Operator:

Good morning and welcome to the Interpublic Group Second Quarter 2024 Conference Call. All participants are in a listen-only mode until the question-and-answer portion. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you begin.

Philippe Krakowsky:

Thank you, Jerry. As usual, I'll begin our call with a high-level view of our results and the business overall. Ellen will then provide additional insights on the quarter and I'll conclude with highlights at our agencies to be followed by your Q&A. This morning, we are reporting a solid second quarter highlighted by moderate acceleration of our growth as well as margin expansion from the same period a year ago. To begin with revenue, second quarter organic growth before billable expenses came in at 1.7% bringing organic growth in the first half to 1.5%. In the quarter, we were paced by growth in Continental Europe, LatAm and the U.K., followed by increases in our other markets group and the U.S. Each of our 3 operating segments grew organically from a year ago. And underneath that, consistent with our performance over some time, we were again led by IPG Health and IPG Mediabrands. We saw strong performance as well at Deutsch LA, Golin and at Acxiom, we saw solid growth in the quarter. Also in keeping with recent quarters, underperformance at our digital specialty agencies weighed on our consolidated growth. That drag was about 1% of organic growth in the second quarter. From the standpoint of client sector performance, growth was driven by health care, food and beverage and consumer goods. Retail was approximately flat and we saw decreases in financial services, tech and telecom and auto and transportation. As we've called out previously, the tech and telecom sector continued to weigh on growth by approximately 1% organically in the quarter. Most of that decrease was due to the loss of a large AOR assignment with a telco client late last year. For the sake of clarity, I would note that excluding double counting, the tech and telco sector and our digital specialist combined weighed on Q2 organic revenue growth by negative 1.7%. Turning to expenses and margin; our teams continue to effectively balance cost discipline with ongoing investment in the evolution of our business. Second quarter adjusted EBITA margin was 14.6%, an improvement of 40 basis points from a year ago. We had strong leverage on base payroll which helped drive 180 basis points of operating leverage on salaries and related expenses compared to a year ago that was partially offset by planned investments in technology, business transformation and senior talent particularly for centralized platform resources which resulted in increased office and other and SG&A expense. Diluted earnings per share in the quarter was $0.57 as reported and $0.61 as adjusted for acquired intangibles amortization and a small impact from net business dispositions. During the quarter, we repurchased 2.2 million shares, returning $68 million to shareholders. On our last call with you, we noted that due to a decision by a major and ongoing health care client in late March related to their global consumer advertising work, the high end of the 1% to 2% growth range, that we had targeted as we entered the year would not be achievable. As the year has progressed, we are seeing modest incremental uncertainty in the macro environment and in domestic consumer sentiment. Our view is, therefore, that we expect to achieve approximately 1% organic growth for the full year. And with that level of growth, we continue to target adjusted 2024 EBITA margin of 16.6%. Looking ahead, we anticipate that the strongest and most consistent growth areas of our business such as our data and tech-driven media offerings, specialist health care marketing expertise, PR and experiential marketing capabilities are positioned to continue their strong performance. The common thread in the growth of our 2 largest businesses, IPG Mediabrands and IPG Health which are also our most successful businesses, has to do with the specialized high-value services that they provide to marketers. These rely on skill sets that are more technical, reach audiences with greater precision and lead directly to outcomes that we can assess and optimize. As you heard from us in the past, these include audience segmentation work, predictive analytics and data-driven decisioning, much of it powered by Acxiom and all of which has been built by in-house engineering talent creating technology solutions that rely on machine learning algorithms and more recently, newer AI capabilities. The developments we're seeing in Generative AI will be equally fundamental to the transformation of a broader set of our offerings. Collaborations with Adobe, Amazon, Blackbird.AI, Getty Images, Google, Microsoft and others have given us secure enterprise access to advanced AI tools and large language models which are increasingly informing every area of our business, including insight generation, creative ideation in production and work in our earn and experiential communications practices, as well as further enhancing our media and precision marketing capabilities. Over the past 12 months, our progress with these emerging technologies has been significant. The ongoing upskilling of our people has been central to this process. We see this as a strategic imperative and have made it the responsibility of every operating leadership team across the company. Generative AI produces foundational capabilities and new canvases for us to work more expansively with our clients. Over time, this offers the promise of reigniting many of our creative offerings as engines of value creation. As you heard last quarter, we recently became the first company to unite all facets of the content supply chain by integrating Adobe's GenStudio AI product into our marketing technology platform, the IPG engine. That engine sits at the enterprise level and is a unified set of standards, practices and a technology layer which in turn is built on consumer insights at scale, fueled by our Acxiom data and identity products. It seamlessly connects media strategies and targeting, including predictive modeling of what we call high-value audiences to creative concepts and messaging across all marketing disciplines. We then move from data all the way through activation by which we mean the production and dissemination of campaigns, whether on marketing technology platforms in earned media or in paid media investments across all formats and channels. Our engine then analyzes the impact of this activity for purposes of attribution and optimization. This allows us to do with our communication strategies, creative assets and all forms of marketing activity what we've been doing in media which is true personalization at scale. This is an end-to-end solution which helps our clients better engage, convert and retain customers through the entire funnel, assessing and understanding the value of their investments across media, marketing and sales channels. In a world in which data-driven audience insights are key to delivering performance for our clients and one in which AI will play an increasingly important role, access to high-quality proprietary data at scale will be essential to success. Acxiom continues to have the industry's top-performing audience data to engage with customers at an individual level without the need for cookies or other proxies. Our tech stack and marketing engine optimized performance using this global data spine, of 2.5 billion real people with Acxiom ID attributes that are meaningfully greater than those available from any other industry data set in which we can match to significantly more global device IDs and our closest competitors. The engine at Acxiom are now core to every significant engagement across the company and help power many of the new business wins I'll cover later in my remarks. Now though, let's turn things over to Ellen for a more detailed view of our quarterly results.

Philippe Krakowsky:

Thank you, Ellen. As I mentioned earlier, our organizational structure continued to evolve and we're working at pace to enhance the parts of our business that are growing and also to address underperforming areas of the portfolio. Going forward, we're going to continue to move to more holistic solutions and make greater precision and performance a part of all of our service offerings. Our interactions with major marketers will also increasingly be guided by senior functional and client leaders at the corporate IPG level. This ensures that we're connecting more of the portfolio to horizontal platform capabilities such as data, commerce, media activation and production. The common denominator across our strategic priorities is to broaden the range of business issues that we can help clients address with our best-in-class assets. Our goal is to continue to become a more strategic partner supporting client needs as they seek to derive more value from connecting marketing and technology in order to power their businesses. An example of this is retail media which is one of the prominent growth sectors we've mentioned to you previously. As more retailers build digital media networks and increase their call for standards and as marketers look to increase investment in this dynamic space, we see this as a promising area of growth. IPG's unified retail media network solution which is housed within Mediabrands and grounded in Acxiom data is differentiated in the market because it allows our clients to evaluate their brand's retail media buys across audience, measurement, optimization and business intelligence criteria, so as to determine which retail networks are performing best for their business objectives. This solution played a significant part in our successful defense and expansion of our assignment for Ulta Beauty during the quarter. Ulta Beauty selected a bespoke unit within Mediabrands which includes teams from Mediahub, Kinesso and Acxiom to handle Ulta's media needs in programmatic, addressable and social as well as the marketers retail media unit, UB Media which had formerly been serviced by a competitor. The client specifically noted the combination of a creative and data-driven approach as assets in fostering connections with Ulta Beauty consumers, ensuring consumer engagement and delivering business building results. Another significant win announced earlier this week will see us take on creative, production, shopper and PR earned media responsibility for driving growth for a number of Kellanova's iconic priority brands. This is the result of an integrated offering combining FCB globally, Weber and Momentum supported by MullenLowe and the Martin Agency in key international markets and on certain brand assignments. And as mentioned, our production capability and the IPG engine also played important roles in our proposal to the client. Notable wins in the quarter saw a Generative AI search platform Perplexity, appoint UM as its media agency of record. After Levi's had consolidated its global media account with UM which builds on a 4-year relationship between UM and Levi's in the Americas. UM was also named media AOR by Alliance Pharma. Reckitt capped McCann content studios which is a core component of our production offering as its social and influencer agency of record for its U.K. health brands. And at General Motors, Buick appointed McCann Worldgroup China as its full-service agency. Another of our core multinational clients, Unilever, named Golin its global PR agency of record for laundry detergents. Top American champagne maker, Korbel chose Carmichael Lynch as its media and brand AOR. And Deutsch LA, we mentioned earlier continued to expand both its relationship with Adobe to include social work for Gen AI app Firefly, Acrobat, Photoshop and other brands. Weber Shandwick was selected by 5-Hour Energy as its partner on creative, media relations, social media and influencer strategy and Mazda Canada named FCB/SIX to lead its strategy, creative and tech work for CRM. Of course, even in a world where technology and platform capabilities are so essential. Creativity remains at the heart of what many of our clients need in order to build their brands and business. Integrating ideas into audience-led and accountable solutions is a must that creativity can be a differentiator and our performance of creative competitions continues to indicate we're well placed when it comes to the talent and craft required to make work that makes a difference for ambitious marketers. Just last week, the New York Festivals Advertising Awards named Interpublic as its Holding Company of the Year. This is a competition that recognizes our industry's best and is judged by our peers which makes it an important hallmark for the quality of our work. In May, we were also honored as Creative Holding Company of the Year at The One Show. And at the Cannes Lions Festival of Creativity which is our industry's largest global award show, Interpublic also outperformed our peers, winning 10 of the festival's highest honors, the Grand Prix more than any other company and almost twice as many as the nearest competitor. Notable categories where we won a Grand Prix include gaming, live brand experience, digital craft and data-enhanced creativity. In terms of client sectors, we won Grand Prix in both the health and pharma categories. Also at the festival, FCB was named Regional Network of the Year in North America for the sixth year in a row. IPG Health was named Healthcare Network of the Year for the third consecutive year and Area 23 won Healthcare Agency of the Year for the fourth year in a row. Unique to the public relations arena, Golin and Weber Shandwick, both won multiple Grand Prix. Our success going forward rests on our ability to combine this kind of creative excellence and innovative thinking with our deep data and tech capabilities. And that's the key reason that during the quarter, we announced that we're further unifying our data engineering, martech and ad tech resources under one leadership team. This move fully aligns Acxiom's data, identity resolution and marketing cloud services with the teams responsible for the engineering behind IPG's integrated marketing engine. Within this centralized technology and data stack, we're powering workflow, customer experience, media, commerce and production. And by unifying marketing on one platform, we can drive marketing performance for clients in real time as well as build brands for long-term success. As you know, this combination of data, tech and marketing expertise has been key to our long-term success at IPG Mediabrands. And while our tech-enabled media offerings are consistently ranked as best-in-class by marketers, during the past 12 to 18 months, we have seen a number of clients place a greater premium on efficiency and costs. Given that marketplace evolution, we have pivoted and are now able to deliver value not only with advanced and effective media solutions but also through our growing practice in principal media buying. This new component of our media practice will take time to scale fully but represents an incremental option for media value creation for current and prospective clients as well as the new avenue for growth for what has consistently been our strongest performing business. As mentioned at the outset of my remarks, we continue to see disparate performance across the portfolio due in part to an asset mix that features more concentration in certain traditional practice areas than some of our peers. An area that's become a regular feature of these conversations is the performance of 2 of our specialty digital agencies, R/GA and Huge. Having made adjustments to the workforce at each of those operations and co-located their headquarters within the IPG Innovation dock, we are now formally evaluating strategic alternatives for these premium agency brands. The right partner could help unlock greater value for their clients and people. We'll keep you posted on progress in this process as appropriate. And those teams remain focused on delivering the top-tier service and innovative solutions for their clients that they're known for. As you know, we spent a number of years outperforming the sector when it comes to top line growth and continue to consistently win many of the industry's most competitive pitches. That said, the challenges we're facing at certain of our agencies, coupled with the shift in the media landscape to principal buying have led to recent losses that will weigh on our results, particularly as we head into 2025. We have a solid new business pipeline for the remainder of this year and are finalists in several large ongoing reviews. These opportunities, organic growth in our existing client base and accelerating the development of new capabilities in areas such as retail media and commerce, we'll continue to have our full focus as we look to deliver the best outcome this year and reignite a higher level of growth going forward. In certain high-growth areas where scale would benefit our competitive position and the company's overall growth profile such as commerce, retail, media and business transformation, we will also consider M&A as an avenue to effect a more rapid transformation of our portfolio. As mentioned earlier, for the full year, we expect to achieve organic growth of approximately 1% and at that level, continue to target adjusted EBITDA margin of 16.6%. Additional areas for value creation include our strong balance sheet and liquidity as well as our long-standing and ongoing commitment to capital returns. As always, we thank our partners and our people as well as those of you on this call. And with that, let's open the floor to your questions.

Adrien de Saint Hilaire:

Philippe, first of all, you talked about 3 factors impacting organic sales growth for the second half. I'm curious how do you think those factors impact 2025 as well? And then the second question I would have is Europe has been outperforming the U.S. at IPG but also at many peers and that also seems to be true across the ad market. From my seat, that seems a bit counterintuitive, given the different GDP growth in Europe versus the U.S.? I'd be curious as to why that is in your opinion?

Ellen Johnson:

Sure. Yes, Europe is about 9% of our revenue and we did see growth across all major markets, Spain, Germany, France, in particular. We had some nice wins through our creative agencies, particularly McCann. But we also had growth at IPG Health. And really, it was a decent breadth of the portfolio that grew; so both, across clients and client sectors. So it has been a relatively strong region for us.

David Karnovsky:

You spoke earlier to some incremental uncertainty and softening in consumer sentiment. Just wanted to see if you could expand on that a bit, what you're hearing from clients in terms of their level of confidence and investment. And then you also mentioned the capability in principal media as being a factor on your views over the past 18 months. As you're now scaling up your offering there, do you see Mediabrands in a better position at this point to compete for new business?

Operator:

Our next question is from Steven Cahall with Wells Fargo.

Philippe Krakowsky:

I'm kind of going for folks who've been following us probably if you look at like a 20-year horizon only; but yes.

Philippe Krakowsky:

Sure, that's a lot. So on principal, it will take, as I said, sometime, we're very focused on it. We're -- obviously, you have to go into the market, you have to engage with the media owners and secure the inventory in that way. You've got to get clients who opt into the model and understand the benefits. And then, obviously, that volume yields a kind of benefit. So I think that, that will be range and bearing over the course of the next year. And we're going to go -- we're going to move thoughtfully but at pace, as I said, about a few other things. On your M&A question, I think what I would say to you is that I do talk a bit about how our asset mix doesn't tilt as heavily to some of these, at least in terms of scale, the capability sets are there. We show up and win with them. But whether it's that scale is valued by certain kinds of clients because you can sort of show up with something that's a very comprehensive solution and again, efficiency, not even in the media space. But also, clearly, the more sale to win that you have, the better it is. So we are going to look in commerce and retail media in particular. And then I guess the business transformation but I would define it as further down the stack sort of less focused on the comm side and more on engineering and kind of how can you help clients rework processes so that they can be much more digital in the ways that they work, including their marketing. So I think those are areas where we will probably look for inorganic opportunities. And I -- look, you know us very well. We're very thoughtful about how we approach M&A. That's not going to change. We're very balanced in that, as you said, we delevered very quickly. We were very transparent with you about why we were doing it and how we were going to do it given the scale of it. But I think that you could change the growth profile of the business with something out there or maybe one or 2 things that might not be at the scale of what we did with Acxiom. But they're clearly going to be larger than the very modest kinds of deals that we've been known for, for some time. So hopefully, that helps unpack the thinking. And no, you -- I forgot. And then you had the creative question. I guess my observation for you is that creative is still very important and a big idea still matters. If you look at the Kellanova news this week, clearly, a client who we're excited about because they believe that big ideas can have a big impact for them in terms of driving growth and what their mission is coming out of their spin. So I think that creative is important but it is important that you integrate it, that you basically figure out how FCB has done a terrific job for us to plug into the data stack, get more precise about what you do and have that, in essence, incorporated into your strategy and have your strategy be about where business opportunities sit and where business outcomes can be driven. And then you engage all of the deep understanding of brands and the craft around creativity. And then you can actually have pretty good outcomes, right? And so I think there's a way. And then I think the other thing, as I said at the outset also is if you incorporate certain components of what Gen AI tools provide and you can take creativity and bring it to bear in a lot of new ways. You can sort of do ideation faster and get to hypotheses -- good hypotheses, better hypotheses faster. You can democratize creativity and distribute it in ways that reach a lot of your clients. Ancillary audiences or partners that you might not have been able to do in the past; so we're still focused there. We probably, as I said, that's one of those might we have more exposure to traditional relative to some of our peers, yes. And the question is going to be a version of both what I said which is we're going to look at underperformance and think about what needs to be addressed or streamlined but we're also going to keep pushing them to transform.

Tim Nollen:

I wonder if you could comment, please, on the news this week that Google is not going to be deprecating cookies. And I'm asking -- I'm interested in IPG's perspective, in particular, because of all the work you do with Acxiom in first-party data and all the good stuff there. So I'm just curious, it seems like this is sort of a positive for the ad industry and that the risk of later disruption seems to have gone away. But for you guys, I wonder, is it positive? Or is it maybe a little less positive than if cookies had been removed and all the great stuff that Acxiom can do with first-party data is maybe not quite as important as it was before. Just don't know how to interpret the news.

Operator:

Our next question is from Cameron McVeigh with Morgan Stanley.

Philippe Krakowsky:

Sure. Look, I mean, I think personalization -- mass personalization, personalization at scale done right. The demand for that is going to be significant for some time, right? Because I think we've all gotten used to sort of a world where you say marketers always need more of everything. So I would break down the AI thing maybe into a couple of buckets. I'd say to you that there are parts of our business where AI has been core to what we do for some time, right? And we talk about that, media, data, performance. And so there, it's going to help us keep up with a very, very rapid rate of change and I think further accelerate what are already our most successful businesses. Then areas where platform and tech solutions are required like production in commerce and CRM, I think Gen AI is an incremental opportunity because I can't think of any client who doesn't leave activities that they know need doing undone due to some kind of constraint, right? So either the tech is limited, the output isn't what you want it to be, there are budget limitations, you don't have the right talent. So even as you see like sort of some of the economics of this, you're kind of going, okay, the unit cost of whatever asset we're talking about goes down. But the resources can be reinvested. We've seen this in our media business where tech allowed us to become a higher-value partner to clients, right? And you saw that in the scale of engagement. You saw that in -- because we had highly skilled folks with skill sets that clients couldn't find anywhere else. What we were able to, in essence, command in the way of the labor hours get redistributed and they go upstream. So I think what you're going to sort of see is resources get reinvested, the nature of the work changes, the nature of the talent evolves. And then what folks in our space bring -- and some of our clients who are very, very sophisticated say, we need people with a lot of experience, people who bring terrific judgment and understand how to use all these tools, we need your objectivity. In some cases, I think we also have the ability to sell tools and tech, whether it's the licenses or something SaaS-like there. And then I think the last thing I'd point out is back to the prior question, quality of data at scale is going to be really important. Because once everybody begins to have all of these same tool sets, then how you build and train the models and what you actually are able to give them that is unique data from which to. Because you're going to be bringing a lot of the discipline that you've got in the more quantity areas of the business too, the content creation and the creative part of the business. So again, there's a ways to go but we do see areas -- I mean, right now, we're actually doing a lot of not only insisting that our folks get trained but we're doing a lot of training for our clients and that's become a line of business for us. So I can't tell you with kind of clarity that it's going to be X percent this and it's going to be X percent that but these are all places where we're seeing conversations and opportunities showing up.

Julien Roch:

The first one is, can we get organic on a revenue basis rather than a net sales. Publicis gave us both for the first half '24. Second question is, are your production capability unified under one roof like Publicis WP [ph] and now Omnicom and how many employees do you have in production? And then lastly, why move to 1% rather than a range? Q4 is an adjustment quarter. So 1% is surprisingly precise to me. Does 1% actually mean more like 0.7%, 1.3% or is it really 1% on the dot. And before you answer, I'm afraid I have to correct you as patented French wines [ph] now but there is no such thing as American champagne.

Julien Roch:

So the last question is why move to 1% rather than the range with Q4 being an adjustment quarter, 1% sounds surprisingly precise. So do you actually mean more like 0.7% to 1.3% when you say 1%? Or is it really 1% precisely?

Operator:

Thank you. And I'll now turn the call back to Philippe for any final thoughts.

Operator:

Thank you. That does conclude today's conference. You may disconnect at this time.

Operator:

Good morning, and welcome to the Interpublic Group First Quarter 2024 Conference Call. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time.

Jerome Leshne:

Good morning. Thank you for joining us. This morning, we are joined by our CEO, Philippe Krakowsky and by Ellen Johnson, our CFO. We have posted our earnings release and our slide presentation on our website, interpublic.com. We will begin with prepared remarks to be followed by Q&A. We plan to conclude before market open at 9:30 a.m. Eastern time.

Philippe Krakowsky:

Thank you, Jerry. As usual, I'll begin our call with a high-level view of our performance in the quarter, and Ellen will then provide additional details. I'll conclude with some highlights at our agencies and key strategic updates to be followed by your Q&A.

Ellen Johnson:

Thank you, Philippe. I hope that everyone is well. As a reminder, my remarks will track to the presentation slides that accompany our webcast.

Adrien de Saint Hilaire:

Philippe, Ellen and Jerry for the comprehensive presentation. I've got a few questions, if you don't mind. Philippe, I think in your intro, you said that tech has largely stabilized. Could you see that segment growing in Q2 and later on this year? Or is it too early at this moment to talk about growth for that space?

Philippe Krakowsky:

No, please. I don't know that I can help you with the middle question just because, as you know, we don't really speak to the particulars or things that are proprietary relative to our clients. And there is one large review ongoing that you called out, which is very important to us, but there are clearly others where we are theoretically a beneficiary where we're not defending.

Operator:

Our next question is from David Karnovsky with JPMorgan.

Steven Cahall:

Philippe, you talked about strong long-term performance expectations at data and tech and health care and experiential. So I was wondering, first, if you could just talk about how health care is performing year-to-date in line with that comment? I think data and experiential were both kind of flat organically in the first quarter. So should we also think that those will probably accelerate as you move through the year?

Philippe Krakowsky:

Sure. So on health care, I'd say IPG Health, in all likelihood, largest in the space, recognized as a leader in the space; to your point, accretive to our overall results for some time and very, very broad penetration. We work with pretty much every major pharmaceutical company in the world. There's opportunity there because we've got a range of agencies inside of that group.

Philippe Krakowsky:

I mean, look, they have been. And as we said, we see them continuing to. We see PR performing well as well.

Ellen Johnson:

Yes. As far as working capital, it's an area of focus for us. It always is. We're very consistent to our approach, very disciplined starting from when we take on new clients to how we manage payables. As I talk about very frequently, it's volatile. Whether you get paid on the 31st, you get paid on the 1st, it creates volatility, but doesn't really impact the underlying result.

Operator:

Our next question comes from Craig Huber with Huber Research Partners.

