate growth, but also deposits. A great example of that is what we have done with Epsilon. As you will remember, when we made the acquisition of Epsilon, it was a business at the time [inaudible]. Returning to iGrowth [ph] for us, that’s for Sapient by the way, because we have been able to connect it with our media person and we’ve been able to deliver for our client personalization at scale as none of the competitors can. So yes, it’s important to look at the growth expertise that we are. But what really matters is to look at the growth overall and by the way, the performance driving your new business, because I mean we do incredible work of our people to win new business. What is making the difference is the connection of assets. Again, a great example of that is McDonald. Winning McDonald without a pitch for the media business in the U.S., because we were working with them on data, because we were working on them on technology is the best demonstration, not only the quality of assets, but our abilities through the power of one to come with an end-to-end solution.

Michel-Alain Proch: Right, on the sales question Lisa about capital allocation, I think first of all I mean we should you know guys notice that we have formalized very clearly with the board for 2022, a capital allocation. We had a mandate in 2021, which was debt averaging. We’ve been super clear about that throughout the year and that’s exactly what we did. As you’ve seen, we’ve reduced significantly our average net debt and we reduced it by a full round, a full term of EBITDA. Now looking at 2022 we have reasonably decided the more balanced capital allocation with you know street pops [ph] in there. The first one is as after you mentioned, is the investment in our business to accelerate our growth by investing double of the 2021 M&A envelope. We go from 200 to 300, to 400 to 600. So this is going up and I think that's an important one, is a substantial return to shareholder with a dividend which is representing 48% of payout and which is fully paid in cash. And the third one, so part of this debt allocation is the continued deleverage which is affecting our strong financial discipline. We believe with the board that the cash allocation I just described will create more value for all our stakeholders, than with surely financial share buyback.

Arthur Sadoun: Thank you, Michel-Alain. Last but not least your question on take-ins. First I know that many – certain people are listening on this call, so we’re given an opportunity to thank them, because we are extremely pleased with the turn around and the transformation that [technical difficulty] and under Nigel Vaz leadership. And by the way, it's important to know that we are very grateful for that, because as you know Sapient’s delivery center, I mean – and I should not correct a delivery center, because you are our best engineers and the least we can say is that 2021 has been a very tough moment for them professionally, but more importantly personally. We did a lot of seeing and we tried to help as much as we can, but deliveries and performance are delivering 14% globally, it’s really a big achievement. So now to answer your question, we don't think you should consider 2021 number as a normalized level of growth. But to be very straight forward on your question, we are confident that Publicis Sapient will be highly accretive to the group organic growth in 2022. There is two factors for that. The first is the U.S. I mean for those who were with us in 2019, you would remember that Sapient for you has been structurally declining in the U.S. We did roughly three things

Lisa Yang: Great! Very confident, thank you.

Arthur Sadoun: Merci.

Operator: Thank you. We now move on to a question from Richard Eary from UBS. Please go ahead.

Richard Eary: Yeah, many thanks and just so a couple of questions from myself. Can you just talk about the capital allocation around M&A. Obviously that’s lifted to €400 million to €600 million. Can you just talk about, without obviously giving targets, you know what acquisition you are looking to add to and what capabilities that you think you need to add to the business from here and what contributions you expect from that investment this year and as we go into next year, so that's the first question. The second question just is on inflation. Obviously we’ve got inflation running through various different businesses. Can you just talk to how inflation impacts your business and as we pivot to more sort of revenue streams that are more cost plus in nature, can you start to pass through that underlying inflation through and whether that’s a beneficiary to you as a business and that’s also supportive of the 4% to 5% revenue growth. And then just lastly, just coming back to the 4% to 5% guide, obviously you’ve said but to just check and correct it, Sapient is number one contributor to growth, Epsilon second, Media third and with the media that includes account wins and Creative is basically broadly flat to slightly up. Just to confirm what you had said previously. Thanks.