Ellen Johnson:

No, I think you've covered it with 7% revenue.

Jason Bazinet:

I just had a quick question on M&A since you called it out in your prepared remarks. Other than the strategic fit, are there any sort of financial guidelines that are important to you if you do M&A, like additive to organic growth or helpful to margins or accretive to adjusted earnings?

Tim Nollen:

I have actually 3 questions, and curious how it ties into your work specifically [ suite ]. I'm wondering about Google's decision to delay the deprecation of the Chrome cookie, which they announced last night. Just wondering, in general, like what kind of work are you doing with brand advertiser clients to prepare for deprecation of the cookie? And how, if at all, does this delay affect your business?

Cameron McVeigh:

Just a couple of quick ones. Curious if you could quantify the very strong growth in media that you saw this quarter? And then secondly, the increase in SG&A due to some senior enterprise leadership investment in IT, just maybe any more color on that and if we should expect increased investment over the year.

Ellen Johnson:

Sure. SG&A will be higher going forward, as we are making strategic investments, as Philippe mentioned in his remarks and senior enterprise talent and technology, that should lead to both increased growth and efficiency going forward. These were all considered, as you mentioned in the guidance that we've given. Q1 was slightly higher due to discrete items. But in general, that ratio should be higher this year.

Philippe Krakowsky:

Thank you, Sue. Thank you all for the time. Obviously, some progress but work in progress. So we look forward to reporting back again next quarter.

Operator:

Good morning, and welcome to the Interpublic Group Fourth Quarter and Full Year 2023 Conference Call. [Operator Instructions]. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you, Jerry. Thank you all for joining us this morning. As usual, I'm going to start with a high-level view of our performance in the quarter and for the full year as well as our outlook for the year ahead. Ellen will then provide additional detail and I'll conclude with updates on key developments at the agencies to be followed by Q&A. We're pleased to share our fourth quarter highlighted by our strongest growth of the year, which exceeded expectations during our seasonally largest quarter. Organic growth in the quarter was 1.7% on top of 3.8% a year ago. Underneath that number, the quarter continued to reflect the cross currency at work in the economy at large and within our portfolio of services and our client roster. Those include the headwinds that we've called out and discussed throughout the year, most notably the austerity among clients in the tech and telecom sector which was evident across our competitive set and the challenges faced by our digital specialist agencies. These factors continue to weigh significantly on our overall growth. In October, we also called out the impact of the tragic developments in the Middle East. First and foremost, it needs to be said that the war and geopolitical turmoil continue to put huge numbers of people in Israel, Gaza and increasingly across the region in harm's way, and that includes many of our colleagues. Understandably, this has also had an impact on economic activity in that part of the world, and therefore, in our results. Notwithstanding those factors, our growth in Q4 showed acceleration from earlier in the year. New business wins onboarded in steadily greater size. And here, it's also worth noting sustained strong performance in media, which was our growth leader throughout 2023, and stronger growth in the healthcare sector as well. Our U.S. organic revenue performance improved from Q3 into Q4 and the overall sequential improvement was helped also by our European and Latin American markets, and both of those regions compounded strong performance in the fourth quarter a year ago. We saw solid levels of variable year-end client investment or the so-called fourth quarter project spend. Given that the macroeconomic backdrop remains somewhat cautious, this seems to have largely been a function of seasonal activity in the quarter. Growth in the fourth quarter brings our organic revenue change for the full year 2023 to a decrease of 10 basis points. That follows a strong 7% growth organically in 2022. Looking at sectors, performance was mixed in Q4. six of our eight client sectors saw revenue increases. Growth was led by clients in the healthcare sector, as mentioned earlier, followed by the consumer goods and food and beverage sectors. Auto and transportation was down slightly, though against double-digit growth in Q4 2022. Between budget reductions and loss assignments, our tech and telecom sector weighed on our consolidated organic growth by approximately negative 2.5% in the quarter. Each of our operating segments grew organically during the quarter. In Media, Data & Engagement Solutions. Organic growth was 1.1% led by continuing very strong growth at IPG Mediabrands, decreases at our digital specialists weighed significantly on this segment. Our Integrated Advertising & Creativity Led Solutions segment grew 2% organically, paced by strong growth at IPG Health and FCB partially offset by some of our more traditional offerings. Our segment of Specialized Communications & Experiential Solutions grew 2.9% organically in the quarter. We saw balanced growth across the full range of disciplines including public relations, experiential and sports marketing. Turning to profitability and expenses in the quarter. Our teams continued to excel operationally. We effectively use the levers of our flexible business model to navigate a complicated economic environment and a challenging year while simultaneously investing in the growth of our most modern and sophisticated capabilities. The result is the strong fourth quarter and full-year margin performance we are reporting today. Adjusted EBITDA margin on net revenue was 24.3% in the quarter an increase of 200 basis points from a year ago. We drove operating leverage on our expense for base payroll, benefits and tax, our performance-based incentive compensation and our expense for occupancy. With that performance, full-year margin was 16.7%, which delivers against the target we set at the beginning of 2023 and further consolidates significant margin improvement over the recent past. Fourth quarter net income as reported was $463.2 million. Our adjusted EBITDA was $628.5 million, an increase of 11% from a year ago. Fourth quarter diluted earnings per share was $1.21 as reported and $1.18 as adjusted for intangibles, amortization and the nonoperating impact of the disposition of small nonstrategic businesses. Full-year adjusted diluted EPS was $2.99 and as an important reminder, our EPS in the year's second quarter both as reported and adjusted, included the benefit of $0.17 per share related to the resolution of routine federal income tax audits of previous years for which we did not adjust. During the quarter, our share repurchases totaled $131 million, which brought our share repurchases in 2023 to $350 million. Over the course of the year, total capital returns to shareholders between dividends and share repurchases were $829 million. As you've seen today, given the continued confidence of our Board and our operating strength and financial position as well as our long-term strategic trajectory, we've once again raised IPG's quarterly dividend by 6% to $0.33 per share. This marks our 12th consecutive year of increased dividends, and our Board also authorized an additional $320 million of share repurchase on top of the $80 million remaining on our previous authorization. Turning our discussion to 2024, we continue to see economic and geopolitical uncertainty inform many of our clients' thinking. Despite signs that the consumer economy is improving, there remains a disparity of views regarding overall macro growth prospects. This is leading to some client conservatism, largely consistent with what we noted over much of the past year. We're seeing a measure of quarter-to-quarter stability in the tech and telco sector, previously discussed budget reductions at our major technology industry clients have been a consequence of broader enterprise cost-cutting programs within those companies. And while it's still not possible to call the timing with a significant upturn in tech spending and marketing activity, we've noted a more recent stabilization in that spend. However, a return to growth for us in this sector has not been factored into our plan for 2024. With respect to our specialty digital offerings, we've taken several steps to strengthen their performance. This includes new leadership, co-location of global headquarters in a common innovation hub as well as comprehensively lowering and aligning their operating cost base in line with revenue. We continue to focus on a broad range of strategic as well as market-facing solutions over the near term, and that includes M&A to address the need for greater scale and digital transformation. As we look ahead, we remain confident in the fundamental strength of our company. We're focused on building on significant new business success during the past year as well as on our longer-term record of growth. We also anticipate that the strongest and most consistent growth areas of our business, which is our data and tech-driven media offering, healthcare marketing expertise, PR and experiential marketing capabilities will continue to perform well in the year ahead. In addition, our proven operational discipline will stay in effect. The net of these moving parts with certain areas of very strong performance within the portfolio, continued client caution and a focus on addressing challenges in some of our legacy and digital specialists, leads us to an expected organic net revenue growth for 2024 in a range of 1% to 2%. At that level of growth, we expect 2024 full-year adjusted EBITDA margin of 16.6%. This reflects a number of investments including in further development of our contemporary addressable capabilities, which is the data-powered tools that inform and drive integration and decision-making across IPG, Retail Media, Artificial Intelligence as well as building new buying models within media brands. We'll also continue to focus on streamlining operations and processes across the group. We're confident that our investment in growth, combined with continued operational excellence on the part of our teams means that our margins will resume their upward trajectory over the years ahead, consistent with our record in this area. In 2024, delivering on our goals, along with integrating our services in ways that help clients build their business and their brands. will be essential in creating value for all of our stakeholders. At this point, I'll hand things over to Ellen for a more in-depth view of our results.

Philippe Krakowsky:

Thanks, Ellen. During the course of 2023, both our industry and our company faced an elevated degree of volatility. And while the top line improved measurably through the fourth quarter, for the year, we did not perform up to our expectations or the standards we set over the long term. We've covered the ins and outs of this performance as it relates to our asset and client mix. To address the needs of modern marketers in recent years, you've seen us create centralized skill sets and resources in areas such as audience definition and identity resolution and more recently, commerce and production. We're connecting more of our traditional offerings to these capabilities, and in order to activate these services fully across the group. During 2023, we also brought in a number of key functional leaders at the corporate group level. Our strategy, talent and culture continue to drive innovation, creativity and integrated services, which come together in ways that help our clients succeed. Another key to our long-term growth has been our expertise in first-party data management and accountable marketing solutions. These continue to be areas of core relevance to marketers looking to build their brands and simultaneously deliver business outcomes in an increasingly digital economy. More recently, we have focused on 4 strategic areas to further our data and technology strategy. First is a suite of identity resolution tools built by Acxiom to help clients navigate a cookie-less world. Second, our unified retail media network solution and IPG Mediabrands which ensures brands have a holistic view of their performance across the fast-growth ecosystem of retail platforms. This, in turn, integrates with our commerce offerings across the company, which extends to all core marketing functions, whether that's media, creative, experiential or earned impressions in PR. And fourth, our investment in performance marketing at KINESSO moving powerful addressable solutions closer to our end users, which is helping brands follow the movement of customers throughout their purchasing journey and then activate accordingly. Analytics teams as well as modeling and decisioning tools are core to all these efforts. These are also areas where we continue to make investments in Artificial Intelligence. It's important to note that AI is not new. Machine learning has been an ongoing part of our media and data business for many years. Combined with the latest advances in generative AI, we're now adding the same level of intelligence for the creation of personalized content across the marketing spectrum. We believe our current and prospective investment in AI continues to be at rates commensurate with competitors relative to the scale of our respective organizations. IPG has enterprise-level agreements in place with a range of key AI vendors, including Amazon, Adobe, Microsoft, Google, Getty and OpenAI as well as with innovative and emerging partners in this space. Our programs with these leading technology partners have resulted in products that are already being used by marketers, including Mediabrands where our client-facing brand voice and brand portrait capabilities help us activate campaigns on behalf of clients. IPG Mediabrands also launched a new AI chat assistant to optimize internal workplace productivity and enhance employee work styles through the use of Gen AI. At Huge, clients are using the agency's AI powered culture decoder and creative capital index tools to help clients on their transformation journeys, and R/GA is using Gen AI across practice areas and include creative concepting, research and analytics. Weber Shandwick has a group called the AI accelerator. It's both the team and a product set that help our clients with technical and cultural issues related to generative AI, training marketers on the technology and ensuring that they're using the tools as effectively and ethically as possible. Across a number of markets, both domestically and internationally. And with clients in a range of industries, we are in market with campaigns that feature thousands of variations of content all made possible by this expanding use of Gen AI and enabling our capabilities with the technology. As I mentioned earlier, we've also enhanced our senior team at IPG to ensure that our centralized resources in key areas like audience and identity, commerce and production are being used across the group, and this includes a Chief Client and Business Officer, who will drive collaboration and integrated service delivery for our clients. Chief Commerce Strategy Officer, who is connecting the existing channel and platform expertise across the portfolio. The Chief Solutions Architect, who's orchestrating our approach to marketing tech solutions that combine data and platform capabilities with partners such as Adobe and Salesforce. And just this week, we announced that one of the industry's top creative leaders will come across and join the team at IPG to focusing on championing talent and delivering innovative ideas and creative platforms across the company. I'll turn now briefly to the highlights of agency-level performance in Q4. As mentioned, Mediabrands performed well, closing out another very strong year. And a noteworthy development was the announcement at IPG Mediabrands and Amazon Ads had entered into a three-year agreement to help brands reach audiences through Prime Video ads. It's made us the first holding company to partner with Amazon Ads on this exciting new offering, which we believe will be significant in the evolution of the media marketplace. The recently streamlined and integrated KINESSO offering at a standout quarter and Media Post named Media Agency of the Year for 2023. At UM, we saw a global win with Boeing in partnership with FCB as well as the promotion of two internal leaders to be both the global and U.S. CEO. An initiative was named Media Network of the Year by the Festival of Media over North America and won that same honor for the sixth consecutive year in Latin America. At Acxiom, on the platform side, the company was spotlighted as an identity and onboarding leader in Snowflake marketing data stack report. Acxiom has also launched a new data offering in the healthcare space and the Acxiom Health data set is going to enable our healthcare clients to significantly increase campaign conversions and improve the success of display and video advertising. As we've mentioned, IPG Health had a strong quarter, leveraging tailwinds from both new business wins and its long-standing leadership in the category in terms of industry recognition, the unit dominated at the Medical Marketing and Media Awards being named Network of the Year for the second consecutive year. FCB's performance was strong as it has been consistently over the course of 2023. Clorox consolidated all of its U.S. creative duties with the agency during Q4. And at year-end, the network continued to garner top industry accolades creatively with Global Network of the Year honors at the one show and similar honors for its North America operations. Our earned and experiential agencies momentum worldwide became the first agency to secure AI patents diffuse machine learning and AI to create smarter and more targeted experiences for consumers and Octagon brought on a range of new clients in the fourth quarter, notably Subway as well as significantly expanding its work with clients such as SNICKERS in the Premier League. Our PR network showed solid growth during the quarter. We saw this across geographies. The healthcare sector was a strong contributor, driven by a key AOR appointment at Walgreens and new assignment with existing clients, Vertex, Weber one AOR duties for Eventbrite and also created the biggest earned media campaign ever on the part of CeloNova [ph], one of our important clients as part of their college football bowl sponsorship and Golan was appointed to lead Fidelity's U.S. PR efforts including external newsroom operations earned media relations, crisis management as well as content and measurement. On the ESG front, we announced our inclusion in three key corporate ratings. The Dow Jones Sustainability Index for North America, the Human Rights Campaign's Corporate Equality Index and a best place to work on the disability equality index. We see earning recognition from these leading organizations as further validation of our efforts to create a fair and inclusive culture across the organization. Now stepping back, I think we know that the world in which we live is increasingly digital, that more than ever, clients need help from us in using audience-led thinking powered by data and AI to solve for a widening set of business problems and opportunities. As always, we're going to continue to invest behind the growth of businesses by developing our own people and continuing to differentiate our offerings. This includes investment in upskilling, training and recruitment, particularly around AI, but also marketing platforms and cloud computing. Our plans also include a disciplined approach to M&A, which will focus on opportunities that are consistent with strategic growth areas, notably increasing our scale and capabilities in digital transformation, and our total commerce offerings. As stated earlier, despite the continued uncertainty we're seeing in some key client sectors, we are targeting growth in 2024 in the range of 1% to 2%. Consistent with that level of growth and the investment needs that we've discussed with you this morning, we foresee adjusted EBITDA margin of 16.6%. Based on our long-term track record, we're confident that margins will resume their upward trajectory in the year ahead. Of course, another key area of value creation remains a very strong balance sheet and liquidity. And our ongoing commitment to capital returns is evident in the actions announced by our board today, which also speaks to confidence in our strategic trajectory and our future prospects. Now that commitment to capital returns is in addition to meeting the M&A priorities mentioned earlier. I would just like to close by thanking our clients, our people around the world. Of course, those for you on this call for your continued interest and support. And with that, let's open the floor to your questions.

Adrien de Saint Hilaire :

I've got a couple, if you don't mind. First of all, Philippe and Ellen, can you help us with the cadence of growth that you expect for 2024. Some of your competitors have been talking about Q1 being in line with the full year. Some others have talked about the year being more second half weighted. Where do you shake out? And the second question is what impact from net new business? Are you assuming in the 1% to 2%? Because on the one hand, you've had some decent success, of course, with GEICO, Pfizer, but then you have some other accounts which are under review like Amazon, some others like GM which may be under review. So curious if you've assumed any benefits or any loss or something neutral in there? Thank you, very much.

Operator:

Our next question is from David Karnovsky with JPMorgan. You may go ahead.

Philippe Krakowsky:

There's only been one. You're following up on a prior question, the second question.

Philippe Krakowsky:

Absolutely. Well, look, I don't think any of us is -- the way in which we demonstrated in '23 that you can run a business this scale and this complexity and see margin improvement, notwithstanding no growth is not our -- any number of us have talked about it over time. And we've always said that the flexible cost model does give us the ability to do that. Looking forward, I think that we tried to call out for you where we see the need for and we're pretty specific about areas where there'll be organic investment in the business. And I think that's part of why we're essentially in a sort of flat-ish down 10 basis points in terms of where the margin target is. But nothing has changed that in the underlying with growth we convert to improvement in margin. And then as you know as well, there is the degree to which we're going to continue to think about and look at our own processes and reengineering our business AI will actually play a part in that as well. It's not a '24 event, but the additional dimension to our media offering. So, media buying model that kind of adds the ability to take that principle to generate efficiency because I think we've been a media buyer where value has been about effectiveness. I think there'll be opportunity there. So, I would not conclude that this year is indicative. I think we tried to be as clear as we could in the prepared remarks that we still see upside on the margin. And then the first part of your question, I don't -- again, I think what we shared in the past is that it did feel to us as if during the fourth quarter, tech and telco was stabilizing. And I would say that that's still the case. It doesn't feel like we are seeing meaningful upside there. And to Adrien's question, we've not factored that into our thinking for '24.

Tim Nollen :

Philippe, I'd just like to ask about some of the reorganizations that you've done, you've had some management turnover you've had some account losses but I'm focused actually on the data and media segment, and you mentioned KINESSO in your prepared remarks. Just wondering if you could help us understand how that data and media organization is more simplified, how it presumably should be better and help clients drive better returns on spending, hopefully win some more business. And relatedly, I think you mentioned also in your prepared remarks about focusing some M&A activity on scale and digital transformation activities. I wonder if that's a particular call out or just -- and if there's anything more to add to that? Or if this is just kind of a standard thing that you would be investing in?

Operator:

The next question is from Steven Cahall with Wells Fargo. You may go ahead.

Philippe Krakowsky:

That's a lot in two very quick questions. So, I guess on the latter, I would say to you that, obviously, if you look at our margins four years ago today -- five years ago today. So, I think that the AI piece, to begin with, it will likely be helpful from a margin perspective. But I think that you have to kind of unpack the spend. There's been a lot of noise around who's spending what or what those commitments are. And I'm not sure that even for the folks who put some numbers out there, it's necessarily been apples-to-apples. But I think from where we sit, the investments across the group that would classify as AI-related are quite significant. So, if we look at '24, I assume that, that number is $80 million range in berry. And that is tech, software, including licenses and the partnerships, many of which I called out to you. And then development, which can happen in-house and then a great deal of training that is required. And so, AI has been a part of the business for many years, particularly data, on the media, sort of more tech-leaning offerings. So, the spend has been growing over time, and that '24 number I throw out there is not all incremental, right? So, you think about the annual budgets we've got for tech, for development, for training portion of that now, an increased portion of that is going to be directed to AI. And as we rethink core components of our business, Ellen talks a lot about how we are kind of looking for more efficient processes. We're going to basically, I think, fund that incremental spend internally. So, I don't know that I would conclude that it's going to be a significant drain on our profitability prospects. And I'm thinking about programmatic, did that happen faster. I mean, AI has definitely been part of the business for a while or certain parts of AI. And then the first question, I would say, it's not a trend that we haven't observed for some time. So, I would say that on the creative side of the business, things have become, in many cases, more project driven than a very, very kind of traditional model that would have existed years ago around kind of AOR. And there's still significant value and creativity, but I think you want to focus on where you've got very, very strong players in that space. And I think, as you called out, many of the large holding companies index heavily into some of those traditional assets. And so, in a fragmented media ecosystem, creative ideas matter a lot. I look at the success we're having with FCB, which is a traditional agency, but it's a very forward-thinking management team, and they have figured out a way to plug into the data layer for insights and to get very precise in setting goals for what they're trying to accomplish with their clients, and then it's integrated with other disciplines, in their case, very strong production. So, if you've got great content and it's part of a bigger system, and then you've got smart delivery, that works pretty well. So, I think these days, clients want both. They're sort of asking for brand and performance which doesn't quite get to the question that you asked for the suggestion, which is, is there a point at which people abandon that because I think that's a dangerous thing as well.

Julien Roch :

Just one question. Omnicom's guided to 3.5% to 5% provision is 4% to 5%, you 1% to 2%, so let's call that a 3-point difference. Can you unpack that difference between the digital specialist those tech and telco net account wins and anything else I did not think about? So, you said flat on account wins, but provision and Omnicom will benefit from account wins. So, I don't know, 50 basis point or 100 basis point on that. But what about the drag from digital specialist exposure to tech and anything else I didn't think about? Thank you.

Operator:

And that was our last question. I'll now turn it back to Philippe for any final thoughts.

Operator:

Thank you. And this concludes today's conference. You may disconnect at this time.