Arthur Sadoun: Sorry, my mica was not on. So I'll start with the sales one. This is correct. The assumption you have are correct. This is exactly what Matt said. I’ll go quickly on inflation. There is no doubt that there will be inflation this year, everyone knows it, nothing new here. But when it comes to our business, the impact will be on personnel cost and it is clearly there. And by the way, this is one of the reasons we are coming with 17.5% in terms of margin. The truth is and I can go on and on about that, but I’m going to try to make it shorter answer now, is that when you look at the model we have built, shifting from an urban company to a platform, today we have the agility and the flexibility to actually mitigate inflation, continue to invest in talent, to invest in our roles and maintain what is the industry first margin and record for us. Maybe I’ll come back to the M&A, because this is a great question. We wanted to put our M&A trough recall of 2021 in the highlights to make one point, which is thanks to the acquisition we have made of Epsilon and Sapients. Today not only we have the technology and the data backbone, but we have 18,000 on developer but are able to land smaller tech acquisitions that can really reinforce our global affair, not only in term of growth, but also in terms of product and services that are made for the future. Citrus is a great example and sorry to be a bit technical here, but I think it's important for you to see that we are making the best out of the investments we are making. When we make the Citrus acquisition, we buy one of the leader in retail media. Not the leader, but one of the leader. What makes the difference between us and anyone else that could have buy it, is that through Epsilon we have a core ID. So we have for example in the U.S. 250 million profile that we can plug into the Citrus platform and then immediately we become the only company that can track a customer from onsite, any retailer sites where we are doing the data to a site, thanks to Epsilon ID. This is a big difference. When you know that a retailer website will be a media that will be bigger than linear TV in ‘25 in the U.S., you understand how important it is not only to have the technology to build it, but to track customer. And so there is no – and by the way I can go on and on. I said we’ll do short answer, but I think it’s very important topic, because it enables you to understand why we are raising our envelop tech trend. Today the pipeline of Sapient is very strong, sometimes too strong. I mean the demand for business transformation coming from the company like Sapient, that is a true differentiator being part of the business is really encouraging. With Tremend, we are multiplying our capabilities to deliver and serve more clients in Europe, and by the way create another global delivery center in Eastern Europe this season here, that is the main one for us. And this again, this is why by the way on both cases you know, the competitors we have for those acquisitions are definitely not the holding company. They are more into system integration or in the uptick world. But it is the addition of our existing capabilities to those new capabilities that make a difference. Again, focusing on targeted acquisition that gave us people and technology. And so to come back to your question, for 2022 we have three priorities in terms of targets

Richard Eary: That’s pretty clear, thanks.

Operator: Thank you. We will now move on to our next question from Omar Sheikh of Morgan Stanley. Please go ahead.

Omar Sheikh: Good morning, everyone. I've got three questions if I could. Maybe if I could first of all, actually I’ll go back to the Facebook comments from last night. I mean specifically they talked about some of these, the cost pressures and inflation pressures and supply chain issues impacting advertising budgets. Could you just confirm that you know the comments that they made aren’t being reflected in your guidance and the way you're thinking about your business this year, that's the first question. And then secondly, on reviews e-business, you put up those. Very helpful taking more than – slides from the last three years and I suppose the notable thing is that there was quite a big increase in the total number of account movements if you look. It’s about 3x the level that you saw a couple of years ago. So could you just maybe talk about what you're expecting in terms of account reviews this year; whether they are going to be defensive or offensive? And then finally you've given guidance to ‘22 on top line and margins. I wonder whether you could just talk, maybe take a step back and talk about what you think normalized growth and margins might be for your business? Clearly you know we’re still going to be benefiting from above average growth I guess during the course of 2022 and so how does you know growth and margins look for Publicis beyond that. Thank you very much.

Arthur Sadoun: I propose we do, one, three, two. So can you start Michel-Alain with one?

Michel-AlainProch: Sure. So I mean in terms of inflation, 2.0 month. The first one is that, as its relating to our top line, as of now we do not see an impact on inflation on our top line. Now, is inflation going to be temporary or be there for a while, I don't know. I leave these to economists, but what I can say that we don't see any impact for now. The other point is that we believe that in this environment we are the best equipped. We sell assets to continue to capture the shift in our client spend towards digital and data and business transformation. Now on the cost base, I think I have explained the moving parts of the cost base for 2021 with definite expense going up 100 BP and the operating leverage providing another 100 BP compensating one to another. The important point to underline here is that we are able to contain this definite cost increase by the significant portion of our talent base that we have shifted to our global delivery center. Well, it's true for PBC, Sapient and for Epsilon. But it’s also true for media, it’s also true for production and for our ship work sanction. Overall we have an offshore base of about 25% and we are going to carry on increasing this footprint. Last but not the least, in terms of salary inflation what we see in 2022, I can't give you like an overall number, it doesn't have any meaning really. But if we look you know country by country, we see the U.S. being mid-single digit, we see the U.K. being a bit below the U.S. In continental Europe we don't see much, we don't see much, except obviously in some parts in Europe where its higher. And finally in Asia we see high single digits in India for sure and China just a bit below India. Well in terms of colors, what I can you tell you about the inflation.

Arthur Sadoun: Merci. I’ll take the question on beyond 2022, and I’ll start with the growth. Obviously it’s too early to make any comments beyond 2022, but I can make just a few remarks that hopefully will give you a bit of growth. First it’s important to note that I said that 2022 will benefit from two factors that we need to be taking into account beyond this. First, new business track record in 2021. Again, this is one of the reasons why we feel confident in our 4% to 5%. And second, again we are still in an overall positive environment when it comes to [inaudible] and business transformation. So it’s very difficult for us to predict beyond 2022 on this second point. What I can tell you is that, when you look at our model, new business track record and the dynamic driving at the moment, we are actually confident that everything that we are building and the robust foundation we are having at the moment will help us deliver and will make us deliver sustainable growth and outperform the market in the midterm. But at this stage, don’t ask me more on the growth, because as you know there are many external factors and it’s way too early. On margin its different amount, and being in my job since 2017 I think that my wife will agree with me that it was the case before. It has been almost a decade with some analyst saying that our margin is going to decline and actually declined pretty steeply. It helped us in terms of image. At the moment, well we were confident and we were saying exactly and thinking about 2019 for example and hopefully at one point people will just understand that now we maybe have a track record 10 years later and that’s for all of this time we have delivered the best margin of the industry. This year we will deliver the best margin of the industry and an historic high for Publicis. And what is really important, and this is something that we have to bring by the way in our margin, because we are listening on this. It’s not margin for the sake of margin; its margin in order to invest in the future and its margin in order to invest in our growth and this is why again we have a margin for 2022 that include inflation, I’m not going to come back to that, but include also the necessary investment to get to what we believe is a strong growth of 4% to 5% in 2022.

Omar Sheikh: Great. Very clear. Thank you very much.

Operator: Thank you. And we now move on to our next questioner which is Julien Roch from Barclays. Please go ahead.

Julien Roch: [Foreign Language]. Good morning! The usual three questions. The first one is on the capital allocation. I mean you were very clear for full year ’22 on the dividend and M&A, but I was wondering whether that is just for 2022 or you think that's going to be for another couple of years, because it should take cash flow less M&A, less dividend but not that much change in the net debt. That’s my first question. The second one is on the breakdown of net sales at group level. So you gave Epsilon and Sapient gross rate at group level for the first time, which is great. What percentage of sales do they represent. I know it’s around 15%, but if we could get 14% to 16% as a midterm right around 15% that would great. And also is how much is media and Publicis Healthcare, i.e., healthcare ex media Sapient, Epsilon at group level. And I’ll stop at two questions because I think we are running out of time. Thank you.

Arthur Sadoun: There is no third question, but there is one and two, I’ll leave it to you Michel-Alain.

Michel-Alain Proch: Alright, so on the – Julien hello! So on the capital allocation for the 2022, I don’t think I’ll go back on this. I hope I was clear in terms of priorities with those three buckets. Now if you look at it beyond 2022, obviously it’s a bit early to share our priority beyond 2022, but there are few standing principles that we wish to highlight. So one, investing in the business through bolt-on is a key element of our strategy. I think Arthur has been super clear about that, to expand our capabilities in data, in tech, in commerce and this will obviously take more than just one year. So you can consider this beyond 2022. The second point is dividend. It has always been one of the fundamentals of our return to shareholder. So you can take the 45 to 50 payout range that we just upgraded beyond 2022. And finally, when it comes to this group data and I know it’s important, we have been very clear that now our goal in the mid-term, so it means beyond 2022, just to stabilize the shutdowns at the level of December 2021. So again these three are beyond 2022. Just to go on the question, if I’m not mistaken, its related to the wait in the mix of Epsilon and Sapients, which as I told you are representing about 15% and 15%. I mean it has changed a little bit, but not that much. As the rest of the group was making 10% of growth too, to 15%, 15%. [Cross Talk]

Arthur Sadoun: And with your other question, yeah we have still have some…

Julien Roch: Well sorry Arthur, my question was also rate of media and healthcare on top of Sapient and Epsilon.

Michel-Alain Proch: The healthcare is about 5% of the total. When you look at media, we said you know several times that digital media is about 10% of our total revenue and the rest is about 20% in traditional media, so 30% was the total media.

Arthur Sadoun: What is very interesting to look at, Julien, so I’m going to talk a little more, is that the way we have organized our approach then, which by the way give us the flexibility and [inaudible] I was talked about, is to make sure that media and creative are managed mostly at the county level, because it becomes more difficult every day to separate creative from media, as of course we are creating experience plus digital agency. What we really track at global level is Sapient and Epsilon, because you need global capabilities that are delivered in a global model and that’s again the perception for the thing we are tracking the most.