Operator:

Good morning, and welcome to the Interpublic Group Third Quarter 2023 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. [Operator Instructions] I would now like to introduce Mr. Jerry Leshne, Senior Vice-President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you, Jerry. As usual, this morning I'll begin with a high-level view of the quarter, after which Ellen will provide additional details. I'll conclude with updates on our agencies to be followed by Q&A. Before getting to the business of the call, however, it seems not only appropriate, but necessary to speak to our collective shock and grief in response to the terrorist attacks perpetrated in Israel and their aftermath. Thankfully, our colleagues in Israel are safely accounted for, but many are being called into service. We're also clearly in the midst of humanitarian crisis in the region. So our thoughts go out to all innocent lives that have been impacted by violence and those, who remain in harm's way. Given the scale of our operations in Israel, we'll also spend a bit more time later in the call discussing the implications on IPG's business. Turning to 3Q performance, starting at the top of revenue, results did not measure up to expectations. The organic change of our revenue before billable expenses was a decrease of 40 basis points. For the first nine months of the year, our organic decrease is therefore 80 basis points from a year ago, inconsistent with a trailing three-year growth of 15.7%. The same factors we've discussed as having impacted the first-half of the year continue to weigh on the third quarter. These are in order of magnitude, the decrease in client activity in the tech and telecom client sector, which has been evident across our industry this year, and the underperformance of our digital specialist agencies. Decreases in both of these areas were at about the same scale as we identified in the second quarter and together they weighed on our third quarter growth by approximately 3.2%. As we've spoken to in recent quarters, major marketers in technology sector are consumers of our core services. And as a sector, their budgets this year have seen significant cost cutting in line with the broader austerity efforts at those companies. While it's challenging to call the timing of the upturn in their marketing spend, we do believe that the current pressure on this sector will abate since these market leaders will need to return to growth mode. Another key factor negatively impacting our results is the broad concern about marketers related to macroeconomic conditions, which we've identified on our previous call this year. Economic concerns have translated into what is now an unmistakably more cautious tone in the business. We saw those headwinds take several forms, including pauses in certain planned activities, fewer and generally smaller project opportunities, and a slower than anticipated pace in conversion and onboarding of new business. Notwithstanding these challenges, it's worth noting that we did see progressively better performance from month-to-month during the third quarter with growth in September. We also saw aggregate growth among our top 20 clients in the quarter. We continue to anticipate that the new business that we've won across the first part of this year will be more visible in our results going forward. And as was announced yesterday, we were pleased to see General Mills tap UM as their global media agency of record. UM handle all strategy planning, buying, analytics, performance, and commerce efforts across 36 markets for this important client. It's also worth highlighting that in the quarter we continue to see growth in areas of the business that have been key drivers of success for us over a number of years. Namely our media offerings, which performed very strongly and the healthcare sector. In addition we had solid growth in sports and entertainment marketing, public relations, and our experiential offerings. Six of our eight client sectors grew during quarter, as has been the case in the nine months year-to-date. We were led in the quarter by the strong growth of auto and transportation, followed by our other sector of diversified industrials and public sector clients, the financial services and healthcare sectors. Healthcare grew in the quarter, though not at the more robust levels we'd expected. Food and beverage and consumer goods sectors also increased in Q3. We had a slight decrease in the retail sector. The tech and telecom sector decreased in the high-teens, the percentage basis, and this is not only due to the larger trend in the sector, but also in the significant client loss at McCann. Regionally we saw organic growth in the quarter across the U.K., Europe, Latin America, and our other markets group. The U.S. and Asia Pacific region decreased. Lower revenue in the U.S. was predominantly due to the sector and agency-specific challenges we've called out. If you look at the balance of the year, the geopolitical situation in the Middle East does add a degree of uncertainty to our business. Our operations in Israel include the full range of creative marketing services and media offerings. And they represent approximately 1% of total IPG global revenue. As you'd expect, economic activity in the country is at a standstill, which has already begun to have an impact during what is seasonally the business's largest quarter. The developing geopolitical crisis is of course foremost a human concern and our top priority is to do what we can to support our colleagues in the region. But in the context of this call we did feel it was necessary to point out it will also have some business implications. Turning to segment performance, media, data, and engagement solutions grow organically by 50 basis points in the quarter. We continue to see very strong growth in our media offerings. That was, again, largely offset by challenge results or digital specialty agencies. Our segment of integrated advertising creativity-led solutions decreased 4.1% organically, as the tech and telecom client sector and a more cautious spending climate weighed on our more traditional consumer advertising agencies. SCB's strong performance in the quarter was a notable exception powered by its strategy of incorporating data-informed audience-led thinking into its core creative offering. Our segment of specialized communications and experiential solutions grew by 6.5% organically. The quarter was highlighted by increases in sports and entertainment, experiential and public relations. Turning to an overview of expenses and margin, operating discipline continued to be a strength and was fully in evidence during the quarter. Third quarter adjusted EBITDA margin was 17.2%, up from 15.5% a year ago. Across the group, we're effectively managing our flexible operating model, which you can see in our expenses for temporary labor, performance-based incentive compensation, and SG&A. Total headcount decreased by 1.5% from a year ago. Occupancy expense decreased, as well as we continue to benefit from actions taken on the real estate portfolio and other variable expenses such as travel or resources operating leverage. Our diluted earnings per share in the quarter was $0.63 as reported and was $0.70 as adjusted for intangibles, amortization, and other items. During the quarter, we repurchased 2.6 million shares, returning $91 million to shareholders. That brings our share repurchases for the nine months to 6.1 million shares using $219 million. The strength and strategic relevance of our offerings is evident in our new business wins year-to-date and our long-term record of organic growth. That said, we had anticipated that the puts and takes in Q3 would have netted to better revenue performance than reflected in our results today. And I'll do more to unpack that for you in my closing remarks. Turning to our outlook for the remainder of this year, given the trends we've called out for you since the beginning of the year, the fact that macro conditions have become more challenging, as well as the incremental impact of geopolitical uncertainty, we believe organic revenue performance for the fourth quarter will come in at approximately 1% growth. Nonetheless, we remain committed to our margin goal for the year of 16.7%. Our current level of performance is not up to the standards we've set over many years. We'll therefore be looking to close this year as strongly as possible and specifics to identified areas of underperformance, also assess structural internal solutions to improve our growth profile. At this point, I hand the call over to Ellen for a more detailed review of our results.

Philippe Krakowsky:

Thanks, Ellen. Without question, organic revenue performance to-date this year is not consistent with our expectations or our long-term track record. We continue to be in market with relevant and compelling offerings that are helping marketers accelerate growth and deliver business outcomes and that has translated to new business success year-to-date. Now, for many of you who've been with us over a period of years, you know, that we were among the first to embed digital capabilities across media, healthcare, and many of our marketing services, as well as to recognize the importance of integrated services in an increasingly complex consumer ecosystem. Similarly, we were early to understand the growing importance of data resources and first-party data capabilities at scale as key tools to power the success of our clients. Given the very rapid rate of change we're all experiencing, we continue to further evolve our offerings, investing in ways that help brands compete in a dynamic world of new technology platforms and empowered consumers. This work has meant that increasingly large portions of our portfolio are better oriented in particular areas of growth. Consistent with that objective, during the quarter we launched our Unified Retail Media Solution, which is a dedicated business unit within media brands. It helps clients manage their investments across all retail media networks, one of the fastest growing advertising channels. That solution is already helping brands maximize their media investments across all of the retail channels in real time in order to drive next best business outcomes. Earlier this week we also launched Real ID in the cloud, the tool powered by Acxiom and piloted at FCB. It modernizes identity resolution and addresses an industry need for identity tools in a post-cookie world. Built on ethically sourced data that prioritizes consumer privacy, Real ID creates the opportunity for us to do the kind of intelligent, data-driven work that we've been doing in media for some time across all marketing channels and disciplines. Our AI Steering Committee includes leaders from across our network, and it continues its work overseeing strategic partnerships and sharing use cases across the group. As you know, we've been using machine learning and other AI tools in our data and media business for a number of years. With 100s of new AI pilots underway across the company, we're tracking a subset of promising programs with a particular focus on three new areas. First, using AI to generate content, including text, images, audio, and video, in our ideation and creative processes. Second, AI is a tool to uncover in a strategy and insights, as well as business trends that can help our clients and their brands. And finally, piloting the use of intelligent chat bots to automate tasks like program recommendations and other key steps on consumers' e-commerce journeys. Given the impact AI will continue to have on all businesses, including ours, we're fully engaged with leading AI innovators, which is Adobe, Amazon, Google, Microsoft, NVIDIA, and Salesforce. For example, during the quarter, NVIDIA worked with us, specifically within our PR agencies, to incorporate AI enabled processes into earned media and corporate communications workflows. Now just to step back and talk a bit again about our reporting segments in some detail as discussed earlier. Within the MD&E segment, we had very strong growth at our media offerings, but that continued to be largely offset by challenges within the digital specialty agencies. I think notably during the quarter we brought three distinct media brand companies, KINESSO, Matterkind, and Reprise, under the KINESSO banner and brand to create a unified sector-driven performance unit that enhances the effectiveness, efficiency, and simplicity of media activation that is end-to-end across that values chain. And as mentioned earlier, General Mills is another great piece of news at Mediabrands. During the quarter, Acxiom announced that its info-based consumer insights and audiences are now available in cloud data exchanges and received a Salesforce Partner Innovation Award for work it's doing with its Heathrow client. The company also recently launched Acxiom Health, which is its latest vertical offering and provides advertisers with quality audiences that span both consumers and healthcare providers with more effective reach and precision. At Huge, the agency had a number of wins with their new suite of consultative products. Their tailored to specific client business problems, which allows them to deliver strategy through execution very rapidly and effectively. The agency expanded its relationship with Darling Ingredients, which was begun earlier this year, with a significant design and build project. And on the product development side, Huge launched what it calls the AI Opportunity Mapper, which helps clients anticipate big shifts that Gen.AI will have in their specific industry and identify opportunities for growth across near, mid, and long-term horizons. Looking at RGA, the agency announced new business wins in the U.S. from Bloomberg and the BBC and in LatAm from Banco Safra, which is Brazil's premier financial institution. RGA also launched the associates program, a unique approach to fractional hiring that offers flexibility and emphasizes adaptability and creativity. And the agency's work for clients like Procter & Gamble and the Ad Council was recently recognized as a finalist for Fast Company's innovation by design awards. Within the IAC segment, as we mentioned, tech and telco weighed on our more traditional consumer advertising agencies. But FCB was a notable exception to that. The network's playing a key role in our integrated Pfizer team and also expanded relationships with existing clients, which is -- sorry about that with new clients which is Diageo, Danone and Upfield in global markets. IPG's health focus on creativity, technology, and data continue to be key to their clients. And during the quarter, the network launched the industry's first clinical trial diversity offering designed to help pharma and healthcare companies ensure more inclusive treatment innovations. Last month, following competitive pitch process, IKEA chose McCann as its first global brand marketing partner. Domestically, T.J. Maxx hired McCann as its creative AOR and Rickett’s Durex brand named MRM and McCann as brand leads in Europe and the U.S. In addition, the network launched McCann Content Studios, its new global hub for social and creative services. MullenLowe retained the DHRA account, which is the arm of the U.S. Department of Defense that's focused on military recruitment across all service branches. This renewal is for five years with an expanded remit that includes advertising, CRM, database management, integrated media, social, digital, and PR. Our SC&E solution segment, as we mentioned, saw growth across all disciplines following a strong new business track record year-to-date in Q3, following one new business including Eve Air Mobility, Tapestry, the luxury brand holding company that owns Coach and Kate Spade, as well as Neutrogena, the Kenvue skincare brand. Momentum grew strongly with core clients including Verizon and Nike and brought on a number of new clients, notably John Deere. Most recently, the company secured three AI patents for the machine learning of experiences, which makes them the first agency to do so in their area of expertise. Octagon signed the ACC of the new client at their industry leading media rights division and the agency won new client brands including Hilton Hotels and PowerAid’s, as well as working with current clients Budweiser, MasterCard and Unilever to manage activations at major global sporting events. Jack Morton, Vivi, the agency's diversity-driven inclusive marketing practice, posted wins and new work with the NBA and TIAA. There were also additional new client ads with Paramount Plus and Comcast, and a large-scale reinvigoration of ESPN's support center. But [Indiscernible] saw growth in the health sector and in its government and public policy work. On the new business front, notable wins included Dollar Shave Club and a significant new assignment with the CDC. The network also expanded its predictive analytics and intelligence capability with a rollout of a new proprietary solution that measures the impact of earned media. Despite these highlights from across the portfolio, as you can see from our results, the third quarter didn't unfold along the lines we'd envisioned when we spoke with you in July. At that time, we shared our view of the second-half inflection point for stronger growth driven by several factors. One, was accelerating growth of our media business, which did materialize with notably stronger performance in the third quarter than we've seen earlier in the year. We also look forward to a similar trajectory in our healthcare vertical. And while healthcare did grow in the quarter across the category, it was not at the level we'd anticipated. However, with new business coming online stronger in Q4, we do see health returning to its more typical rate of revenue growth. And as I mentioned earlier during Q3, while we saw the impact of new business coming on stream, it was slower to convert than the rate we'd foreseen. Therefore, when we look to the fourth quarter, as mentioned earlier, and this is historically our largest due to seasonal factors, as you all know. We believe organic revenue performance will come in at approximately 1% growth. And also to reiterate, we remain committed to our margin target for the year of 16.7%, 10 basis points ahead of last year. We're going to stay focused on closing the year as strongly as possible. But as I mentioned earlier, we're also specific to areas of underperformance, assessing structural solutions to improve our growth profile. And an important additional area for value creation is our longstanding and continued commitment to capital returns, which has been underscored by the execution of our share repurchase plan and consistent dividend growth over time. These remain important priorities for us going forward. As always, we thank you for your time and attention. And with that, let's open the floor to your questions.

Adrien de Saint Hilaire:

Yes, good morning everyone. Thanks for giving me the opportunity. So hello, Philippe, a couple of questions please. So first of all, can you help us quantify the impact of the tailwinds that you alluded to from new account wins, from perhaps recovery in tech into 2024? And then maybe a second question for Ellen. So clearly an amazing job this year in terms of protecting the margin. Is there a risk that as growth resumes next year and as you onboard new clients, we see cost growth effectively exceed revenue growth in 2024? Thank you very much.

Ellen Johnson:

No, just to add to Philippe’s comments, I mean, we've been very disciplined about not hiring ahead of revenue, as well as being able to really, as you've seen, you know, this year included, really manage a flexible cost structure. So we do see the ability to continue to increase our margins.

Philippe Krakowsky:

Thank you.

David Karnovsky:

Thank you. Philippe you noted that IPG would assess Internal Structural Solutions to improve growth. I wanted to see if you could expand on what that means exactly? And then just regarding the commentary you gave on healthcare before and that not performing as expected in Q3, was that largely related to new business or were there other factors? And just like new account wins aside, how do you kind of assess the health of that vertical?

David Karnovsky:

That's helpful. Thank you.

Operator:

Thank you. The next question is from Ben Swinburne with Morgan Stanley. You may go ahead.

Philippe Krakowsky:

On your first question, I think that across the industry over the last year or more, in fact, you've seen folks call out that the more "the traditional consumer advertising” portion of all of our businesses is under some stress as you put it. So within IAC, you've got our health care business, which we spoke about. You got FCB, which again, I think we did speak to how they've leaned into incorporating data and precision thinking, sort of, an audience-led approach and married it up to a very, very creative offering. And so for us, the rest of what is in that grouping is a McCann, which is on that same path. And then a group of kind of a portfolio of U.S. independent agencies where we do, again, I think, need to look a bit as sort of part of the answer that I shared with David around what does scale look like? How are we clear about centers of excellence? How do we get complementary skill sets working together? And what's a simpler way for clients to engage there and for us just to be kind of have a flying formation for that grouping? So I think IAC definitely needs -- not unique to us, right? As you called it out, that's a part of the business where I think everybody is thinking about what the right way to integrate that. When you take creativity and is part of an integrated offering, it's definitely much more powerful. And then on the AI question, it is an investment priority. It has been for some time, as I said to you, because whether it's inside of Mediabrands or at Acxiom, there's quite a bit we've been doing there and ways in which AI is going to make it possible for us to get more done for clients or work smarter and take a lot of processes we have. So from an efficiency point of view, it's clearly going to be a boon. But we also think it's going to open up opportunities to -- there's so much demand for content at this point, given how many channels there are and how complex the consumer journey is across this incredibly fragmented tech ecosystem that we still see opportunities to also have it be a revenue generator. So as I said, we've got a task force that has a handful of the top leaders from across the group. And that's probably going to then become something that gets leadership at the center here, and we prioritize investment that way.

Philippe Krakowsky:

Thank you.

Michael Nathanson:

Thanks,. Hey, good morning, Philippe. How are you?

Michael Nathanson:

Okay. So this is a long-running Q&A we've been having. I guess when you get…

Michael Nathanson:

Okay. Exactly. When you look at Media, Data & Engagement and backing away R/GA and Huge, just taking it out, we're used to you guys growing top of the leaderboard. And this year is going to struggle, we know that. But I wonder if we look at some of your competitors, those who bought data assets and those that have not, look at what's happening under your hood, what do you think about the strategic pivot that you made? What is slowing down maybe the growth ex those digital specialist assets? And is this something that you think strategically is on the wrong foot or is just execution? Because we see other companies just growing faster. And I know your comps are hard, but I wonder like what do you think about the decisions you made to get here is just basically a tough year that bounces back next year.

Michael Nathanson:

Got it. And then can I ask one to Ellen? Billable expenses. I know there's no media there, given what we know. The growth was pretty strong this quarter. Can you tell us what was that tied to?

Michael Nathanson:

Okay, so netted out some don't, clearly.

Michael Nathanson:

Okay. Thank you, guys.

Steven Cahall:

Yes, thank you. Good morning. So Philippe, you talked about the 3.2 percentage points growth drag from tech and telco and digital. And I don't think that was too new from Q2 to Q3 because we've talked about that a lot this year. And same with the macro concerns, I just know we've been talking about those this year. So I guess my question is what has changed most from your perspective over the last three months? It seems like the business did deteriorate in some ways versus your prior expectations. I think we're trying to understand what of that is idiosyncratic related to a lot of the agencies you've talked about? And then what might be just more broad-based that can really flow and extend into a great deal of next year? So just love to have some incremental color on what's changed the most more recently. And then, Ellen, you said you're not hiring ahead of revenue. A lot of the labor market stats indicate things are pretty tight, but I've seen a lot of industry trade reports. That there's also a lot of headcount reduction. So when you look at the labor market today, do you think it's a buyer's market for the skills you need? Or is it a seller's market? Thank you.

Ellen Johnson:

And then looking at our workforce, if you're looking for broad-based trends based upon your question, if I go back post the pandemic, labor was tight, attrition was high. Those trends have attenuated. But we're not one business, as you know. We are many businesses, and we recruit many different types of talent. So where the skill sets are more scarce, there is that supply and demand mix. But we have a truly great labor force and our talent. And so we are very competitive in that regard. But the broad-based trends that were called out post the pandemic, those have attenuated a bit.

Philippe Krakowsky:

Thank you.

Tim Nollen:

H, Philippe, Ellen. Thanks very much. Just I wonder if you could give a little bit more explanation around the new business trends. You've said it two or three times on this call that you've seen some, I guess, delays in the conversion and onboarding of some of the wins that you've been talking about for a little while is supposed to come through in the second-half. I mean, maybe this happens sometimes. I just don't really recall that occurrence before. I just wonder if you can explain, is it part of these new clients seeing the slowdowns and worrying about spending in the fourth quarter and just sort of deciding to go slower? Or is it a change in the scope of work that's coming on and just haven't really heard that commentary before. And relatedly, the General Mills win sounds pretty big. I didn't check the numbers. I wonder if you could just help us maybe scope out kind of, of the long list of wins that you've had in the last several months, like which are the biggest ones?

Tim Nollen:

Thanks.

Operator:

Thank you. The next question is from Jason Bazinet with Citi. You may go ahead.

Philippe Krakowsky:

Well, I mean, I think tech specifically, we would have been largely through it. But as I did call out, we had a significant loss at McCann in the telco space, which is then going to extend that into next year. And then I don't think health falls into the same category. I think health is really just -- we expected more from that sector this quarter than we've seen, but that's not a long-term hedge into next year drag.

Philippe Krakowsky:

Thank you.

Julien Roch:

Yes, good morning, Philippe. Good morning, Ellen. Thank you for the question. Two, if I may. I was hoping you could give us the number of employees at Huge and R/GA today. And the second question is margin versus growth next year. So previously, it's doing 5% top line growth and only come 4% for the full-year if they make that number in Q4 on flat margin. Is that cost including employees are up 4% to 5%, while you're flat. So as talent and these days investment intake is key to growth in agency land? Could that be an issue for next year?

Julien Roch:

Okay, thank you.

Operator:

Thank you. And that was our last question. I'll now turn it back to Philippe for any final thoughts.

Operator:

Thank you. This concludes today's conference. You may disconnect at this time.

Operator:

Good morning and welcome to the Interpublic Group Second Quarter 2023 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. [Operator Instructions]. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you Jerry, good morning. As usual I will begin our call with a high level view of the quarter, Ellen will then provide additional details, and I will conclude with updates on our agencies to be followed by Q&A. Starting at the top with revenue, the organic change of our revenue before billable expenses was a decrease of 1.7% against last year’s second quarter organic growth of 7.9%. For the first six months of the year our organic decrease was 90 basis points. During the second quarter we saw the same puts and takes on revenue that we have identified and discussed with you since the beginning of the year. Those factors continue to weigh significantly on our performance in the second quarter. Concurrently we continue to grow in areas of the business that have been key drivers of success for us over a number of years, namely our media offerings in the healthcare sector. We saw solid growth as well in disciplines such as public relations and our experiential offerings. Consistent with the items we've called out previously, during the quarter, we continued to see reduced spend from clients in the tech and telecom sector as it moves through a challenging period that has included significant cost cutting. Those reductions significantly impacted on our ability to grow in the second quarter and for the first half. Our digital specialist agencies also continued to underperform in the quarter. As we've discussed previously, the transformation of those offerings continues to move forward and we've seen some good wins there recently. Restoring those brands to consistent growth is proving slower than anticipated, however, due largely to continued challenges in the tech sector as well as modestly heightened macro uncertainty. Taken together, the second quarter impact on our growth due to the second telecom sector and our digital specialists was approximately 3.5%. Along with the strength of our media offerings and the healthcare sector, it's worth highlighting that six of our eight client sectors grew during the quarter and in the six months year-to-date. We also continue to win some of the largest new account opportunities in market so far this year. Our very strong new business momentum encompasses a diverse set of client industries including pharma, financial services, autos and food and beverage. These wins span the full range of marketing disciplines, especially in media as well as global integrated solutions that bring together creative, public relations, experiential and data. As such, they underscore the world we play as a critical partner to the world's most sophisticated and demanding marketers. To cite an important example, we're proud to have recently significantly expanded our relationship with Pfizer, having been named their lead Global Creative Public Relations and Medical Affairs Partner. Most of the new revenue from our wins has yet to ramp given that the transition periods between announcement and onboarding are the norm in our industry. As these wins come on stream in greater magnitude in the second-half of the year, we expect their impact to be evident in our results. Looking at client sectors in the second quarter, we were led by strong growth in automotive and financial services followed by growth in food and beverage, healthcare, consumer goods, and our other sector of diversified industrials and public sector clients. Our retail sector decreased modestly against very strong multiyear comparable performance and as discussed tech and telecom was the significant outlier. Regionally, the U.S. decreased 2.5 organically in the quarter predominantly due to the sector and agency specific challenges that we've called out. Our international markets decreased slightly by 10 basis points organically with mixed performance by region. In terms of our segments, our Media Data and Engagement segment -- solutions segment decreased 1.5% organically in the quarter, where we saw good growth at the media offerings offset by challenged performance in the digital agencies. Our segment of integrated advertising and Creatively Led Solutions decreased 3.8% organically. This is a place where tech and telecom in a somewhat more cautious spending climate is weighing on several of our more traditional consumer advertising agencies and that's impacting segment performance. Within the specialized communications and experiential solutions segment, we grew 3.7% organically on top of 11.1% growth a year ago. The quarter was highlighted by increases at both our public relations and experiential disciplines. Turning to expenses and margin in the quarter, our operating discipline continues to be a strength as our management teams demonstrate that we have the talent and tools as well as the flexible business model, the deliverable favorable margin results. Second quarter adjusted EBITA margin was 14.2%, which is ahead of our pre pandemic second quarter 2019 margin. As expected, our Q2 margin was lower than a year ago when additions to headcount had lagged our robust pace of multiyear growth. We are effectively managing our flexible operating model, which is clear in our expense for temporary labor, performance based incentive compensation, and SG&A each was notably lower than a year ago. Total headcount decreased by 1.2% over the course of the first half of the year. Expense for severance was elevated in the quarter as we continue to both address areas of the business where performance is lagging as well as further accelerate business transformation and integrate delivery of services in our very strong media offering. We'll see the benefit to margin of those actions going forward. Occupancy expense decreased from a year ago as we continued to benefit from actions taken on our real estate portfolio. Diluted earnings per share in the quarter was $0.68 as reported and $0.74 as adjusted for intangible amortization and other items. We want to make sure to call out that our EPS, both as reported and adjusted includes the benefits of $0.17 per share related to the resolution of routine Federal income tax audits previous years. During the quarter, we repurchased 1.3 million shares, returning $50 million to shareholders. That activity brings our repurchases for the six months to 3.5 million shares using $128 million. Turning to our outlook for the full year and having just completed our usual midyear update with our operators, we're positioned to resume solid organic revenue growth in the range of 3.5% to 4% over the course of the year’s second-half. As we move ahead, we expect that the benefit of net new business will be increasingly meaningful and the underlying growth from several of our larger businesses will also strengthen. Nonetheless, given our first six months which in Q2 reflect what we believe is modestly heightened macro uncertainty, we are revisiting our full year organic growth expectations to 1% to 2%. At the same time, with strong operating discipline, we remain committed to our margin target for the year of 16.7%, which represents an increase relative to our 2022 full year margin. The strategic relevance of our offerings is evident in new business performance year-to-date, which as I've mentioned has been exceptional. And while we're disappointed in Q2 organic revenue performance, we will continue addressing certain areas of the business with urgency during the back half of the year. We'll also continue to invest in the multiple growth drivers in the portfolio. Now I'm going to hand things over to Ellen for a more detailed review of results.

Philippe Krakowsky:

Thanks, Ellen. Clearly, organic revenue performance to date this year is not consistent with our expectations for our long-term track record. That said, we continue to successfully be in market with relevant and compelling offerings that help marketers enhance their brands, grow share, and deliver business outcomes. Since the start of the year, IPG has consistently led the way in new business and this positive momentum should provide strong tailwinds as we move into the back half of this year, and even more so in 2024. As mentioned earlier, Pfizer [ph] rewarded global creative and marketing communications responsibilities to an integrated IPG team, marking the conclusion of the largest and one of the most competitive reviews of the year. Also during the quarter initiative was named U.S. Media AOR for Constellation Brands, UM was appointed Global Media AOR for upfield, the global leader in plant based foods, and Media Brands was awarded the U.S. Media Account for Bristol Myers Squibb. This followed the Q1 headline win of GEICO, which also awarded sports marketing work to Octagon. Along with the first quarter Skoda win in June Intuit QuickBooks selected FCB as its creative AOR. And McCann Worldgroup won the highly competitive Air India review. During the quarter, IPG also received numerous accolades including being named most effective holding company at the U.S. Effie awards. At the Cannes Lions Festival our agencies had remarkable success during many of the festival’s top honors, including one of only four Titanium Lions, and five category Grand Prix. McCann Worldgroup had a particularly strong showing as their work for longtime client MasterCard won nine Lions, including the festival’s top honor, the Titanium where it's Where to Settle campaign, a digital tool that aggregates employment and real estate data, as well as spending insights to help Ukrainian refugees make new lives in Poland. From Microsoft McCann created the ADLaM project and digitized a popular West African language spoken by over 60 million people, which previously had no written alphabet. [Indiscernible] seven Lions including two Grand Prix. Other significant honors include IPG Health's performance as healthcare network of the year, an area 23 earning the prestigious title of Cannes Healthcare Agency of the Year, both of which reflects our continued excellence in the healthcare space. The festival also named FCB, its North American network of the year for the fifth consecutive year, which demonstrates the consistent outstanding work done by that agency for leading brands in this important region. Looking ahead clear that artificial intelligence which already plays a role in our data and for media performance businesses, will begin to have an impact on our industry as a catalyst for creativity. Technology provides new canvases for brands to work with and we're seeing the advent of AI tools that strategists and creative people can use to quickly generate and scale ideas. Given that every competitor will have access to these same kinds of tool stands to reason that great creative ideas will remain essential for brands to stand out and win in the marketplace. During the quarter, we announced a partnership with a leading quantum computing developer to build new software tools that solve complex data intensive problems. The partnership combines quantum cloud services, with proprietary data drawn from IPG agencies, clients, and media partners. Together, we're helping clients identify high value audiences and deliver more tailored messages at the right time in the right setting. This is one of many such partnerships, as we engage with leading AI innovators, including Amazon, Microsoft, Google, Salesforce, Adobe, and Nvidia we have established a matrix deployment strategy that benefits all of our clients. On the important subject of retail, during the quarter we continue to strengthen IPG’s commerce offering with a launch of our creative Commerce Labs, which are finding new revenue streams for marketers to reach cross channel collaboration in partnering with key commerce providers. You will have also seen earlier this week that we launched a unified retail media solution within media brands. This is a dedicated business unit. It helps brands manage and optimize performance across retail media networks, which as we know is one of the fastest growing advertising channels. This platform identifies which retail networks are performing best for our clients and can allocate spend to maximize sales and profitability. Brands can augment existing audience data via proprietary axiom datasets and our solution automatically aggregates this cross network data using AI, power planning, and activation. This offering will allow our clients to solve an important pain point in the growing retail media space, which is the lack of standard measurement just to make informed investment decisions. Turning to segment performance, we saw strong growth in our media offerings within the MD&A Group. As I mentioned earlier, those assets continued to win major client assignments, Initiative was just ranked number one by [indiscernible] for new business over the past three-year period, and the UM was named campaigns media agency global network of the year. Moving to our digital specialists at RGA we saw progress in new business, including a significant AOR win with Intuit TurboTax in the U.S, announced just last week. Our GA was also selected as Mexico's largest sporting goods retailer Innova Sport for its digital commerce work. Huge launched and deployed a proprietary AI powered engine to inform creative platforms online to drive business growth, and during the quarter Huge’s new product size and consulting offering helped to secure business transformation assignments from driven brands, just the largest automotive services company in North America. During the quarter Acxiom announced its win of one of the largest auto groups in the U.S. to implement a customer data platform across their networks and dealerships. The company also continued to renew with many of their premier clients in the financial services, insurance, and telecom sectors. These renewals and new wins highlight the value of Acxiom’s customer intelligence cloud offerings, which include the management of brand’s first party data to improve customer acquisition, retention, and growth. At our integrated aid advertising and creative lead solutions segment FCB was named the number one global network and FCB the number one agency in the world by the One Club. The FCB New York also won a sports Emmy for Outstanding Digital Innovation for the AI driven creative work McEnroe versus McEnroe for Michelob Ultra. Campaign named McCann Worldgroup, the best network in the Europe for the fourth time and MRM was named large agency of the year, Effie ANA’s 2023 B2B Awards. The Global 2022 Effie Effectiveness Index ranked McCann as the most effective agency network in Europe, and the number two most effective network globally. And MullenLowe was named U.S. agency of the year at The One Show. Turning to the Specialized Communications and Experiential Solutions Group, we saw strong balanced growth in the segment with Golin performing particularly well. Weber Shandwick showed continued solid growth in Q2, proven by the healthcare sector, and with the most awarded PR agency network income. Our experiential assets also posted solid performance. Highlights at Octagon included the agencies work with Cisco to negotiate the company sponsorship for the 2023 FIFA Women's World Cup, as well as activation of global sponsorships for Budweiser and Unilever in New Zealand at the World Cup. Strong growth at momentum was driven by clients in the retail, finance, and food and beverage sectors, as well as the continued integration of technology into live activations. Looking ahead, as mentioned earlier, we are revising our full year organic growth expectation to 1% to 2% while remaining committed to our margin target for the year of 16.7%, which is ahead of last year's results. We view our very strong new business tailwinds coupled with growth in our existing client base, notably in media and healthcare as key drivers of our outlook for the balance of the year with also benefits in 2024. Another factor will be our long standing open architecture model, based on collaboration by design in a foundational data and technology infrastructure, through which we integrate our services from agencies across segments in the solutions we deliver for clients. This approach continues to be core to our offerings. Another ongoing commitment that's been a hallmark of our culture is our work in ESG and D&I [ph] to remain vital in a talent business. Our flexible cost model is an important lever not only for improving margins in times of growth, but also to consolidate those gains as we've demonstrated this quarter. In additional areas for value creation, as Ellen called out include our strong balance sheet and liquidity. IPG’s ongoing commitment to capital returns has been underscored by consistent dividend growth and the execution on our share repurchase program. As always, we thank our partners and our people, as well as those of you on this call for your support and with that, let's open the floor to questions.

Benjamin Swinburne:

Thanks. Good morning. Philippe, could you talk a little bit more about the X sector office that is impacting IPG’s organic growth, we obviously heard for a while from you about some of the specialty agencies at IPG, but it feels like it's broader than that and so I am just curious if you could maybe talk a little bit about where that pullback is occurring, if it's in media, project work, I know it's all kind of client specific, but just help us try to think about how much of this is sort of idiosyncratic to certain clients or part of a broader theme because it would certainly seem logical that tech technology companies are going to be growing their investment over time but it'd be helpful to try to think through how much of this is sort of idio versus structural? And then I was just curious, what are your focus areas with AI at IPG, in a year or two what would you like to see the company doing or not doing, what our clients are asking you about as you think about this technology opportunity and obviously, the risk around it as well? Thank you.

Benjamin Swinburne:

Thank you.

Operator:

Thank you. Our next question is from David Karnovsky with J.P. Morgan. You may go ahead.

Philippe Krakowsky:

I mean, if I kind of try to strip it down for you and kind of literally almost go from the top, I'd say, as we said the puts and takes have not changed from what we've shared with you since the beginning of the year. So in that sense, I don't think there is new news. The differences are clearly pressure on tech and telco is not abating. And as we said, you've got this modestly more uncertain macro. So that is leading to delays in clients, Ben. And that's, as I said, impacting some of our businesses more than others. I think that the other thing about the uncertainty around the macro is in our long tail of smaller clients, we're seeing some small cost cuts. So there's a degree to which that’s adding up to something that, again, is having is having an impact. And so those are really the factors that led us to looking at where we are at this point in the year and revising the revenue guidance. But I think I would point out that our outlook for the year at this point is not contingent on a recovery in the rate of revenue change on those two factors. So we're not saying it's delayed some things which, for us, were important. And as we pointed out, cumulatively cost us about 3.5 percentage points of organic growth. Going the other way, you're seeing the client losses that we called out. So we came into the year with a net negative new business position. So that was a headwind and that has actually shown up in both the first and the second quarter for us. By April, that was something that we share with you that we have neutralized. Now we've turned it into a strong tailwind. So it's the client conversations, it's incremental, it's marginal, it isn't like something dramatically different has happened, but where it's impacting us, happen to be areas where we've got two agencies in turnaround mode to the extent that this is causing delays. We therefore are looking at two things that are there for still not helping us. And then tech and telco again, big category for us in the long-term. We still think it'll be a good category to be meaningfully represented in but they are as I called, as I said, they are meaningful outlier when it comes to the sectors for us client wise.

Philippe Krakowsky:

Maybe one of our peers has a meaningfully larger presence there and so I think that their line of sight to it is something that everybody will probably learn something from. You have heard from us clearly that when we work with clients and we show up with data tech and media offering we end up in some really interesting conversations that are about solving higher order business problems. And that that part of our space or that part of the opportunity set that we're getting are looking at our new business performance, that part looks like it's still quite active. Commerce is a place where we're still in build mode to a greater degree. So we probably see less of that. I think there's a more to go, RafterOne, we've got Commerce lead as we've talked, we're thinking about how we take a commerce approach actually, those Commerce Labs are around really enhancing all the creative work we do to make it more addressable and more shoppable. So I'd say marginally, but, I think that what we heard earlier this week probably has a little more breadth to it in terms of what they're seeing.

Philippe Krakowsky:

No worries. Thank you.

Tim Nollen:

Great, thanks for taking my question. Philippe, I wonder if you could help explain something you said and also on the common promises [ph] this week, which is that media is very strong, even while creative is weak. I assume your work with data and everything Acxiom does would help with your successes there. But I just wonder why clients are putting a lot of money in the media, but not so much creative?

Tim Nollen:

Okay, thanks. Could I supplement sales [ph], as well, which is that it's great to see the operating income come in pretty strong despite a softer top line. The salaries line, however, was up almost a couple 100 basis points. I wonder if you could give us a bit more color on why that rose so much and if that's going to level off from here? Thanks.

Tim Nollen:

Great. Okay. Thanks.

Operator:

Thank you. Our next question is from Steven Cahall with Wells Fargo. You may go ahead.

Philippe Krakowsky:

Sure. On the former again, understanding that client’s business and confidentiality around client business is what it is. Yeah, I think your read on is that more a tech than a telco set of comments? Yes, it is. And it is the case that we talk about sectors globally. But when you think about our revenue mix all in being two thirds U.S. it would have -- there would have to be a pretty significant outlier for it not to also apply domestically. So we're definitely seeing it. I mean, you see the disproportionate drag on performance that U.S. growth or lack thereof had on us. So yes, more tech, and yes, very much something we're feeling domestically. On the second question, I don't think that I would read that as you have. The segment was created, because we have like entities there -- the digital component of what they do, but the impact of those digital specialists is was leading to what you're seeing as deceleration. And, as we've called out, media is very strong for us, has been and given performance year-to-date in terms of securing new assignments will continue to be. So I don't think I would extrapolate that last piece.

Philippe Krakowsky:

Thank you.

Michael Nathanson:

Thanks. Two for Philippe, one for Ellen. To beat the dead horse a little bit more let's focus on tech weakness again. If you were to go under the hood, I'm sure you've done, when do you think kind of the normalization of spend from those large tech domestic companies will start to normalize, so, put yourself in our shoes under the hood, when did it ease? Second question would be now that we see another one of your peers showing the size of their principal media buying business, I guess last quarter, do you think that is a structural disadvantage that you guys are not in that business, any update on the latest thinking on that following my question last quarter? And then Ellen, just surprised that you guys raised debt this soon at the rates, the balance sheet is pristine, how did you debate whether just paying off the debt when it came due next year, versus raising debt when the rate is not high, but you could have waited a bit, so walk me through that thinking? Thanks.

Ellen Johnson:

Sure. So we have as we do from time to time, hedge interest rates. So the coupon that you're seeing on that debt is the face value or what we issued at but we had previously hedged, largely the treasury component of that. So the rates that we're actually paying are better. And when we looked at it from that perspective, and looked at the opportunity to take it off the table, and then where interest rates are had the opportunity to invest, as we talked about in the securities we had, it was a good economic decision.

Michael Nathanson:

Thank you for that.

Operator:

Thank you. And our last question comes from Julien Roch with Barclays. You may go ahead.

Philippe Krakowsky:

I'll take them in order, because the latter is probably a doctoral dissertation. So, as I said, we are no longer expecting the turnaround as you put it, right. So our outlook as it stands now does not factor in either significant recovery in tech and telco and clearly, the timeline on the digital specialty agencies, given this greater uncertainty is pushed. So how the year lays out for us in terms of, to your point doing 3.5 plus, in the back half, 3.5 to 4 is the drag from tech telco and digital becomes given so it's not going to receive it mid-year, it will likely be with us for most of the year. The negative net new business position that we had coming into 2023 impacted the first half, will not impact beyond that and has now been turned around and is now a strong positive. So if you look at the second half, and then in the first half, we had, strength of media and healthcare. So if you look at the second half, the growth is roughly 50% from net new business that comes on stream and 50% from stronger underlying performance at those two large entities. And our new business all those wins bring a significant plus up, but we have not assumed all of it at one go. We have assumed essentially that full run rate for all of those is not in effect until close to the end of the year, which is why we pointed out that clearly it'll have a benefit for us in 2024. So there's a very significant full run rate number, but we're not forecasting that full run rate until late in the year. And then on media and healthcare, I think our view reflects, Ellen talked about timing on work and campaigns. And then on the media side, I would say business mix and seasonality. So hopefully that helps you understand how we are seeing what that 3.5 to 4 for the back half looks like. On the AI question, which as I said, I think merits a lot of conversation. And you know, it is getting a lot of thought, it is early days in the application of it on the creative and content creation side of things. I do think that when you begin to see what's possible, given the volume of content that can be created, then it isn't necessarily the case that one is going to replace the other, it's that you're going to be supplementing because you're going to be creating much more and much more complex sort of ecosystems of content. And then the other thing that we've seen in the businesses where we've already applied machine learning in AI, such as data and media, is that as you're able to bring solutions that are informed by this to clients, the nature of the opportunity with them evolves. And so you're brought in to do different things. So you can take some of that young digital talent and upskill it or you can have them focus on areas of client business and strategic problems that are more strategic, that are higher value. So I don't know that it will be as you know, as clear as what you laid out there. I think, we've been all along the efficiency piece of this will be important, the new ways of being compensated will be important. But for at least the foreseeable future, we're figuring out what it means relative to the very sort of direct, for instance, that you put out there. But instead it's a concern or at least an issue that we're all thinking to address. I don't have an answer for you sitting here right now.

Philippe Krakowsky:

No, those are important questions. We appreciate them. Thank you for the time. We look forward to updating you on progress in October and we'll get to it.

Operator:

Good morning, and welcome to the Interpublic Group First Quarter 2023 Conference Call. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you, Jerry, and good morning. As usual, I'll begin our call with an overview of our performance in the quarter. Ellen will then provide additional details, and I'll conclude with updates on highlights at our agencies to be followed by your Q&A. Let's start at the top with revenue. The organic change of our revenue before billable expenses was a decrease of 20 basis points against last year's very strong first quarter organic growth of 11.5%. That performance is consistent with our internal forecast, not only for IPG as a whole, but across our operating segments and at the individual agency level. Back in February, we called out for you the puts and takes specific to our diverse portfolio of services and within client sectors, which would be impacting our results during the first half of this year. So it's fair to say the year is tracking as we expected. In keeping with our typical calendar, we recently refreshed our outlook with our operators, and we remain comfortable at the midpoint of the growth range we shared with you on our February call, which is 2% to 4% organic revenue growth for the full year. Specifically, during the first quarter, the services and sectors that have led our substantial multiyear growth notably Media and Healthcare, continue to perform strongly. Our experiential and public relations businesses also continued their growth into the new year. It's also worth calling out that we've continued to win some of the largest competitive new account opportunities in markets so far this year. These wins encompass a diverse set of client sectors, including financial services, pharma and autos. And as they come on stream, they'll build on the large client win in the retail sector, which closed out last year. Taken together, and given the advanced client briefs increasingly in play, new account activity further demonstrates our role in the business transformation agendas of the world's most sophisticated marketers. As we've called out in recent conversations with you, the performance of our digital specialist agencies continued to weigh on growth in the first quarter. Transformation underway at those businesses does continue to progress, and we will begin to cycle their revenue decreases in our third quarter. You'll also recall that in our most recent call, we underscored the evolving impact of a more challenging environment specific to the technology sector, which is one of our largest client sectors. We've all seen it in the headlines, most prominently with respect to employment in technology that austerity and cost focus did continue to weigh on our revenue results in the first quarter. Notwithstanding that impact and a macro that, since the beginning of Q4 of last year, has been somewhat more cautious, it's notable that 6 of our 8 client sectors grew in the quarter on top of very strong performance a year ago. We were led by growth in our other sector of diversified industrials and government clients with growth in consumer goods, financial services, autos, healthcare and food and beverage. As discussed, our tech and telecom sector decreased in the quarter, as did to a much lesser degree, retail. Both were comping against double-digit gains a year ago. Regionally, the U.S. decreased 90 basis points organically in the quarter. And this is largely the result of agency- and sector-specific challenges that we've just called out and came against 12% growth in Q1 of 2022. Our international markets grew 1.2% organically on top of 10% growth a year ago. In terms of our segments, each was cycling double-digit growth a year ago. Our Media, Data & Engagement Solutions segment decreased 70 basis points organically in the quarter, strong growth in our Media offerings was offset by the underperformance at the digital specialty agencies. Our segment of Integrated Advertising & Creativity Led Solutions decreased 90 basis points organically. And there, we were again outpaced -- paced by growth at IPG Health while the decreases in the tech and telco sector weighed on overall segment performance. In Specialized Communications & Experiential Solutions, we grew 3.3% organically, highlighted by increases across our experiential and public relations offerings. As we navigate the near term, our team has demonstrated over a period of many years that we have the financial and management talent; [tools] and business model to successfully manage margin in a range of business environments. Q1 adjusted EBITA margin was 9.7% in our smallest seasonal quarter. And that result compares favorably to our pre-pandemic first quarter 2019 margin of approximately 5%, which means we're seeing both structural efficiencies and meaningful leverage on our growth over the last several years. As expected, margin decreased from a year ago when expenses for travel and entertainment were still unusually low due to the impact of the pandemic as well as additions to headcount, which had lagged the robust growth environment. We are effectively managing our flexible operating model. This is clear in our expense for temporary labor, performance-based incentive compensation and SG&A. Each was notably lower than a year ago. Our expense for severance was also elevated in this year's first quarter, and we'll begin to see the benefit to margin of those actions going forward. Further, we continue to see the impact from actions that we've taken over the last few years on our real estate portfolio, where we've reduced occupied square footage by approximately 30%. As with the top line target, we remain committed to our margin target for the year of 16.7%. Diluted earnings per share in the quarter was $0.33 as reported and was $0.38 as adjusted for intangibles and amortization and other items. During the quarter, we repurchased 2.2 million shares using $78 million. In February, our Board authorized another $350 million share repurchase program and increased our common share dividend by 7%. Our ability to create marketing and media solutions that bring together creativity, technology and data at scale is responsive to the evolving needs of marketers for more advanced and integrated services. We're consistently bringing together our differentiated resources to deliver precise, accountable and audience-led thinking and solutions. The current macro may be creating a moment in which, for certain clients, efficiency is prevailing at the expense of increasing effectiveness in order to power business growth. But in the mid and longer term, we remain confident that the fundamental drivers of value for our clients, employees, shareholders and the communities in which we operate, remains strong at Interpublic. At this point, it seems appropriate to hand the call over to Ellen for a more detailed review of our results.