Julien Roch: Thank you.

Operator: Thank you. Our next question comes from Tom Singlehurst from Citi. Please go ahead.

Tom Singlehurst : Yeah, good morning! It's Tom here from Citi. I’m essentially questioned out, but I had two sort of quick ones if that’s okay. You mentioned the direct to IRD and I don’t know whether Steve is on the line. But I was interested at a very high level about inflation and your thoughts on what that does for advertising versus promotion and then within advertising for brand, but performance, because I wonder whether with all the questions about Meta and Facebook that maybe sort of comparing apples with eggs in terms of inflationary impacts on your top line. That was the first question. And then secondly just to maybe challenge you a bit. I mean the Tremend acquisition you talked about, before delivering another sort of delivery center. I'm just wondering whether we should view some of the M&A as sort of essentially sort of acre highs. I mean is this pushing into doing deals like Tremend signaling that you're running out of room to execute Sapient. Those are the two questions. Thank you.

Arthur Sadoun: Tom, thank you. Steve, I’ve got good news for you. We have decided anyway that the next question will be for you, whatever was the question. So the good news is it is definitely appropriate. So I propose you take the first one and I’ll the second question.

Steve King: Okay. Hi Tom! Good morning everybody. Yeah, its Steve here. I thought I was going to get away with that and not answering any questions on this call for the first time. So I think Tom in terms of your question about advertising demand, you know I think what we have seen is shift in a number of factors during the course of the pandemic. We’ve seen obviously the impact of the overall economy, we've seen the impact of COVID, we’ve seen shifting consumer behaviors and we've obviously seen alongside that evolving media landscape, and you've been tracking long enough Tom to know that this is obviously what we used to call a quadrennial year. So you’ve Olympics and you’ve got the World Cup, and you’ve obviously got the mid-term elections, all of which will have an upward impact on demand. I think what we are also seeing, and I think this is may be what you were getting at when you are talking about your apples and eggs comparison and we talked in the previous earnings call about the resilience of our economy. We are seeing a real shift now with an increase of new entrants to the market and that is really driving the resilience and the growth and we’ve talked obviously and we’ve talked about the growth of digital media and business transformation and particularly direct-to-consumer communications, and you know the way we are putting these together in joint connected solutions where we are bringing together data, tech and media, and creative, Tom what we are certainly seeing and I think the impact of the quadrennial year is lessened and we are certainly seeing what I think is a significant change with new entrants to the market price, driving demand, less reliance on retail space and building out direct-to-consumer relationships, and I think that is why we have seen a strong despite the past we anticipated in ’21. And we are seeing that, clearly that resilience and a less marked level continue into ‘22.

Arthur Sadoun: Tom, I’ll take the second one. Do you want to chime in? I’m going to chime in a bit. I think our acquire is very good. Again, when we make an acquisition like Tremend, but maybe I’ll come back to Citrus, because is it exactly the same. We have three quick hires. Quick hires number one are the talents, because again as I said earlier, everyone can talk about technology and data. If you don’t have the scale and talent to deliver in the people business, you are just going to do this. We have 18,000 engineer and developer among our 85,000 people. This is our biggest trend when it comes to data and technology. I’m going to come back to the platform later, but this is a very important point. And so take Tremend. Tremend today is roughly 650 highly skilled software engineer, okay. When we are going to add those guys to our fleet and platform, we plan to actually accelerate headcount to 2,500 in the next year, which means that yes, we want to again scale in terms of talent, because we fighting against other player in this area that can serve the client in the same way, so scale and talent matter. The second thing is technology. Every time we buy this kind of small acquisition, we look for the right technology that can add to what we do and what they can bring to Sapient for some industry is extremely interesting and last but not least, there is a clear business leader and in this case the business lead is Europe. But that’s the combination of the three things; expanding our talent base, and again this is why we are credible and why we wining, getting new technology that we can land on our existing one and responding to a clear need. The same thing for Citrus. We brought engineer from all around the world that understand some data management and retail media, at the momentum [inaudible]. We brought a technology or SaaS that we can bring into every retailor and we are fitting with the need that we know is going to grow exponentially, which is retail media.

Tom Singlehurst: Very clear. Thank you.

Operator: Thank you. We now move on to a question from Christophe Cherblanc from Société Générale. Please go ahead.