Philippe Krakowsky:

Thanks, Ellen. The results we're reporting today, as you heard, are in line with what we forecast coming into the year for the first quarter and consistent with the phasing of our full-year plans. That said, our top line performance in the quarter is not in keeping with our long-term track record or the growth we're collectively striving to achieve. As mentioned earlier, during the quarter, we won several of the highest profile and largest reviews in the industry, and these wins encompass a diverse set of client sectors and demonstrate our key role in the business transformation journey of marketers in a number of sectors across the economy. They will also increasingly benefit our growth as we move further into the year. We continue to invest in our emerging technology capabilities as well as expertise across the group and with external partners, with a focus on areas including Web 3.0 and artificial intelligence. We also recently launched a pilot program during the quarter with [D-Wave], quantum computing pioneer, to build advertising optimization equations based on our existing data sets, focusing first on an engagement with one of our top 20 clients. When it comes to AI and machine learning, IPG has been investing in this area for some time, Reprise media and network that specializes in search marketing and retail media marketplaces, onboarded a Chief AI Officer over 2 years ago, just as MRM was adding a Global Head of AI and Behavioral Sciences. Acxiom has also been a long-time user of AI in their data analytics practice to improve how companies reach consumers. All three of these entities fit on our AI Steering Committee, which recently launched a number of incubators and labs that leverage our enterprise agreements with a range of large technology partners. Turning to specific highlights from the quarter at the agency level. At our Media, Data & Engagement Solutions segment, we continue to see strong growth in industry recognition for our media operations. Notably, IPG Media brands was named the New Media AOR and Marketing Transformation Partner for GEICO in a highly competitive industry-wide review. Initiative continued outstanding performance was recognized by both Adweek, which named it Global Media Agency of the Year and Ad Age, where Initiative was A-List Media Agency of the Year. At UM, the network welcomed the new global CEO and won multiple honors at the Campaign's Global Agency of the Year Awards. Our Mediahub agency, now a part of Mediabrands, was named Media AOR for home appliances brand Bosch in Australia and New Zealand. It extended its relationship with Royal Caribbean and Celebrity Cruises in the UK and Europe. And Mediahub was also named Global Media Agency of Record by Esprit. Matterkind's Outcome Navigator, our proprietary suite of connected solutions for digital media that guarantees outcomes for marketers, was named a winner at the 2023 BIG Innovation Awards, presented by the Business Intelligence Group. And Reprise Media, which I mentioned earlier, has been shortlisted in the running to be Campaign's Global Performance Agency of the Year. Acxiom continues to lean into its strategic partnerships, integrating its ethical data and identity products in the cloud solutions, including data clean rooms powered by Snowflake, which allow customers to securely share data sets with partners and platforms to identify high-value audiences and consumers. Since the start of the year, Acxiom has been among Salesforce's fastest-growing full-stack marketing partners. And we further expanded the list of leading ad tech platforms, where marketers can find and activate Acxiom data. During the quarter, we saw our new Salesforce asset RafterOne [acquire] new assignments from Motorola in partnership with MRM. Huge has begun to go to market under its new positioning as a consultative creative growth accelerator. The agency recently launched in Australia and was also recognized by Business Insider as a thought leader in the area of AI. At R/GA, we announced significant C-suite changes. Globally, new business wins included Metagenics and KFC. R/GA has also brought generative AI into its creative work processes on clients like Verizon, Opendoor and Nike and released an AI ethics handbook with this client in assessing how they will incorporate the technology into their marketing programs. Campaign also named R/GA a Digital Innovation Agency of the Year in the UK. In our Integrated Advertising & Creativity Led Solutions segment, IPG Health led performance. During the quarter, we saw wins with a number of clients in the growing therapeutic areas of oncology, endocrine, metabolic and cardiovascular disease. The company also made significant leadership appointments, named a Chief Medical Officer and a Chief Strategy Officer, who will both facilitate even greater interconnectivity across the network in the service of our health and pharma clients. On prior calls and conversations with you, we've mentioned that our Media and Health offerings leverage IPG's data spine and our open architecture model. This quarter, IPG Health launched a healthcare-first connected data intelligence platform in the U.S., integrating tools from Acxiom, IPG's marketing intelligence engine and Mediabrands into their offering. And IPG Health was also named Healthcare Network of the Year by Ad Age, marking the first time a healthcare network has been named to the prestigious A-list. At McCann, wins in the first quarter included premium mattress brand, Beautyrest at McCann, Detroit and continued growth at McCann Paris' Luxury Practice, which recently added the Valentino brand. At FCB, the highlight in the quarter came when the network was appointed global agency of record for Skoda, including one of the biggest pitches in Europe. The World Advertising Research Center also named FCB New York as the industry's #1 most awarded creative Agency for effectiveness. And FCB's contract for change work of the Chicago office, I believe for [Michelob ULTRA], was the world's most awarded communications campaign for effectiveness. MullenLowe in the UK was named Agency of Record for Manpower. And more recently, the agency was selected by the U.S. Golf Association to help grow and brand the sport. Reflecting an increase in the number of global in-person events as well as the need for companies to seek out strategic communications advice during periods of economic uncertainty and societal change, our Specialized Communications & Experiential Solutions segment saw good growth during the quarter. Octagon onboarded new brand and talent clients as well as negotiating a historic long-term partnership agreement for Stephen Curry with Under Armour. Additionally, along with the Mediabrands team, Octagon was tapped to serve as the strategic lead for GEICO's more than 100 sports marketing partnerships with leagues and teams. Weber Shandwick had a solid start to the year with its multi-stakeholder approach. The firm's corporate and public affairs capabilities drove growth, [added] the health and wellness sectors. Agency's one new client partner, Case International Harvester, the global agricultural company, and expanded assignments with several large clients, including Mars. [Golin] saw strong growth in the quarter, driven by the UK and North America, but it saw sector strength in consumer marketing and healthcare. A key executive hire included a new health equity lead, who will help integrate the agency's public health, social purpose and sustainability teams. Jack Morton continues to see new client wins with clients like Nike, [Riot Games] and Novartis and notable activations in the quarter, including large-scale client events at March Madness and MLB's opening day. Similarly, Momentum posted growth in the quarter as an innovative in the way brands connect with consumers, notably through the use of immersive technologies, including the integration of augmented and mixed reality with live broadcast. This approach helped them win new clients like Purina and General Mills. At the holding company level, we've long been clear that for IPG, our commitment to ESG is a priority with 5 key strategic pillars, including D&I, climate action, human capital, data ethics & privacy and responsible media and content. With growing demand for climate action among consumers and the need for all companies to adapt to changing regulations particularly in the data space, ESG is a crucial topic not just for us but for our clients. On our call in February, we indicated to you that we we're entering the year in a net new business negative position. In the intervening period, we've successfully neutralized that deficit, and the benefits of those wins will begin to come on stream in the second half of the year. Despite macro uncertainty that's largely consistent with what we saw in Q4, the tone of the business remains solid. We should meaningfully cycle issues at certain of our agencies beginning in the third quarter. Industry new business activity in areas where we're strong, notably media, is picking up and should present further upside opportunities for us. As indicated earlier, we remain comfortable with our growth outlook for the year, along with our expectation for margin expansion. Over time, we've consistently demonstrated that we can expand margins. Our flexible cost model is an important lever, not only for improving margins in times of growth, but also to consolidate those gains in the face of downturns in the business environment. Another key area for value creation remains our strong balance sheet and liquidity. And our ongoing commitment to capital returns has been clearly underscored by both our recent dividend increase as well as share repurchases. The teams remain highly focused on delivering on our targets by continuing to provide higher-order business solutions to clients to help them drive growth in the digital economy. We thank our partners and our people for their our continued support as well as those of you on this call for your time and interest. And with that, let's open the floor to questions.

Steve Cahall:

So Philippe, it sounds like the U.S. trend should see sequential improvement throughout the year. I think your last quarter of cycling off a big loss, and I think you'll now be cycling on to some wins. So first off, is that right as we kind of think about the trend to organic growth as we move through the year? And then in the release, you mentioned some of the weakness in the tech sector. I imagine what's gone on recently in the financial sector probably hasn't helped. So in your mind, is there any new negatives in your technology exposure? Or are the expectations for that vertical kind of unchanged from where you were when you started the year? And then I have a follow-up for Ellen.

Steve Cahall:

Great. And then, Ellen, I think salaries were up more than 2 percentage points as a percentage of revenue in the quarter. Office [indirect] was up a little bit as well. Maybe how are you thinking about the ability to pass through some of the cost or wage inflation through organic growth? Is there any upside to EBITA margin guidance? And is there any more restructuring we should expect this year?

Operator:

Our next question is from David Karnovsky with JPMorgan.

Philippe Krakowsky:

That's a fair question. I think it's clearly in the nature of their offerings, where you have a lot more innovation hanging, sort of taking place. And so I think that whether it is -- it's funny because if you really think about it, we're really seeing the macro in very specific in few and specific places. So we've seen it impact tech. And then clearly, these are agencies that are probably -- have greater exposure to that sector than other parts of the portfolio. But I think what you've got there is you've got 2 entities with premium positioning. The field has become somewhat more crowded. And then the timing in terms of when they were hitting a cycle at which there needed to be a reinvention, happens to be as we're going through this period where there is some uncertainty. So the thinking is to get them more focused. As I mentioned, you did see news of a leadership change at R/GA. Huge is further along in terms of what the next value proposition is going to be for them. And essentially, it's going to market with more of a consultative model, where it's less people and hours and more of a product and solutions approach. So that's in market now. And then, I don't think that it's an issue that's sort of intrinsic to this space. So we do expect them to get back to being growth drivers for us. I think, to be a growth leader, you increasingly -- no matter where you sit in the portfolio, you have to be linked into the data stack into what we're doing around precision and accountability. But both of them, I think, have that predisposition, given the nature of what they do. As we've been clear as well, I think that some of those losses, again, where we saw that impact us or begin to impact us, we see that falling off as we start the second half of the year.

Ellen Johnson:

Sure. Interest income was higher, but that's really due to the rising interest environments that we're in and the amount of return we're able to earn on our cash balances, which we actively manage. So really, it's a factor of where interest rates go, but there is nothing that I would highlight other than that.

Tim Nollen:

Can you hear me okay?

Tim Nollen:

Philippe, I hope you don't mind if I push one more time on the tech and the Huge, R/GA question. I just want to see how much the two are related. I went back to my notes from last quarter, and I think you said that those 2 agencies, Huge and R/GA, were 1.6% drag on Q4 organic growth. And I think I heard you say just now that the tech and telco sectors were a 2% drag worldwide in Q1. I just want to make sure I understand how much is tech and telco and Huge, R/GA related. Or are they...

Tim Nollen:

That's great. I wasn't even hoping -- I wasn't even thinking to get that kind of a number from you, so that's great to hear. So separate, but related issues. Could I ask another question on margins? You beat our estimate on operating margin, I think, probably ahead of what you were kind of pointing people towards. Was that some real estate savings from the Q4 events that are already working through? And I think you also mentioned on the last call, you still expect to be net hiring in 2023. I wonder if that is still the case? So how do we think about that?

Ellen Johnson:

Sure. I would just point out that we have extended our margin 260 basis points over the last several years. So we really have a good sense on how to do this. You did see that severance was elevated in the quarter. And as Philippe pointed out, we are hiring where we have growth, but we're also adjusting the business in places that we do both for either rightsizing or upscaling talent. We expect that will continue in Q2, but we'll see the savings from that as we move forward through the year. As you mentioned, we are seeing the savings from the real estate actions as well, as well as using temp help as we should as a lever. So I think all of those things together keep us -- make us feel good about our margin targets for the year and our ability to expand them, going forward.

Michael Nathanson:

I have a two-parter. First, Ellen. What is in your billable expenses? And why was it such a variability between net and gross revenues? And can you remind me if you take a principal position in media buying? [indiscernible] on answer, I have one for Philippe.

Michael Nathanson:

Okay. So there's not a media buying position in there. And Philippe, I think, in the past, you guys have not been pretty clear, right? So given that others are now doing it, it looks like with some success, why maintain that posture when it seems like it's now more standard?

Operator:

The next question is from Lina Ghayor with BNP Paribas.

Philippe Krakowsky:

Sure. I'm not sure in what order. So perhaps I'll start with the first and the last and then pass the question in the middle to Ellen. Acxiom is growing. Acxiom is, I think, different than the data asset that exists within one of our competitors because at least my understanding is that there's a media component to that. Whereas for us, Acxiom is a first-party data management business and -- where we plug it into -- and it works closely with others of our agency businesses. We then see more attractive growth within those businesses. So to the extent that Media is our strongest performer, and one can assume that it's growing well ahead of the overall number for us. We're seeing Acxiom fuel strong results. It's core business, where it sells these very large software engagements to handle first-party data for clients, those are multiyear contracts, those take a while to sell in. And that is, to our mind, always going to be a business that has probably mid to slightly below mid-single-digit growth. That's really not the purpose of it. It is the engine on which we drive a lot of the others. And then in terms of your question about clients, I think it's quite consistent with what we shared with you the last time we spoke. So I think that at the time, we did say that there was a sense at that point, a palpable sense that there had been more of a caution or that clients were looking for a level of flexibility and contingency planning. But I don't think that there's really been a change since that time as we go into this point in the year. And I think the thing that I would also sort of point out, if you try to dimensionalize the macro, is we take you through the client sectors. You can assume that those are probably in the order of the growth at which they're coming in, and we said 6 of the 8 sectors were growing. And I guess if you wanted sort of further quantification, you've got three of them at the top end that are growing north of 5% and 3 that are growing 3% to 5%. And so the tech and telco is clearly the drain on us, but I don't think we're seeing a macro that is dramatically different than what we shared with you when we last spoke.

Operator:

Our next question is from Julien Roch with Barclays.

Philippe Krakowsky:

I don't think we're unique on the latter question. So obviously, when you think about a lot of the modeling work and the analytics work that is taking place in our Data business, in our Media business, as we mentioned on the prepared remarks, increasingly, where our Health business is also incorporating that, we've been using machine learning for some time there. And so I think there continue to be opportunities there. I think that the commerce space for us is still opportunity. There's a great deal that we can do there. And you saw us, towards the end of the year last year, make an acquisition in that space. You saw us add a leader for that space at the holding company level. So I think that in a number of areas, it's going to enhance the nature of the services that we provide to clients. And then that I think the question or the challenge is how do you incorporate it into your processes and then how do you enhance what you're doing on the creative side of things by perhaps reinvesting some of the dollars it frees up because it will, doubtless, make it possible to do some of the things that we're doing inside of the creative agencies differently, faster, perhaps more efficiently. And then on the new business question, that would be a tough one because as I said, the real opportunities in the places where we're seeing new business come up is either in media, in large integrated opportunities, where data and media are important components of our offering. But I don't think that we are going to start breaking down the new business at the agency level because I'd rather people spend time actually with clients and focused on growth than sort of that level of performance kind of granularity, back to you guys. But it's not -- the falloff there, the fact that it ends up and we begin to cycle off of that in the third quarter, what is cycling on, we've had wins in integrated consumer advertising, work in financial services, in auto and then we've had wins in media, also in financial services and in pharma. But what's coming in and what's going out isn't necessarily the same.

Philippe Krakowsky:

I mean as I said, we went into the year net new business with a headwind. And at this point, we have managed to retire that. And all -- and the wins will start coming on stream shortly but definitively and stronger in the back half.

Cameron McVeigh:

This is Cameron McVeigh on for Ben. A couple. Just on your recent appointment of your Chief Commerce Strategy Officer, I was wondering if you could talk a bit about the retail media opportunity and how your clients are approaching that? And then secondly, on the M&A environment, curious if your appetite has changed for M&A at all, if there's any specific type of strategic acquisitions you guys are focused on in the near term?

Operator:

Thank you. And that was our last question. I'll now turn it back to Philippe for any final thoughts.

Operator:

Thank you. And this concludes today's conference. You may disconnect at this time.

Operator:

Good morning, and welcome to the Interpublic Group Fourth Quarter and Full Year 2022 Conference Call. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thanks, Jerry, and thank you for joining us this morning. As usual, I'll start with a high-level view of our performance in the quarter and the full year and our outlook for the year ahead. Ellen will then provide additional detail, and I'll conclude with updates on key developments at our agencies to be followed by Q&A. We're pleased to share another year of strong performance. Before turning to the numbers, I'd like to once again thank our more than 58,000 colleagues around the world whose dedication to our clients and one another are exceptional, along with our expertise spanning creative marketing services, technology and data management, that's what continues to be at the heart of our performance. Turning to our results. For the full year, organic growth was 7%. Our adjusted EBITDA margin was 16.6%, both are at the levels we shared with you in our last update in October. It's worth noting that a year ago at this time, we looked ahead to full year 5% organic growth on top of very challenging multiyear comps and performance throughout the year drove consistent increases to that 7%. We grew in every world region and broadly across client sectors. Our three year organic growth stack, therefore, stands at 14%. The level of performance that speaks to the strength and relevance of our offerings, particularly in services and sectors demanding precision and accountability. In our fourth quarter, organic net revenue growth was 3.8%, which brings three year growth performance to 9.7%. That means that, as expected, growth slowed in the fourth quarter consistent with global macroeconomic and geopolitical crosswinds, which we're all aware of. Notwithstanding slowdowns across the global economy and with that, a broadly more cautious marketing and media environment, our growth continued in every world region during the fourth quarter. Overall, U.S. organic growth was 2.4% despite dilution from certain units in the portfolio on top of a very strong 12.1% a year ago. Organic growth in our international markets was 6.1% on top of 11% a year ago. By sector, growth in the fourth quarter was led by our clients in the auto and transportation sector, followed by the retail, our other sector of industrial and government and health care. Going the other way, second telco, which for us is our second largest client sector began to show the impact of - but I guess we could refer a sector-specific issues, which we're forecasting will continue to present headwinds for us for at least the first half of 2023. Also in Q4, we felt the largest quarterly impact of the late 2021 loss of a large food and beverage client which will finish running off at the end of Q1 this year. Each of our operating segments grew organically in the quarter. In Media, Data & Engagement Solutions organic growth was 5%, led by double-digit growth at IPG Mediabrands. Increases at our digital specialists, which we've called out previously, weighed significantly on segment and group-wide growth in the quarter and the year. Our Integrated Advertising & Creativity Led Solution segment grew 2.6%, paced again by IPG Health, which posted high single-digit growth performance. Our segment of Specialized Communications & Experiential Solutions grew 3.5% organically with leadership from the full range of our experiential and sports marketing offerings. Turning to profitability and expenses in the quarter. Our teams continued their outstanding execution, effectively navigating today's complicated economic environment. This, in turn, led to the strong fourth quarter margin performance we're reporting today. We've been able to deliver this result while continuing to invest in our offerings and to take significant real estate actions in the quarter that will further our structural operating efficiencies going forward. Fourth quarter net income was $297.2 million as reported. Our adjusted EBITDA was $568.4 million, which is before a noncash charge in the quarter for those real estate actions. Adjusted EBITDA margin in the quarter was 22.3%, and that brings full year adjusted EBITDA to $1.57 billion and margin on net revenue of 16.6%. I think it's worth reflecting that at that margin level, we've successfully consolidated 260 basis points of margin improvement over the last three years, along with that very strong three year growth stat that I mentioned earlier. Fourth quarter diluted earnings per share was $0.76 as reported and was $1.02 as adjusted for the real estate restructuring charge, intangible amortization and the disposition of small nonstrategic businesses. In sum, our fourth quarter completes a year of strong financial performance across the key performance metrics of growth, adjusted EBITDA and earnings per share. During the quarter, we also closed on the acquisition of RafterOne, a leading e-commerce implementation partner, which brings additional scale and capability to our offerings in an area of growth and strategic importance. Over the course of 2022, we also returned capital to shareholders in the amount of $777 million between dividends and share repurchases. Given the continuing strength of our operating results and confidence in our strategic trajectory, our Board has once again raised IPG's quarterly dividend by 7% to $0.31 per share. This marks our 11th consecutive year of higher dividends, which, as you know, continued uninterrupted through the pandemic. Our Board also authorized an additional $350 million share repurchase program on top of the $80 million remaining in our previous authorization. Turning to discussion to 2023 and our outlook for the year. There remains a meaningful degree of macroeconomic uncertainty. Visibility, therefore, is somewhat challenged. I think it's fair to say that clients are approaching 2023 with equal parts conviction in the need to be in the market, as well as an increased level of conservatism. That's not to say that they are any less focused on the need to drive for growth into the new year or to invest in the transformation of their business. It's just that we're seeing budgeting decisions made with more deliberation. And it's also fair to say that there's significant variability within our client portfolio from client to client. We're confident that the strongest growth areas of our business such as consultative media services, health care marketing, experiential marketing, commerce as well as data management and data sales will continue to perform strongly despite the broader economic situation. We're also confident in our operational rigor and flexible cost model. Our actions in the fourth quarter to further reduce our occupied real estate footprint by nearly 7% demonstrates our consistent and ongoing focus on identifying and acting on opportunities to rethink our business model and improve efficiency. So bridging all of these moving parts together, we expect organic net revenue growth for 2023 of 2% to 4% on top of those industry-leading multiyear comparators and further expansion of our adjusted EBITDA margins to 16.7% for the full year. Our priorities for the year remain consistent. First, to build on IPG's strategic differentiation, which for us means to focus on the people, talent and capabilities that enable us to solve a broader set of business problems, and which further our evolution into a higher-value solutions provider, as well as strong execution when it comes to integrating our agency's expertise through open architecture solutions. Second, to combine those client focused offerings with operational excellence, which is always important, but never more so than in an uncertain economic climate. Delivering on these goals and our new financial targets, as well as our long-standing commitment to return of capital should lead to another year of value creation for all of our stakeholders. At this point, I'm going to hand things over to Ellen for a more in-depth view of our results.

Philippe Krakowsky:

Thanks, Ellen. As you can see from our results, our strategy, talent and culture continue to drive innovation, creativity and collaboration that fuel our clients' success in an increasingly digital economy. Over the past 3 years, we've organically added $1.2 billion of revenue to our business as well as increased adjusted EBITDA by over $360 million since the start of 2020. Credit to our teams for those very strong results. Throughout this period, what we're seeing play out are the accelerated technology-driven shifts in media and consumer behavior that our company had anticipated and against which we've made significant investments. Our expertise in first-party data management, performance media and accountable marketing solutions are all areas relevant to marketers looking to build their brands while also delivering business outcomes. Vital to our strong performance are our media, data and health care offerings. These specialized assets have evolved their offerings to combine marketing services with emerging communication channels and technology is to help clients find new ways to identify and interact with individual consumers. As you saw in October, we continue to look for strategic areas of investment. With our RafterOne acquisition, we brought a talented and specialized team into the IPG network, to architect and implement scaled sales force solutions that connect brands with customers through end-to-end commerce experiences in both B2B and B2C settings. The RafterOne team will help us deliver creative campaign that work smarter for our clients by building meaningful relationships in digital marketing platforms. Enterprise marketing suites like Salesforce and Adobe formed the foundation of so many brands marketing technology stacks, and our company can serve as a bridge between those brands, their consumers and these platforms, strengthening every touch point in the customer journey. We continue to invest in this important growth area and recently announced that we brought on board our first Chief Commerce Strategy Officer. He joins us from Accenture where he oversaw their omnichannel commerce practice. At IPG, he'll connect our existing channel and platform expertise, including strong and scaled teams at MRM, RafterOne, reprise media and IPG platform services as well as others across our entire portfolio. And he'll orchestrate how our company supports clients as they build out commerce solutions and integrate them with a full breadth of their marketing programs. Turning now to the highlights of agency level performance in Q4. As we've mentioned, results were once again led by our media, data and technology offerings. Media performed very strongly to close out a successful year. And during the quarter, we saw a series of notable wins, including Celebrity Cruises at Mediahub, Energy Australia, the REIT tension of major client Merck and the addition of assignments on AWS at initiative and the onboarding of Moneysupermarket Group at UM where earlier this week, we also announced that we welcomed the new Global CEO to the agency. As we speak, IPG Mediabrands is also hosting their third annual equity upfront which provides opportunities for clients and our agencies to engage directly with diverse owned media partners, including black, API, Hispanic and LGBTQIA owned media which is vital to establishing the kinds of partnerships that can change buying patterns in the industry. Acxiom continues to be a strong contributor to the performance of our media agencies as well as others in the group who've incorporated audience-led methodologies into how they develop strategic insights and creative work. During the quarter, Acxiom brought in new logo wins and contract renewals in the automotive, CPG, financial services, insurance, retail and travel and entertainment sectors. They were recognized as a leader in the Snowflake Modern Marketing stack report and also launched a new integration with a customer data platform, Telium to enhance deterministic modeling capabilities. Turning to IPG Health. That network continued to deliver strong results for us in the quarter, compounding very strong -- excuse me, again, trailing growth since we created the group approximately 15 months ago. While growing with nearly every existing client, IPG Health also focused on expanding its presence globally through some strategic alliances, notably in Europe. And the caliber of their creative work was honored at the 2022 M&M awards, where the network was named large Healthcare Network of the Year. At our global advertising networks, we continue to see the benefit of our investment in strong differentiated agency cultures which are driving distinctive ideation and creativity, and we're seeing that recognized again and again in the industry. FCB won significant accolades during its first full year under its new leadership team, who was named as 1 of the 10 most innovative advertising agencies of 2022 by Fast Company. It was honored as the #2 network overall in Cannes and was once again named Festival's top rank North America network, thanks to powerhouse offices in New York, Chicago and Toronto, which it bears noting are all leaders in leveraging data to power audience insights and creativity. With a new CEO in place at the beginning of the fourth quarter, McCann saw new business wins with Smirnoff which make it part of the Diageo roster and post-consumer brands. McCann also launched work for recently won clients Converse and Prudential. Additionally, the agency was named Network of the Year to 2022 EpicaAwards for the fifth time at 6 years and McCann New York won Epica innovation Grand Prix for Mastercard's Touch Card, the accessible card standard for blind and partially cited people. More recently, McCann also announced a series of senior organizational changes, elevating key internal leaders and adding new executives to the agency. MullenLowe Group continued to secure new business as it had throughout the year. With the addition of Ferro International, [indiscernible], National Highways in England, Lifestyle Fashion in India and the Barcelona football club in Spain. We also announced the new global CEO for MullenLowe promoting the key female leader from within our organization, who's known across the industry as a champion of creativity, a strong growth driver and someone fully committed to diversity and inclusion. Among our domestic independent agencies as part of the agency's goal to help reshape our industry, the Martin Agency announced their commitment to hire a minimum of 50% directorial and editorial talent from underrepresented groups for all their video content production. At our earn and experiential agencies, performance was led by Octagon, Jack Morton and Momentum, all of which posted strong growth in the quarter. With more than 3 decades of World Cup experience, Octagon was very active with a range of clients at this year's tournament. For example, with a long-time client Budweiser, the agency ran a range of on-site activations in Doha, managed complex global influencer campaigns and hosted nearly 0.5 million consumers who are fans and viewing events around the world. Jack Morton continued to deliver outstanding performance and launched a sponsorship consulting practice, which has dubbed Jack39 and continue to build out JackX, which is their global experience innovation practice which creates events of the combined content with Web 3.0 times. Among our public relations firms during the quarter, Golin had several wins, including a product launch for new alcohol brands, corporate communications work for food products and services brand and then being named the influencer AOR for household appliances manufacturer globally. Weber Shandwick announced new client wins with HP in North America and IKEA and the U.K. And the network also launched what it's calling the business Society and Society Futures, which is a C-suite offering that combines public affairs, corporate affairs as well as organizational design and consultancy. During the quarter, DXTRA Health posted strong gains, winning a large global oncology assignment for a major pharma clients. And in addition, its leader was named to PR Week Health Influencer 30, which is the annual list of most influential individuals in health care communications. At the holding company level, as you know, we have a long-standing commitment to ESG and DE&I as key strategic priorities. And as you may have seen last week, we announced that IPG has been included on the Bloomberg Gender Equality Index for the fourth consecutive year and was recognized for the first time as a top-rated ESG performer by Sustainalytics. We were also once again included in the FTSE for good Index, and Newsweek's America most Responsible Companies 2023 and Forbes featured us on both its America's Best Large Employers list as well as the world's top female-friendly company for 2022. As a business in which human capital is so vital to our success, our culture, including an intentional approach to ESG has long been an important part of our strategy for attracting and retaining top talent, whether in strategic, creative, data analytics or engineering roles, or across a range of other skill sets that have become key to our evolving offerings. Looking ahead, we believe IPG remains well positioned for the future. Much of our growth in recent years as well as in 2022 was fueled by disciplines that most actively tap into our data and precision marketing capabilities as well as our exceptional health care marketing offerings. These are growing parts of our portfolio that continue to develop into more structural and secular revenue streams. We know the world in which we live is increasingly digital and that more than ever, clients need help from us in using audience-led thinking to solve for a widening set of business problems and opportunities. We've been leaders in this space and 2023 will be a year in which we consolidate those gains and prepare to further evolve the way in which we deliver this expertise to marketers is to elevate the value of the services and solutions we provide. In addition, we're confident that our commerce and experiential disciplines, which not today figuring as large in our revenue mix will continue to grow going forward. As stated earlier, despite the broader uncertainty that we're seeing at a macroeconomic level, we expect to deliver growth in 2023 of 2% to 4% on top of a very strong record that has compounded for a number of years. And consistent with that level of growth, we foresee adjusted EBITDA margin expansion to 16.7%. Of course, another key area of value creation remains a strong balance sheet and liquidity. And our ongoing commitment to capital returns is clear in the actions that were announced by our Board today, which also speaks to the confidence in our strategic position and future prospects. Part of our balanced approach to capital allocation, we'll continue to further invest behind the growth of our businesses by developing our people and continuing to differentiate our offerings. This includes a disciplined approach to M&A focusing on opportunities that are consistent with strategic growth areas, primarily commerce and Performance Media, business transformation and consultancy. We thank our clients our people and those of you on this call for your continued support. And with that, let's open the floor for questions.

Philippe Krakowsky:

Maybe I'll take them backwards if that's okay with you. I mean I think if you think about our budgeting process, right, it's bottoms up with our operators. We do, in fact, as you suggest, go client by client. We look at pipeline. And then with our larger clients, obviously, we're able to engage with them directly. And I think what we're pointing out there is just that I think what's happening is that the caution that we're seeing is less a function of the specifics of what's going on right now. I think it's just the open-endedness, the concern about a potential downturn somewhere along the line as we get further into 2023. But again, if you go back to how we build the budget, that bottoms up, look at clients, factor in the pipeline, clearly factor in a view of the macro, and we're going to have a geographic or a client or even a business mix that's specific to us. And then we did call out a couple of places. As you know, I think we're quite direct and kind of clear about what's going on in the business, where are we taking the business. So we call that a couple of places where some things require attention and some things are having an impact as we look at the year ahead. So I would say that, that's how we got to the range the fact that the range is broader than one would see in other years is reflective of that sense of uncertainty. I think you're seeing broader ranges when companies are going out there. And I would say we're comfortable at the midpoint of that range.

Ellen Johnson:

Sure. Thank you for the question. Very optimistic about the opportunity to increase our margins going forward. And I would point to, we have a long track record of doing so. I mean if you look at the past couple of years, we've increased our margins 260 basis points since 2019. So I think it's a combination of several factors. One, as you point out, I think high-value services is a continued opportunity for us. But also, I think we have a good track record of translating growth profitably into margin expansion. We manage our costs in a very disciplined way. And we're continuously looking at opportunities on business transformation. We have a large portion of our revenue in shared services. We manage our real estate portfolio centrally. So put all those things together, I do think that there is opportunity for margin expansion as we move ahead.

David Karnovsky:

Thank you.

Lina Ghayor:

Good morning. Philippe and Jerry. Thank you for taking my questions. I have three, please. The first one is on the guidance. Could you elaborate a tiny bit more the guidance regarding the impact of inflation on the revenue? And marginally, what shape do you expect the growth to be, for example, H1 versus H2? The second one, perhaps for Ellen on wage inflation. How much was wage inflation in '22? And what have you taken for 2023 in your assumptions? And lastly, Philippe, just to come back on your point at the beginning of your remarks, could you comment on the performance by sector? I think you mentioned telecom. Could you elaborate? And more [indiscernible] what is the attitude of your claims by sector ahead of '23? Thank you.

Ellen Johnson:

So as far as inflation on our cost base, we've been very transparent that there's been modest inflation in the salary line, but ones that we feel are very manageable and that will not take us off the growth trajectory on our margins nor deter us from expanding them accordingly. So that was factored into our guidance for '23 and going forward.

Lina Ghayor:

Thank you.

Steven Cahall:

Good morning. Maybe just to follow up on that theme a little bit first. So Philippe, can you give us an idea of what the net new business impact is for 2023? It sounds like it's probably modestly negative. So I just want to make sure I'm piecing all that together. And I'd love to include some components of this question, which is how does kind of health care set up from a growth rate perspective in 2023 since that's such a big part of the revenue mix? And R/GA and Huge, it sounds like those will be drags this year. Historically, they've kind of been some real superstar agencies for IPG. So I guess, how do you kind of think about the journey of these digitally native agencies? Is it still an area of investment? And how do they kind of fit in the portfolio going forward?

Steven Cahall:

Great. And then maybe just a short follow-up for Ellen. Working capital was a big use in '22 I think it was favorable in '21. I know the timing of the year can be a strange line to draw on the sand, but should we expect it to then be back to probably a benefit in '23?

Steven Cahall:

Thank you.

Operator:

Thank you. Our next question is from Michael Nathanson with MoffettNathanson. You may go ahead.

Philippe Krakowsky:

How are you?

Philippe Krakowsky:

Look, I think that's really -- I mean it's very apt observation, right? I can definitely speak to RafterOne and what it is about them and why, right? So to our mind, a very strong asset in a very specific space that is growing very fast, right? So obviously, Salesforce as a platform means a lot more to more of our clients. So they're ascendant. And then for the dollars that go into a major sales force implementation, there's a multiple, there's that goes to the service providers. So that's a -- there's a large service economy around that, and we're very strong in Adobe. And to us, we were building that Salesforce capability, started working with this company as a partner got to know them. And it was actually preemptive on our part because I don't know that their ownership was -- their owners were necessarily thinking that this was a moment in time at which they would trade the asset. But from where we sit, tech implementation, direct-to-consumer work, the internal platform services group that we've created so that we are bringing kind of bigger presence into those kinds of engagements. So I think Salesforce -- I mean, RafterOne is 500 experts, I think 800 or 900 certifications and both B2B and B2C expertise. But I think what you said that's very accurate is that we're a bigger company by a fair bit as of the last 3 years. So you used to think of us as doing tuck-ins, and they were quite small, and they were much more sort of agency like. And to our mind, I think we want to concentrate that buying power and then focus on these areas where what you've got is sort of a hybrid of marketing expertise, some measure of creativity against an emerging channel and then some piece of what they do, which brings some technology expertise. So I think you probably will see us do fewer and scale-wise, they'll have gotten bigger. What tuck-in means will be, I think, more like this.

Michael Nathanson:

Ellen, can I follow up? I remember asking you when you started about that question about margin. Why was your drag on margin from that tax this year? I think you answered previously, what was a much difference. So what happened this year on margin that didn't happen in the past?

Michael Nathanson:

Okay. Thanks.

Tim Nollen:

Hi. Thanks very much. Could I ask a couple of cost-related questions, please. If my math is right, your $20 million in real estate savings equates to about 30 basis points of margin. Is that the kind of scope of upside we could expect in 2023? And maybe an offset to that or maybe a boon to that, I don't know, would be any comments you could make on staff. I heard your comment on managing the staff cost inflation versus the revenue growth. It sounds like you guys maybe net might still be hiring rather than reducing staff. And there's a lot of talent now available from all these layoffs and lots of other companies. I'm just wondering what you could say about your expectations in terms of staffing levels and growth in cost this year? Thanks.

Tim Nollen:

Great. Thanks a lot.

Jason Bazinet:

I had a quick question in terms of the macro. In terms of the macro uncertainty, is there anything that you would call out in terms of either higher or lower risk profile as it relates to account reviews? It just doesn't seem like it's been as active as I would have thought, but I'd love any color that you have.

Jason Bazinet:

Okay. Thank you very much.

Philippe Krakowsky:

Thank you, Sue. Thank you all for the time and the interest. We're looking forward to the year. We've got a lot of work to do, and we'll keep you posted as we go. Thanks again.

Operator:

Good morning, and welcome to the Interpublic Group Third Quarter 2022 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. [Operator Instructions]. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you, Jerry, and thanks for joining us this morning. I hope you're all keeping well. As usual, I'll start out by covering the highlights of our performance in the quarter and the nine months. Ellen will then provide additional details and I'll conclude with an update on our agencies and the tone of the business, to be followed by your questions. We're pleased to report a strong third quarter and nine months. Third quarter organic growth was 5.6%. That's on top of a very strong 15% growth a year ago, and it brings our three-year organic growth stack over the period of COVID to 16.9% in the third quarter. Over the first nine months of the year, our organic growth was 8.2% on top of 12% a year ago, which brings three-year growth to 15.7% for the first nine months. Those three-year numbers continue to lead the industry. We once again posted growth across our US and international markets. Domestically, organic growth for the quarter was 4.4% on top of 14.7% in last year's third quarter, and organic growth in our international markets was 7.8%, highlighted by growth in every region of the world and that was on top of 15.4% growth a year ago. Our growth in the quarter was also broad-based across our portfolio whether viewed by segments, agencies or marketing disciplines. Each of our segments compound double-digit growth a year ago. Our media, data and engagement solutions segment grew 3.8% organically, which adds to 15.9% growth last year. Performance here was led by double-digit increases at IPG Mediabrands, while two of our digital specialist agencies decreased from a year ago, and are weighing significantly on the segment. At our integrated advertising and creative led segment, organic growth was 6.7% on top of 12.8% growth last year, and we had growth in all of our largest agencies with clear leadership again, this quarter by IPG Health, followed by McCann Worldgroup. In our specialized communications and experiential segment, organic growth was 7.8%, highlighted by double-digit growth in our experiential solutions across Jack Morton, Octagon, as well as Momentum, along with solid single-digit increases in the public relations discipline. This result builds on the 18.5% growth in the segment that we saw last year. Across client sectors, our growth in the quarter was led by health care, retail, financial services, our other sector of industrial and public sector clients and our auto sector. Turning to operating expenses and margin. Our results again continue to reflect the strong cost discipline, exercised by our operating teams, as well as our ongoing investment behind key growth areas. As you know, our comparisons to last year reflect the ins and outs of the pandemic, so we continue to drive margins at levels that are well above seasonally comparable pre-COVID periods. Net income in the quarter was $251.8 million as reported. Our adjusted EBITA was $356.2 million, resulting in net revenue margin of 15.5%. As expected, that's below last year's third quarter, when our growth had accelerated at a rate that was well ahead of hiring and when certain variable expenses were still at low levels, due to the effects of the pandemic. Compared to a year ago and under our organic growth of 9.1% over the trailing 12 months, headcount has grown approximately 7%. Variable expenses have recovered to higher levels as well as we've resumed travel and return to office in far greater numbers. Our diluted earnings per share in the quarter was $0.64 as reported and $0.63 as adjusted for intangibles amortization, restructuring adjustments, and our net dispositions. Under our share repurchase program, we authorized earlier this year we repurchased 2.6 million shares in the quarter. We're gratified that our ability to deliver marketing and media solutions, which bring together creativity, technology, and data continue to drive growth with existing clients as well as new client wins. The growth you're seeing is driven largely by these very relevant capabilities, which can solve for an expanding set of marketer needs for more precise, personalized, and accountable engagements with their audiences at an individual level. The strength of our company is bringing talented people together in our client-centric model to create customized solutions that meet these higher order client needs whether those engagements are led by one of our powerful agency brands or through a collaborative IPG Open Architecture team. These strong and relevant offerings are important for our long-term future as well as at this moment of heightened macroeconomic and geopolitical uncertainty. The current environment is making visibility more challenging. But given our strong year-to-date performance, we are upgrading our expectation for organic growth for the full year to 7%. With growth at that level, we expect to achieve adjusted EBITA margin of 16.6%. Notwithstanding this update to our outlook, we are seeing a more challenging macro environment going forward. On a question following our last call, you'll remember that I mentioned some clients were asking us to help them scenario plan and think about how they might best redeploy media and marketing investments in the event of a downturn. The majority of our clients are now asking us to engage in this kind of contingency planning, prioritization of activity, and a focus on actions that will drive performance in sales. To a lesser degree, we are also seeing some deferrals of digital project work. Historically, we know that marketers that continue to invest through the cycle come out ahead in the long run with measurable gains in market share and growth. These days that's a conversation that's ongoing with many of our clients who also know that given the duration of past downturns, reductions are generally short-lived. At IPG, our differentiated resources of creative and marketing talent, data and technology, as well as outstanding agency brands along with our diversified and flexible business model and proven management teams position us well. You can expect that we will hold true to our history of managing effectively even in more challenging times, while also continuing to invest in and advance our offerings for success in an increasingly digital economy. We are of course staying close to our clients and to our people. And on that note, I'd like to close this part of my remarks by recognizing and thanking our people for their focus and their work on behalf of clients in support of each other and also for their engagement on the many vital societal issues that are consistent with our culture and values. So, at this point, I'm going to hand the call over to Ellen for a more in-depth view of our results.

Philippe Krakowsky:

Thanks, Ellen. Our growth thus far this year builds on a record of success that goes back some time, and embedding digital across the portfolio as well as adding a layer of data and tech to our offerings have been important parts of that playbook along with our commitment to talent and strong agency brands. Now the convergence of media and entertainment with the impact of technology on the retail sector is leading to another major growth opportunity for brands. And that's the evolving world of commerce and direct-to-consumer business models. To-date, we've been successful in helping our clients creating engaging and effective customer experiences across a range of physical and digital environments. During the quarter, we took another important step along this journey when we announced our acquisition of RafterOne. The company is a leading Salesforce implementation partner that works with marketers and brands to deliver personalized content that engages and converts in a measurable, precise and repeatable way across a range of marketing technology channels. With over 25 years of experience building digital journeys for clients and with more than 500 employees RafterOne is a Salesforce Summit Partner and that's the highest tier awarded to implementation partners. By bringing IPG and RafterOne together we're significantly enhancing our commerce capabilities on a key marketing technology platform in both the B2C and B2B Salesforce cloud. Now RafterOne will continue to work independently with their own roster of clients as well as work directly with IPG agencies, bringing specialized commerce capabilities whether that's in strategy, service, data or CX implementation to clients across our entire portfolio. Commerce and other forms of business transformation work can be a significant growth driver for us going forward and the addition of RafterOne is an important step in rounding out our offerings in this space. Turning to highlights of performance across the group in the quarter, a key sector that continues to show strength is healthcare. Reputationally, we continue to be the leader in this dynamic sector. IPG Health won Healthcare Network of the Year in 2022 MM+M Awards. Collectively, our agencies took home 23 wins across 21 categories, making us the industry's most awarded network. During the quarter we launched IPG Health Medical Communications, which aligns eight agencies to create what we believe is the industry's most comprehensive and interconnected medcomms offering. And this type of specialized offering available to all of our healthcare clients is precisely the kind of benefit that we foresaw when we launched IPG Health just a little over a year ago. Importantly, the company's thought leadership and creative recognition also converted into growth as IPG Health continued to win new business and grow with existing clients including AstraZeneca, Pfizer, Teva and Boehringer Ingelheim. IPG Health was also a key part of a successful integrated media consolidation with Merck. In Mediabrands, we continue to see a high degree of engagement with many of the world's most sophisticated marketers. During the quarter we onboarded new clients including Nike, and expanded our relationships with Merck and Teva. Last week Mediabrands shared the fourth iteration of its Media Responsibility Index, which is proprietary research on the relative safety and fairness of media platforms. And this helps our clients make their media planning decisions in ways that are responsive to issues such as dis- and misinformation. Notably, we also promoted Eileen Kiernan, who is exceptionally client-focused and strategic naming her Global CEO of IPG Mediabrands. In this regard Eileen becomes the first female leader of a major media management group in the industry. Staying in the media space, as we see travel continue to bounce back, Celebrity Cruises just selected Mediahub as its media agency of record for North America. Acxiom played a significant role in this win as the teams will develop custom audiences through addressable media to power this client's highly personalized marketing efforts. During the quarter, Acxiom garnered recognition as a Great Place to Work with Fast Company naming it as one of the best workplaces for innovators and Fortune naming the company a best workplace in technology and a best workplace for women. As Ellen indicated, the performance of two of our specialist digital agencies has been challenged as a result of the macroeconomic uncertainty that we're seeing. Both of these agencies are in the midst of evolving their premium offerings, which is a requirement to stay ahead in their space. When it comes to the strength of our brands in the creative advertising space, McCann, FCB and MullenLowe continue to distinguish themselves. During the quarter, we announced a new global CEO from McCann, Daryl Lee, who has a remarkable breadth of experience that spans all facets of our industry and the full range of IPG. As such, Daryl is extremely well positioned to advance the success of the network and drive it to further achieve its ambition, which is to be the global leader of creativity that drives growth for clients. We saw several wins in the quarter at McCann including Beefeater Gin, McArthurGlen design outlets and Hankook Tire. The global Effie Effectiveness Index, named McCann Worldgroup, the most effective agency network for the fourth year running. And McCann was also named Network of the Year by the Gerety Awards, where an all-female jury rewards the highest standard of creative excellence in advertising and communication. At FCB, the creative network won new assignments with existing global clients including Kimberly-Clark, Clorox and AB InBev. And FCB's Global Chair and Chief Creative Officer was honored by the AEF, the ANA Educational Foundation with the Inspire Award recognizing her commitment to education and inspiring young talent as it makes its way into our industry. MullenLowe Group saw a number of new business wins in the UK market, winning the Co-op retail chain as well as Morgan Stanley, Value Retail and the Tic-Tac and Nutella candy brands. MullenLowe continued to be recognized as one of the industry's most creatively effective networks as well for the 11th year in a row was the top-ranked network scored dollar for dollar in the Effie Effectiveness Index. And during the quarter we also created a new integrated agency called iX, which is based in London to handle global, creative, strategy and advertising for new client Bentley Motors. Our agencies that specialize in live events continued their strong return to growth. The industry is seeing budgets shift from more traditional marketing for the kinds of engaging experiences that allow consumers to build emotional connections and lasting relationships with brands, often connecting the physical and digital space. And having three of the industries premier, global, sports and brand experience companies within our organization is a point of differentiation for Interpublic. Notable highlights in the quarter here and Octagon included the creation and management of Coca-Cola's, FIFA World Cup Trophy Tour, as well as a nationwide campaign highlighting the Home Depot's, 20th season sponsoring ESPN's College GameDay. Octagon and R&CPMK also worked with our Amazon client to kick off a campaign celebrating the launch of Thursday Night Football on Prime Video, and the athlete representation group within Octagon, negotiated an MLB record-breaking contract extension for Julio Rodríguez, with the Seattle Mariners, making it the largest in baseball history. At Jack Morton, we saw significant wins with clients like McKesson, Siemens, Intel, Cigna, Riot Games and McDonald's. The agency produced the Cadillac-US Open sponsorship at the US Tennis Center and brought to life several major events for the first time since the pandemic began, including auto shows, large retail activations and wellness conferences. At Momentum, the network was named Adweek's experiential agency of the year and brought Jimmy Fallon's, Tonight Show to Fortnite. Among our public relations firms, Golin won AOR duties for West Monroe, a Chicago-headquartered digital services firm. And the agency was also named as PR agency in the UK for Specsavers, the optical retail chain. While at Weber Shandwick new business included Bud Hero in North America and working alongside future brand and Jack Morton, as part of the DXTRA Health team Weber was awarded a significant brand launch by life sciences company PerkinElmer. Our US independence during the quarter, the Martin Agency stood out as it extended its run of new business by winning Santander, LegalShield, Bud Light NEXT, Bud Light Seltzer. Deutsche LA won Strava the number one, app for runners and cyclists and Carmichael Lynch, onboarded a new client in Hostess for our public relations remit. When it comes to our ESG programs, we continue to make notable progress during the quarter. We named our first Chief Sustainability Officer. We announced a new process for evaluating energy and fuel clients. And we once again released our domestic workforce data, which is a transparency commitment IPG established and has now become an industry standard. Our ongoing work in this area speaks to our commitment to embrace issues that are important not just to our people and our planet, but to our clients and other key stakeholders. For the year, we remain in a positive position from a net new business standpoint. Our net new business pipeline continues to be sound. Activity in new business does seem to be increasing, as we head into the new year. Despite a more challenging macroeconomic environment, as you've seen, our expectation is given our strong performance through the first nine months, we are upgrading our view to organic growth for the full year to 7%. As you know, this compounds multiyear sector outperformance. And current results combined with the continued execution of our long-term strategy, should remain significant drivers for sustained value creation going forward. Of course, given the macro, we're going to stay committed to sound financial fundamentals as Ellen was mentioning, and that's allowed us to grow our dividend for 11 consecutive years. And we are also committed to continuing our strong share repurchase program. We're confident as well that the investments in talent and capabilities we continue to make, position IPG well for the future with highly relevant and differentiated offerings, underpinned by the sound financial foundation and a strong balance sheet. As always, we want to thank our clients and our people who are both essential elements of our success and thank you, as well, for your time this morning. And at this point, let's open the call for questions.