Christophe Cherblanc: Yes. Good morning. So most high level question has been asked, so I have two quick ones. First one was on CapEx. CapEx was still two-third of the pre-COVID level, so is it a permanent reset or more asset lined model or should we expect CapEx to go back to the let’s say 200 medium. And the second one was on the [inaudible] situation. I know there is a legal situation there. So do you have any visibility on the timetable? Are you tempted to settle? Any color on the issue would be good. Thank you.

Arthur Sadoun: Thank you. We are going to start one with Michel-Alain and we are going to move on to Anne-Gabrielle for two, expect if Anne-Gabrielle want to start. Yeah, alright Anne-Gabrielle first.

Anne-Gabrielle: Okay so on the pre-COVID to be very clear, consider that the lawsuit has no merit. That it should not have been brought to the court and because now it’s a lawsuit we don’t want to enter into details. As for the timeline, it's really too early to know. It can take years actually. So we are working on it and we continue monitoring the situation.

Michel-Alain Proch: Okay. On CapEx Christophe, so you’re right we had low level of CapEx in 2021. Coming actually, and maybe you remember that, coming back to July from our first semester in 2022, we are estimating indeed a level of CapEx that will go back to the level of 2019. With most of the increase derived from the investment in our platforms in both digital media, Epsilon and Sapient. So just to give you a round number, we think we’ll be in CapEx around 220, 230 for 2022.

Christophe Cherblanc: Okay, thank you. Very clear.

Arthur Sadoun: Thank you very much. I know we are bit late, but maybe we’ll take the last question.

Operator: Perfect! Our last question today comes from Conor O'Shea from Kepler Cheuvreux. Please go ahead.

Conor O'Shea: Yes, good morning! Thanks for taking the last question. Arthur very quickly, just a couple of follow-ups. I wonder if you could just give us the mix of the international part of Sapient in 2021 and particularly the U.K. business. Secondly, just on the margins, obviously overall a very good performance, but if I'm not mistaken, quite a sharp drop in AsiaPac and the Middle East versus the previous year. Can you just explain what was going on there? And then just very quickly just in terms of the M&A pipeline, what kind of sales multiples on an average would you expect to pay going forward and are those prices coming down or going up coming out of the pandemic. Do you have a strong pipeline already lined up? Thank you.

Arthur Sadoun: Thank you Conor. I think that Michel-Alain are going to take the three question and them maybe I’ll wrap up.

Michel-Alain Proch: Yeah, I’m sorry, I’m sorry, my mic was not on. I’m sorry guys. Alright so, I was saying that beginning with number two, which is the margin decrease in FX. So we see the temporary margin deterioration. We had some minor non-recurring impact, so on off in there that will not be repeated in 2022, that's on the one-off path. And then we made two very strong investments, back to China and the mid-eighties. So when you look at it, the margin in this region should come back to the more normal level in 2022, that it had in 2020; that’s for the margin. In regards to Sapient, we are not disclosing the size of Sapient by country. If I go back to the U.K., the major thing I want to say here is that the Sapient U.K. will be contributing to the growth of the U.K. in 2022. And I think it's important because Arthur and I have been telling you for the last year, it’s a negative organic growth, it will go back to the old positive in Q4 and then it will be contributed in 2022 and its exactly what's happening with the diversification of business we’ve made, not only financial services, but now retail too. And then finally, the acquisition that we are making. As Arthur was saying, they are these three criteria that Arthur just explained, so I'm not repeating them, between talent, scale, technology and basically the delivery. We are looking at this acquisition each time with very strong discipline in matching them towards these three great areas. Obviously we bind them in term of multiple, more than our multiple for sure, but each time we are building up a business case that show that the synergy managed to get back the value to the shareholder in the near term. Arthur.

Conor O'Shea: Great guys! Thank you. [Cross Talk]

[End of Q&A]:

Arthur Sadoun : Thank you very much to all of you for listening. Sorry we have been running a bit longer. Just to wrap-up, as you have seen, we had a Q4 that was ahead of expectation and record year on KPI. We do believe that we are emerging from these crises as a stronger company. We have a growth and operating margin and a free cash flow that are above 2019 and at an historical high. Hopefully you think that we are entering actually 2022 with confidence, because we truly believe that we have built very robust foundation. With our growth committed to continue to deliver on these three leading financials with 17.5% operating margin and again, despite inflation and while investing in our talent to maintain the growth. And when it comes to growth, we are committed to deliver around 4% to 5%. It’s going to be a lot of work, but we believe that we have three reasons to be confident. The first and we talked a lot about that, so thank you for the questions

Operator: Thank you. This concludes today’s call. Thank you for your participation ladies and gentlemen. You may now disconnect.