Steven Cahall:

Thanks. Good morning. Maybe first, Philippe, could you talk a little more about the deferral of the digital project revenue you talked about? Is this a lot of the project revenue that often comes in in the fourth quarter, or is this more of a kind of longer-term comment, reflecting the way clients are doing some of that contingency planning for 2023? And relatedly, when your clients talk about contingency planning and you see them maybe pulling back a little bit in 2023, do you think they're just shifting the way they go to market, or is that more of a sort of material slowdown in what they might spend on marketing? And then, I have a quick follow-up for Ellen.

Steven Cahall:

Yes, makes sense. And then Ellen, it sure seems like the stock is not reflecting some of the strength in the business. I've got it at about 10 times earnings. You've got a really healthy balance sheet. I don't think there's much in terms of maturity until 2028. So, how do you and I guess, Philippe and the Board sort of feel about leaning more aggressively into the buyback now in a period of uncertainty as opposed to waiting until a period of rebound?

Steven Cahall:

Great. Thank you.

Operator:

Thank you. The next question is from David Karnovsky with JPMorgan. You may go ahead.

Philippe Krakowsky:

Well, look, I think it's everything that you said, and it really depends on where in our world we're having the discussion, right? But, it's -- flexibility is a very big part of it at this point. And then, understanding the implications of the decisions you make and ultimately as I said, if it's a client where we're the adviser and the consultant on the media side of things then it does focus on where and how they're going to redeploy. If it's an Open Architecture client where we're working with them in a really broad macro sense then we might dial up certain capabilities knowing that we're heading into this moment in time. So, it's very kind of case dependent. And within some client categories are feeling it to a greater degree than others. I mean, I'd sort of point out that where the macro is impacting is, clients who are particularly exposed to the changes that we're seeing. So, if high interest rates impact your business, if commodity input costs impact your business then you're thinking this through. So there isn't one answer, but I think it's around that set of conversations just making the most informed decisions and getting the mix between brand and performance and up and down the funnel, and actually linking those two increasingly and keeping some optionality, as I said earlier.

Philippe Krakowsky:

Sure. I mean in health, I'd sort of point out a couple of things. So, we're fortunate in that, we are very, very well represented among the largest players in the space. IPG Health clearly is - been a focus by the nature of what we've just done a year ago and how we've put that together. But it's been a long-term investment that has led to that growth for us, right? And then, there are trends -- underlying trends that are clearly tailwinds to all of that. We have some biotech, but we've got a very balanced portfolio. I'd say that specific to biotech have we seen the market dislocation have some impact on funding there? Sure. But is that something that's having a significant impact from where we sit given the breadth of what we do? Not really. And then beyond IPG Health, there's sizable health business inside of Mediabrands, inside of marketing services, PR is very strong in that regard DXTRA Health, where we're bringing a lot of the marketing services agencies together. So that continues to feel to us like it's an area that's going to be pretty resilient.

Philippe Krakowsky:

Thank you.

Michael Nathanson:

Thanks. Philippe, I have two. One is it feels to us that the macro in Europe and the U.K. is obviously going to get worse through the winter. I wonder is the tone of business discussions different by geography there? So maybe talk about in terms of where are the questions are coming about budgets, Security to Europe. And then given the potential for slowdown in those markets, what are you doing on the cost side to initially plan where I know it's hard to -- if you had to take people out of capacity as it's slower. But what are you doing in thinking about just planning for budget expenses in 2023 and the growth of budget for 2023? Thanks.

Michael Nathanson:

Okay. Thanks Philippe.

Operator:

Thank you. Next is Ben Swinburne with Morgan Stanley. You may go ahead.

Philippe Krakowsky:

Everybody else seems to.

Philippe Krakowsky:

Sure. And I think commerce is an interesting one. I mean, you said software and obviously there's a technology layer at Acxiom, and then there's what we're doing with data and tech with media. So it's not by any means the only place where we've got businesses that are services plus a service -- a software layer of some kind. But on commerce I guess, I mean just breaking it down there's D2C part where clients need our help with everything from the design of a site, the build of a site, the content creation, the CRM piece and then business processes, because you often really have all the way down to payment transactional stuff. And for us the leader in that space has been MRM. So they excel in those areas. And so to our mind RafterOne meaningfully bolsters that offering. Then there's the marketplace side and so that's where we optimize media. We do SEO. We leverage social commerce and you're doing a lot of message amplification and you're finding places where you intersect with the consumer. And then that for us sits inside of Reprise Commerce. So that's a big part of the story for us there. So those are two sizable places where we've housed a lot of that capability. And it all comes together on this umbrella of IPG Commerce. And then what we do is we activate a company like ChaseDesign for in-store campaigns, or as you said a momentum for promotions and activations. But we also have specialist agencies and influencer management. For example, you have paid placements. And another big piece of it is going to be retail media. And so we're very active. You saw MAGNA put out a -- how big is this? How big is it going to get? And I think it's net going to be a growth area for brands and therefore for people who provide advisory services. So we kind of draw that from a number of our agencies. And then that's kind of the martech side of it. But when you follow the consumer along the purchase journey and you're going awareness purchase, but you're also going loyalty lifetime customer value then you wanted to play into Acxiom and the data that's there and you want to decide where and how you get martech and ad tech working together. So that's why I said we see it as a really big opportunity for us. And then on the experiential piece, when the pandemic hit, we scoped that for you all to say circa maybe a little bit shy of 5% of our revenue. And the world closed. So that was clearly a very difficult time for them. But we see that as something that is a differentiator for us collectively those assets. And the question for us is to get them more focused on where clients are going which is ROI and accountability and the digital component building out digital into -- and with those organizations, we think is going to make the nature of what they do more precise and more accountable. It's also a really interesting place to talk to clients about using all of that activity as a way to onboard first-party data about your customers in a way that's very, very transparent and therefore very, very compliant. So we do think that that's an area where there's the opportunity for growth for us.

Philippe Krakowsky:

Sure.

Julien Roch:

Yes. Good morning, Philippe and Ellen. Thank you very much for taking the question. Two, one for Ellen and one for Philippe. Ellen on net interest both Publicis and Omnicom said that that was fixed so no impact on interest expenses, while either higher interest met more interest income. What about IPG, same i.e. lower net interest? Could you quantify it? You have $1.8 billion of cash. Yield on cash went from zero to four, so $64 million benefits? And then Philippe, some agencies are saying that in case of a downturn some advertisers have learned their lessons from last couple of downturns and therefore we cut less. However, a recent survey from the World Federation of Advertisers polling 55 of the world's largest advertisers conclude that the economy will be the main driver of the budget next year for 74% of them, which would indicate they intend to cut the same. So if we go into a global recession next year, do you believe that advertisers would cut as in the past, or will they behave differently? Thank you.

Philippe Krakowsky:

The bigger question, as I said in the prepared comments, it is a conversation that's ongoing with the vast majority of our clients. There is an understanding and an acknowledgment that there's a meaningful benefit to staying the course. We don't break this out for you, but our top 20 -- or say our top 40 clients have been growing consistent with the overall growth of the company, although there are lots of ins and outs, because as I said if you've got certain factors that are impacting your business or your business model disproportionately. And it's interesting because even supply chain we were talking about at the very beginning of the year with all of you and we said we don't see it -- we don't think it's in the conversations with clients. It might be later in the year and there are one or two categories where it's come into the conversation with clients. So I do believe that clients understand it and so it will be a function of where they sit, if their company has the wherewithal to move through the period and stay invested. And then the other thing that we've also talked about is the tools available to clients and the ways in which we and some of our competitors have capabilities that can move much further down into the funnel or can do -- as the question earlier alluded to can do work that connect brand and performance. So it really is dependent on how significant a downturn would we be looking at and whether people are in a position to do something that they know will benefit them in the long-term or whether they might have to take some action -- kind of corrective action to get through a period that might be more challenging for them.

Philippe Krakowsky:

Thank you.

Tim Nollen:

Good morning, everyone. Thanks a lot for taking my question. I'd like to actually ask the recession question again, if you don't mind, but in a different way. Let's ignore the Q2 2020 recession, because that was such a sudden weird thing. And let's go back to like 2009 or 2001 2002. In those days you were very much a traditional media business and now you're very much a digital media business doing lots of different things beyond measured media. And I wonder if you could help us understand maybe if we all assume that measured media spending might drop in a recession, perhaps at similar rates as it did last time around who knows, but you do so many other things right now. Is there a way to qualitatively or hopefully quantitatively assess what the spending might be with Acxiom, Kinesso on IT consulting all those sorts of things beyond just traditional media?

Tim Nollen:

Yeah.

Tim Nollen:

Yeah. Thanks, Philippe. And just maybe one point of quantification then could be that all these things you're talking about -- I mean I you probably have it in your slides. But this is half or more than half of all the business you do, right? The traditional measured media stuff is way less than half isn't it?

Tim Nollen:

Okay, great. Thanks.

Philippe Krakowsky:

HI Craig.

Ellen Johnson:

Hi, Craig. Sure. If revenues were flat given that scenario it clearly would be our objective to be able to maintain our margins. The things that I would point to that give us line of sight is we're an experienced managed team that has navigated together through many economic environments. As Philippe has pointed out we have a flexible cost structure right between open reqs attrition temp help and incentive comp which vary closely with performance. All those things will help. And then ultimately it will depend upon the revenue mix the cost of that right? But it's something that it would clearly be in our objective and we think we have line of sight to.

Operator:

Thank you. This concludes today's conference. You may disconnect at this time.

Operator:

Good morning, and welcome to the Interpublic Group Second Quarter 2022 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. . This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you, Jerry, and good morning. I hope you all keeping well. These days that's no small ask. Before turning to our results, it's important to acknowledge that as individuals we're living through and as organizations, we're operating in quite unusual and challenging times. In all our conversations with clients, the question of purpose is something that increasingly comes up. That topic is also at the forefront of our thinking. And it's essential that we as IPG continue to be clear about our values because living into those values is something that our colleagues across the company take very seriously, which is particularly important when you consider that we're a talent-based business focused on ideas, creativity, and IP. So I wanted to call out to the teams across Interpublic that are making contributions to alleviating the impact of crises such as the war in Ukraine and the political upheaval in Sri Lanka, as well as to all our people who are leaning into our equity and inclusion efforts and are playing their part in programs that seek to address other key areas of ESG, which remains an important priority for us. I think that was evident after the Supreme Court decision on Roe v. Wade, when we assured our people that we would update our health care benefits to provide funding for travel, to ensure consistent and equal access to health care, including reproductive choice for all our employees. We understand the decisions regarding health care and our families are by their nature ones that each of us makes with a great deal of thoughtful deliberation and in keeping with our individual circumstances and beliefs. As an organization, we want to ensure that we live up to our values of mutual trust and respect, which have been core to our longstanding commitment to inclusion and equity. Turning now to the immediate purpose of this call, we'd like to share with you our Q2 and first half results, as well as updates on the highlights at our agencies and on the tone of the business to be followed by answers to your questions. We're pleased to report a strong second quarter and H1, in which we continue to build on our industry-leading performance over a period of many years. Second quarter organic net revenue growth was 7.9%. It's worth noting that's on top of very strong 19.8% growth a year ago. And this brings our three-year organic growth stack over the period of the COVID crisis to 16.5% in the second quarter, which is well ahead of industry norms. Over the first six months of the year, our organic growth was 9.6% which brings three-year growth to 15.2% for the first half. We saw consistent growth both in the U.S. and our international markets. Domestically, organic growth for the quarter was 8.3% on top of 17.4% in last year second quarter. Organic growth in our international markets was 7.1%, highlighted by growth in every region of the world, and on top of 24.4% growth a year ago. Growth in the quarter was also broad based across our portfolio of solutions, whether viewed by segments, agencies or marketing disciplines and clients sectors. This reflects the increasingly integrated nature of our offerings and progress in infusing more of our portfolio with data-led thinking. Specific to segments and agencies, it's important to call out the fact that growth at each of our segments compounds double digit growth a year ago. Our Media, Data & Engagement Solutions segment grew 6.2% organically, which adds to 25.1% growth last year. This strong performance was led by double digit increases in our media, data and tech and e-commerce offerings. Our digital specialist agencies were dilutive to this result as we saw deceleration in certain speculative client categories and related project work. At our Integrated Advertising & Creativity Led segment, organic growth was 8.5%. We had growth at all of our largest agencies significantly outpaced by IPG Health, followed by strong growth at MullenLowe and FCB. In our Specialized Communications & Experiential Segment, organic growth was 11.1% highlighted by double digit growth in our Experiential Solutions and solid single digit increases across the public relations discipline. As you'll recall, when we launched this enhanced disclosure, we believe the new segments are important in that they reflect the key areas of activity in which we are providing services to our clients and the broader evolution we are seeing across the industry. However, we remain a highly client-centric culture and organization and our major engagements with clients involve custom solutions, which draw on services from all segments in integrated Open Architecture teams. Our growth in the quarter was also broadly shared across client sectors. We were led by double digit percentage growth in our other sector of leisure, government and industrial clients as well as by double digit growth in the financial services and health care sectors. Turning to operating expenses and margin, our results again reflect our leadership teams' demonstrated capacity to run their businesses with the appropriate discipline, while at the same time continuing to invest behind key areas that will drive further growth. And while our comparisons to last year continue to reflect the ins and outs of the pandemic, it's encouraging that we're driving margins at levels well above seasonably comparable in periods prior to the pandemic. Net income in the quarter was $229.6 million as reported. Our adjusted EBITDA was $370.1 million, resulting in net revenue margin of 15.6%. As expected and as shared with you on our last call, that is below last year's second quarter of 17.9% when our growth had begun to accelerate very significantly, yet certain variable expenses were historically low due to the effects of the pandemic. Compared to a year ago and under our organic growth of 11.4% over the trailing 12 months, our headcount has grown approximately 9%. Variable expenses have recovered to higher levels as well, as we've resumed travel and returned to office in far greater numbers. It's worth pointing out that margin in the quarter of 15.6% compares quite favorably to margin in the pre-pandemic second quarter of 2019, which was 13.4%. That's a result of both our growth and the benefits of the strategic restructuring actions taken in 2020. Our diluted earnings per share in the quarter was $0.58 as reported and $0.63 as adjusted for intangibles, amortization and dispositions. Under our share repurchase program reauthorized earlier this year, we repurchased 2.7 million shares in the quarter using $84.8 million. A differentiator of our performance in the quarter and over a period of many years now has been our ability to bring together creativity, digital technology and data to create higher order marketing and media solutions that are responsive to the evolving business transformation needs of our clients. The growth you're seeing is driven largely by these very relevant capabilities, with which we can solve an expanding set of marketer needs for more precise, personalized and accountable engagements with their audiences at an individual level, with respect for data ethics and consumer privacy. Looking ahead, we fully appreciate that we're at a moment of macroeconomic and geopolitical uncertainty. In this environment, it's fair to say there is a high degree of volatility and visibility is challenged for every company. That's no less true for us at IPG given that we're a global and diversified client service business. Despite these uncertainties, however, and having very recently refreshed our bottom up outlook for the year in meetings with our operators, we have not seen macroeconomic concerns significantly weigh on the growth outlook for the year that we shared with you back in April. While we appreciate the environment is dynamic, the demand we're seeing for our services remains broadly strong and we are committed to delivering on our growth expectations for the year. You'll recall that in April, we upgraded our 2022 organic growth expectations to 6%. Given our growth through the first half of the year, we see upside to that and believe we will exceed 6.5% organic growth for the full year. We continue to expect that we'll deliver adjusted EBITDA margin of 16.6%. While there are always puts and takes as we progress through any given year, we've not to date seen anything of the size or significant that would put us off those objectives. We are, of course, staying close to our people and our clients, carefully managing expenses and as always, we'll keep you apprised as the year develops. Understandably, clients are considering how best to factor a slower macroeconomic picture into their plans for the balance of the year. That varies significantly on an industry-by-industry basis. And marketers are also giving consideration to the disadvantages of being out of market during a slowdown, especially if one doesn't fully materialize or is short lived. Our diverse business model, which as you know encompasses about 5,000 clients, a 100 plus countries and a full range of marketing, media, e-commerce and data services is a core strength of our model. It means we're always working across a broad range of client strategies and addressing an even broader range of evolving consumer behaviors. Marketers remain focused on leading with strong brands, which can help mitigate the impact of higher inflation and brands are critical to their continued transformation to DTC at scale, all of which matches up well with our strong portfolio of agency brands, fueled by top industry talent, differentiated capabilities in data and the ability to customize our offerings on an Open Architecture platform. The skill and commitment of our IPG colleagues have helped us to reach the halfway point of the year on a strong footing. I'd, therefore, like to, in this part of my remarks, again recognize and thank our people for their work on behalf of clients and in support of each other, as well as their engagement on vital societal issues consistent with our culture and values. One additional important item. As you'll have seen, there's significant news related to senior leadership within our organization, which we will be releasing a bit later this morning. Our people are key IPG's long-term success and another thing that's core to our culture is the ability to develop outstanding talent and find new opportunities for colleagues across our organization. So it's gratifying to have elevated a number of our most exceptional and experienced leaders to new roles within two of our key business units. Daryl Lee, who has been most recently serving as the CEO of IPG Mediabrands, has been named the CEO of McCann Worldgroup. Eileen Kiernan, CEO at UM Worldwide, will succeed Daryl at IPG Mediabrands. And at McCann Worldgroup, Bill Kolb will continue in his role as the network's Chairman. We know they will all contribute to the future success of IPG and our clients. At this point, I'd like to hand over the call to Ellen for a more in-depth view of our results.

Philippe Krakowsky:

Thanks, Ellen. Turning now to highlights from the quarter, much of the demand we're seeing and in many cases converting into growth comes from more transformational services as clients seek to tap into the areas where IPG has made significant investments in recent years. The business transformation agenda crosses all clients sectors and the consumer sits at the centre of these changes. We're being asked by marketers to address not only the all important questions regarding the positioning and articulation of their brand, which are key long-term equities, but also the activation of that brand's value proposition in ways that engage with consumers and drive marketplace performance. That combination of our creativity and expertise and marketing services, coupled with the use of data and technology to identify and understand audiences, means we have an important role to play going forward in helping companies to find their businesses and unlock growth. A key component of that formula is our continued ability to deliver best-in-class creativity across all marketing disciplines and around the world. Our very strong showing at the Cannes Festival of Creativity just a month ago demonstrates that our capabilities in this regard continue to be world class, as IPG agencies won 110 Lions at Cannes, including five Grand Prix and one Titanium Lion. Earlier this year, as you'll recall, we were also the number one holding company in North America at the Effie Awards, which recognize the effectiveness of the programs we create for our clients. An ongoing success story for us is IPG Health, which continued to deliver very strong business performance in the quarter. And at Cannes, their creative strength was also on full display as the network marked its one year anniversary by winning 17 Lions more than any other health care agency group. FCB Health was named Health Care Network of the Year and McCann Health came in second in that category for an unprecedented showing a top those rankings at Cannes. AREA 23, also an IPG Health company, was named Health Care Agency of the Year and won the Grand Prix for Good, which recognizes campaigns for nonprofits that use creativity to make a positive impact in society. The creative success of IPG Health comes as the group continues to leverage its broad reach, scale and diverse talent to evolve its capabilities. In the second quarter, the network launched a new agency offering called 90NORTH, which is a software-based advisory that enables pharmaceutical, biotech and life sciences companies to tackle complex issues beyond traditional marketing communications. Another standout for us at Cannes this year was FCB which despite a more modest number of entries than many much larger global agencies was honored as the number two network overall following up on last year's number one overall ranking. In North America, FCB was the Cannes Network of the Year for the fourth consecutive year. The network took home the Creative Effectiveness Grand Prix for its work for Michelob ULTRA, which is a remarkable campaign and that it's a platform idea that seeks to impact long-term sustainability and goes well beyond traditional advertising. FCB Lisbon won Portugal's first ever Grand Prix in the design category for work that directly addresses the country's history of fascism, and FCB Inferno based in London won a Titanium Lion in their partnership with Virgin Group and LinkedIn for their effort to make dyslexic thinking recognized as a term that should be celebrated and a skill set that should be valued. Noteworthy developments at McCann other than those I called out a bit earlier, during the quarter included several new business ones. Prudential Financial selected McCann as its lead agency, creative agency of record following a competitive pitch. The agency won creative duties from McArthurGlen, which is Europe's leading owner of designer outlets; and in collaboration with Golin, McCann expanded its remit with Nomad Foods, Europe's top frozen food company to support the development of a sustainability marketing strategy and communications framework for 2023. McCann also won a Grand Prix at Cannes for its serious and thought-provoking work related to global food shortages, which was done on behalf of the Swedish Food Federation. At MullenLowe Group, the New York office was named U.S. AOR for buyers' pain reliever Aleve and in the UK, MullenLowe Group successfully renewed their remit for the National Health Service following a highly competitive review. Highlights in Mediabrands in the quarter included continued strong new business performance as the network helps clients make data-driven decisions that are central to effectively investing marketing dollars in an increasingly complex, digital and addressable media landscape. We saw Initiative win significant new assignments in Spain, Canada, Australia and the UK during the quarter, including media planning for meal kit delivery giant HelloFresh. UM was named Media Agency of Record for Upwork, the platform that connects companies and freelancers. In April, MAGNA held its second annual equity upfront, which seeks to accelerate support of diverse owned media businesses. By enabling collaborative workshops between brands and media owners as well as arming those media owners with the tools to engage with major marketers, Mediabrands is helping upstream investments take hold of media that are minority owned or those that serve critically important diverse audiences. During Cannes, IPG also announced a partnership with SpringHill, the global entertainment company created by LeBron James and Maverick Carter. While additive to our own creative capabilities, this partnership will provide a new avenue for our clients to access SpringHill's exceptional range of diverse creators. We're active across the breadth of communications channels and formats. We've already seen strong interest in demand for this new partnership, notably from the Mediabrands Content Studio, which is a high growth unit within Mediabrands. Media also continues to benefit from close connectivity with our Acxiom unit, and news at Acxiom during the quarter includes the enhancement of its marketing cloud practice with new offerings in both the Salesforce and Snowflake environments. During the quarter, Kinesso continued to focus on its marketing intelligence engine suite of technologies, which helped brand manage all the data, marketing, software and ad tech services required for growth. In bringing those complex capabilities into one comprehensive offering, Kinesso is helping our clients connect with audiences in a flexible and respectful way, deriving insights that can power creative campaigns as well as media investment decisions. During the quarter, Mediahub, which is another very dynamic IPG media agency, was appointed by Lyft to handle U.S. media planning, buying, analytics and measurement duties. And for this win, Mediahub worked in close collaboration with Acxiom to understand and identify key consumer audiences for the transportation company. Mediahub also won U.S. media for Amazon's new live radio app Amp. And in Australia, the agency was named media AOR for global CPG brand Arla. MRM Commerce continued its strong growth performance, winning assignments from General Mills and Electronic Arts as well as an enterprise level assignment in CRM and first party data integration with Johnson & Johnson. Among our specialized communications agencies, we continue to see strong marketplace performance. An integrated cross discipline DXTRA Health team was appointed by Moderna as the brand's global enterprise agency of record. The solution draws on talent and expertise from Weber Shandwick, Golin and Jack Morton, and they've been tasked with enhancing Moderna's reputation globally as well as expanding awareness of Moderna's leadership in mRNA technology. Weber Shandwick continued to win significant assignments from major brands, including expanded responsibilities from client Mars for their Skittles, Orbit and Extra brands. Group Black , a media collective and accelerated rooted in the advancement of Black-owned media properties, also recently announced that it had hired Weber Shandwick to lead its external marketing and communications activities. All our PR agencies continue to stand out for their creativity and effectiveness during the quarter. At Cannes, Weber won 20 Lions, including three Grand Prix, and at this year's North American Sabre Awards, our PR agencies combined to win 14 awards, which was more than any other holding company. And this was led by Golin which was named both Large Agency of the Year for the second consecutive year as well as overall Agency of the Year. In terms of notable developments on the ESG front, we published our 2021 ESG report which covers a range of environmental, social and governance topics. And this report is the first from a U.S.-based advertising holding company to receive limited external assurance on certain ESG data, and the first to disclose in accordance with the recommendations of the task force on climate-related financial disclosures. This work builds on our evolution of enhancing disclosure following our 2020 report, in which IPG became the first company globally to publish in alignment with the Sustainability Accounting Standards Board's advertising and marketing standard. It's a mouthful. In summary, we are pleased with our quarterly results as they contribute to a strong first half of 2022, which comes on top of exceptional 2021 comps, especially in Q2 of last year. And despite increased volatility and growing caution due to macroeconomic concerns, the tone of the business is broadly strong, and we remain net new business positive. As stated earlier on the call, we believe organic growth for the year will exceed 6.5% along with our expectation for an adjusted EBITDA margin of 16.6%. Given the macro uncertainty that does exist across multiple economic and geopolitical factors, we're clearly going to stay very close to our clients and our people just to be in position to respond as required if there are unforeseen developments. An area of value creation I think which Ellen just pointed out remains our strong balance sheet and liquidity and our ongoing commitment to capital returns was underscored by another increase in the dividend earlier this year, and the resumption of share repurchases. And I think these initiatives also reflect our Board's confidence in the longer term prospects for Interpublic. Going forward, our teams remain highly focused on operational execution, just as our companies continue to provide the kind of higher order of business solutions to clients that can help them drive growth across a range of marketing activities and economic conditions. With that, I'd like to just thank our client partners, our people and those of you who are on this call for your continued support and open the floor to questions.

Tim Nollen:

Hi. I guess the obvious first question I'll kick off with is about the macro outlook, which just seems to be so conflicting between what you and your peers are saying you've seen thus far and what clients are telling you, and then everything we're reading in the press. I just wonder if you could just maybe help us understand why the numbers seem to be so strong. And like, really, what should we think about for the second half? Clearly, your full year guidance implies slower numbers. Just wondering what kind of -- what gives between those two kind of sets of info? And if I could ask a second broader question, there's been a lot of news recently with new regulations passed in Europe of the Digital Markets Act, Digital Services Act, and now we're reading about -- and reading about Google possibly considering splitting out its ads stack business. Just very broadly, if you wouldn't mind, kind of zooming out and giving us your opinions on what all of this might mean for your business positive or negative? Thanks.

Tim Nollen:

Great. Thanks for the insights, Philippe.

Steven Cahall:

Thank you. Philippe and Ellen, the guidance implies a big slowdown in the second half and as you said, we know some of that is conservatism in the comps. I think there's also been some announced agency reductions in places like R/GA and Huge. So I guess my question is, are you proactively managing headcount in anticipation of a slowdown or is the business actually still pretty strong? Those are more idiosyncratic agency announcements and things would kind of have to get worse from here before you started taking sort of aggressive action on the cost base? And then the second question is, if we do see a bit of a slowdown, particularly into next year, how should we think about EBITDA margins? They're up a lot from where they've been historically. Even with a good growth this year, they're kind of staying flat. So I guess the question is, if growth kind of decelerates in the future, what does that kind of mean for margins from here? Thanks.

Ellen Johnson:

Sure. Thank you. I would say, start with our track record, right. We do have a track record of being able to manage our margins very effectively in a variety of different circumstances. And Philippe mentioned I think some of the things that really help us do that is that our flexible cost structure. So as Philippe mentioned, it's temporary help versus permanent labor or our performance-based incentive comp, which provides variability as well or buffers absolutely help us. We're very disciplined on how we manage cost. As Philippe also mentioned, our incentives are aligned with that. And we're continuously looking at off-shoring and near-shoring in other ways that will make us more efficient in addition to the fact that we're growing our higher value services, which should also help us expand our margins. So yes, we do believe that we can expand our margins going forward.

Philippe Krakowsky:

Thank you.

David Karnovsky:

Thank you. Maybe to follow up on the macro questions, Philippe, one thing we've heard from some of your peers on earnings calls this week is that marketers have largely learned from prior recessions or crisis periods that if you cut spend too quickly, there's a real price to pay later on in terms of market share or sales. So I'd love to get your take on that and whether you think that mindset can kind of keep ad spend relatively steady even as macro trends potentially worsen? And then just to follow up on the digital specialists, I think you had mentioned some weakness in speculative categories and project work. Do you view these headwinds as sort of temporary and the underlying performance remains strong, or are there kind of more structural factors at play? Just wondering if these firms at least in the pre-pandemic period were real standouts for IPG? Thank you.

David Karnovsky:

Thank you.

Operator:

Thank you. The next question is from Michael Nathanson with MoffettNathanson. You may go ahead.

Michael Nathanson:

Good morning, Philippe. I'm asking for reconciliation also. I'd love to know, we look at your client mix in total. How much of the growth do you think is coming from the speculative categories? I think back to 20 years ago and all, the I wonder, is this time different because you guys didn't benefit from either the growth expected categories or the growth of SMB. So is there anything you tell us about client mix now versus pre-pandemic? That to me I think help reconcile why we see the digital weakness we're seeing at Facebook and the rest versus maybe what you're seeing?

Michael Nathanson:

Thanks, Philippe. I appreciate it.

Ben Swinburne:

Thanks. Good morning.

Ben Swinburne:

I was curious if the lockdowns in China, broader Asia impacted that region's growth at all this quarter? Still pretty solid, I think you mentioned China was down year-on-year, but just trying to get a sense for how mature that might have been? And then I wanted to ask about the media business. In 2020, as the pandemic came on, brand spending really collapsed and we saw much more of a focus in bottom of funnel performance. Some of that obviously because we're all stuck at home staring at our phones, stimulus checks being sent out. But I'm just curious, like we've talked to your media, your smart media people, what do they think happens as if things just get even incrementally tougher, let alone recession, is there parts of their media spend that sort of is more defendable or they're more focused on than others? And I'm sure you'll tell me it depends by client, but I'd still love to hear your answer. Thanks.

Ellen Johnson:

Absolutely, yes. China was dilutive to the overall continent. If you look at it ex-China, our growth would have been there high single digits, closer to double digits.

Philippe Krakowsky:

And in terms of media, in the event of or should there be a slowdown, it's interesting because in '20, we saw that it was a place people went to because it was the place people could sort of turn off the spigots very, very quickly. And I think that we definitely -- it's the logical -- it's sort of the equivalent of what used to be a project that you could perhaps choose not to go forward with in a difficult economic climate in certain back in the day. So it's not that there isn't a sense that it would be a place clients might go, but I think that there's going to be more thought that goes into can I interrupt the consumer journey? Can I interrupt the flow of information I get back from those channels? And I think people will probably just be more choiceful . I think it will be like anything in a circumstance such as that. And again, you're asking me for a supposition and we're telling you that in the business and in the bulk of what we're -- the interactions and the conversations we're having with clients, the reality we're dealing with isn't the story that to the very first question we had that you're seeing in the headlines. And so I think that there would be sort of a flight to kind of quality in essence. There would be what can I not afford to turn off? Where am I getting the best returns? What makes the most sense because it really is getting me to intersect with audiences? So it's not that you might not see some issues there, but it would -- I think it would be about the quality of the platform, it would be about the quality of the backend and the data you're seeing as a result of making that investment. But I think it's naive to suggest that if as you say we got to that point, you wouldn't have some of what we saw more recently.

Operator:

Thank you. Our last question comes from Jason Bazinet with Citi. You may go ahead.

Jason Bazinet:

Hi. Good morning. Just had a real quick one on inflation. Since I don't think any of us have covered a firm like yours in a high inflation environment, can you just spend a second and talk about what items you feel like that would be impacted sort of coincidently with the rate of inflation, and which items either revenue or expenses you feel might lag the rate of inflation where it doesn't show up until a little bit of time goes by?

Ellen Johnson:

And I would just add that, again, we're always focused on continuing to offshore and near-shore and there's things that we're looking at, but it also helped mitigate --

Jason Bazinet:

And how about revenues with inflation, would you say that's sort of lagging or coincident or --?

Jason Bazinet:

Okay, super helpful. Thank you.

Operator:

This concludes today's conference. You may disconnect at this time.

Operator:

Good morning, and welcome to the Interpublic Group First Quarter 2022 Conference Call. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thanks, Jerry, and good morning. As you all know, for two years now, since the onset of the pandemic, we’ve begun these calls by sharing wishes for our collective health and safety. Yet in the early part of this year, the world dramatically changed again. And the invasion of Ukraine means that people on the ground there are anything but safe. So before getting on to the business of this call, it seems appropriate and actually even necessary to express our support for the Ukrainian people. Across our company, IPG colleagues have been focused on doing their part to help during this crisis. Some of us closer to Ukraine have assisted with transportation near the border, others have helped with refugees resettlement and with access to housing and medical services. And several of our agencies in Eastern Europe have opened their doors to displace colleagues. Of course, we’re also making significant donations to humanitarian organizations at all levels of the company and matching employee donations as well. On a related note, we’ve disengaged from our Russian operations. So, having first provided for our associates there, many of whom were individuals with whom we’ve worked for many decades to receive a minimum of six-month salary. And amid this ongoing tragedy, all of us continue to hope for a deescalation of the war and ultimately, for peace so as to bring to an end the immense and senseless human suffering that we’re witnessing. Turning now to the reason for our call, which is obviously to discuss our business results, I’m going to start with a high-level view of our performance in the quarter. Ellen will then provide additional details, and I’ll conclude with updates on the highlights at our agencies to be followed as Jerry said by Q&A. We’re pleased to report a strong start to the year. First quarter organic net revenue growth was 11.5%. That reflects strong performance in both the U.S. with organic growth of 12.2% and in our international markets, with organic growth of 10.2% as well as increases in every world region. We’re also pleased to share with you strong first quarter growth across each of our new three reportable segments. We indicated in February that operational changes would result in revisions to our segment structure as of the start of the year. Many of you have already seen last week’s filing in which we describe our new segments in the recent history of financial performance. Going back nearly two decades, we operated and reported with two segments, IAN and DXTRA. Yet during that time period, there, of course, been significant changes in our business, the needs of our clients and the workings of consumer and media ecosystems. Those changes were significantly accelerated as a result of the pandemic. And as you know, above all IPG is a client-centric company. Our offerings and businesses collaborate by design in order to help clients win in an increasingly digital-first fragmented media environment. Our go-to-market strategy, therefore, supports the need to provide integrated multi-agency services that span reportable segments. And that means that our operations will always reflect the strategic reality that marketers should have access to the best capabilities and talent no matter where they sit across IPG. We bring these complementary skill sets together in what we call open architecture teams that drive clients’ business success. Concurrently, the speed at which market and client needs are changing, requires a focused and disciplined approach to the way in which as a company we operationally manage investments in key areas of our business. This includes the creation of infrastructure and expertise that supports and can be shared by like-with-like assets. You saw an important example of that last year when we created IPG Health, which continues to perform very well for us. Reflecting our evolution and following a recent strategic review of operations. We’ve therefore realigned our business operations to comprise three reportable segments. So they are Media Data & Engagement Solutions, Integrated Advertising & Creativity Led Solutions and Specialized Communications & Experiential Solutions. In the first quarter, each segment grew at a double-digit organic rate, which demonstrates the strength of our offerings across the portfolio. Organic growth was 11.5% at MD&E, 11.2% at IA&C and 12.5% at SC&E. Our global growth was also highlighted by consistent increases across client sectors. We were paced by double-digit percentage increases in our other sector of leisure, government and industrial clients as well as double-digit growth in the retail, tech and telecom, financial services, health care, and auto and transportation sectors. Turning to operating expenses and profitability. Our teams once again demonstrated outstanding discipline even as we continue to invest to support our growth. Net income in the quarter was $159.4 million as reported, and our adjusted EBITA was $273.6 million, which excludes a small charge related to the 2020 restructuring program, resulting in net revenue margin of 12.3% in our smallest seasonal quarter. Our margin comparisons to prior first quarters continue to reflect the ins and outs of the pandemic. Compared to a year ago, under very strong revenue growth headcount has grown approximately 11%, some variable expenses, such as travel and related and return-to-office costs are well above the levels of a year ago, but not fully to historic norms. A year ago, comparable first quarter margin was 13.1%. And for context, in both 2019 and 2020, our first quarter margins were approximately 5%. With our strong margin results in this year’s first quarter, we’re confident that we continue to see the benefits of the strategic restructuring actions taken in 2020. Diluted earnings per share was $0.40 as reported and was $0.47 as adjusted for intangible amortization and other items. You’ll recall that in February, we announced that our Board had reauthorized our share repurchase program. And in the first quarter, we repurchased 1.8 million shares using $63 million. We’re pleased to be able to share with you the strong set of results, which builds on our long-term record of industry outperformance as well as our new disclosure, which furthers our long-standing commitment to transparency, in order to assist in analytical work and assessment of our company. A differentiator of our performance in the quarter and over a period of many years has been our ability to create marketing and media solutions that bring together creativity, technology and data. This combination is responsive to the evolving needs of our clients and allows it to assist them by delivering higher order client solutions. The growth you’re seeing is driven by these highly relevant capabilities. In the midst of an expanding set of marketer needs, for more precise, personalized and accountable engagements with their audiences at an individual level. Our first quarter, as I said earlier, is seasonally our smallest quarter, and most of the year remains ahead of us. We understand that we are at a moment of elevated global uncertainty across multiple dimensions, whether geopolitical, macroeconomic or in terms of public health. These are part of the current reality facing every company today. However, despite these uncertainties and having recently refreshed our bottoms-up outlook for the year with key clients and with our operating teams. The tone of the business remains positive. This leads us to believe it’s appropriate to update our revenue target for the year. You’ll recall that in February, we shared our expectation for approximately 5% organic growth in 2022. We would see that as a strong result given that it compounds IPG’s multiyear growth stack, which significantly leads our industry going back a number of years. At this point, we are nonetheless increasing that outlook for the year to approximately 6% organic growth. Along with our expectation for adjusted EBITA margin of 16.6%. We remain confident in the things we can control, including the quality of our talent, the resources across our portfolio, and our ability to bring them together in collaborative, effective and impactful client solutions. We are, of course, staying close to our people and our clients and carefully managing expenses, and we’ll keep you apprised of our progress as the year develops. Our colleagues scale and commitment have helped us to start this year on a strong footing. And I’d therefore like to conclude this part of my remarks by once again recognizing and thanking our people for their work on behalf of clients, but also in support of each other. And at this point, I’m going to hand over the call to Ellen for a more in-depth view on our results.

Philippe Krakowsky:

Thank you. As Ellen just said, our work and our people continue to set the standard for the industry. So, I would also like to again thank approximately 57,000 colleagues around the world who contribute to our clients’ growth and the continued evolution of our business. Collectively, we’re implementing our strategic vision, which is to integrate brand experiences across consumer touch points by combining award-winning creativity with best-in-class technology and data infrastructure. That commitment has translated into new client engagements, expanded relationships with our existing partners, and programs that deliver significant growth outcomes for our clients as well as for our own business. Turning now to specific highlights at the agency level in the quarter. At our Media Data & Engagement Solutions segment, we continue to see strong growth, the UM won Grubhub a year ago in the quarter. RG/A continued to perform well in new business with a notable win when it was named AOR for the XFL Pro Football League, and the agency also earned a top position on Ad Age 2022 A-List. New client wins were strong across Acxiom, Kinesso and Matterkind, and all three of those organizations work together with UM to provide a behavioral science-led solution for the GrubHub win, I mentioned a minute ago. During the quarter, Acxiom extended California Consumer Privacy Act rights to all U.S. residents in the absence of a national U.S. Privacy Law. We believe this is a meaningful step because it’s clearly responsive individual consumers who increasingly want more access to and control of their personal data. So, I think it’s fair to say this move is aligned with IPG’s commitment to going above and beyond what’s required by law. And this allows us to ensure we can support our clients’ business needs with the best data, tools and advice and do so by leading the way in the ethical use of data. In addition, we launched the Acxiom Partner Marketplace, which is a comprehensive offering of leading industry-specific data under one roof. The Acxiom partner marketplace complements our best-in-class and foundational info-based data and it gives marketers greater access to actionable and precise people-based data across a range of use cases and touch points on the consumer journey. And this is particularly important at a time when the ecosystem faces severe disruption due to proxy and ID deprecation. At the end of the quarter, Kinesso also launched its outcome Navigator, which is a suite of performance-based services that drives specific business outcomes for brands. And this puts Kinesso’s Matterkind unit in line to capture more performance-based marketing budgets. During the quarter, MRM expanded its commerce consulting service in health forming a strategic partnership with Salesforce Health Cloud, which allows us to deliver enterprise-level solutions at scale for the insurance, pharmaceutical and medical device sectors. Looking now at our integrated advertising and creativity-led Solutions segment. IPG Health continues its very strong performance with clients, new business and within the industry. At the recent Manny Awards where Med Ad News honors the best in pharmaceutical and health care advertising, IPG Health took home nearly 60% of the awards given. The agencies within the network won across many categories, including most creative agency, most admired Agency, Advertising Agency of the Year and additionally, IPG Health was named Network of the Year. Elsewhere at IA&C, following a highly competitive review, MullenLowe was named as creative agency of record by KFC and some of that new positioning and work will be in market shortly. MullenLowe was also named U.S. agency of record by Bayer for their Aleve brand, which further builds on our relationship with a valued existing client. Media Hub continued to show very well, winning new clients top golf entertainment post consumer brands and Pacaso, which is a technology-based real estate marketplace. At FCB, we promoted a dynamic new team to lead the network, and we’ve seen a very smooth transition. So they’ve hit the ground running with a focus on building new business opportunities. They’re fueled by the agency’s exceptional creative reputation. During the quarter, FCB was named one of the 10 most innovative advertising agencies of 2022 by Fast Company, and they also featured an Ad Ages prestigious 2022 A-List. Now during the quarter, FCB won new assignments from Hershey’s and Kellogg’s in North America. At McCann, Q1 saw the network win Velocity Global to distributed workplace platform, hands grow out of the UK and Club Med Canada. World Group also continued to win organic assignments across its global client roster. At the Andy Awards, the first major creative awards show of the season, not only was IPG named the most awarded holding company that McCann was named the most awarded global network. Also worth noting that FCB and McCann were ranked number one and two, respectively, and act responsible good report, which identifies the global networks doing the most powerful and effective cause-related work in our industry. And we see this as a clear reflection of the degree to which IPG’s commitment to ESG directly manifests in the work that we create. Reflecting an increase in the number of global in-person events as we enter a post-pandemic world. Our Specialized Communications & Experiential Solutions segment saw strong growth during the quarter. DXTRA Health posted a number of wins, where Weber Shandwick, Golin and Jack Morton came together to help companies in the biotech and pharma sector define, protect and enhance their reputations. Also during the quarter, Grubhub selected Golin to handle its consumer PR work and NAPA Auto Parts named Golin as its first-ever PR agency. At the 2022 PR Week U.S. awards, we celebrate the industry’s best public relations work current global – DeVries Global, excuse me, Weber Shandwick, the Martin Agency and Mullen Group combined to win 11 awards, which was more than any other holding company. R&CPMK continue to spearhead global campaigns across the entertainment industry, including the launch of Apple TV’s “They Call Me Magic campaign,” and Octagon secured a multiyear agreement to manage event programming for Toyota to activate the company’s Olympic partnership as a lead sponsor. As a result, Octagon will develop and produce the client’s full range of activity related to the 2024 games in Paris. Now as we know, the pandemic disrupted pretty much every facet of human interactions. And for brands, upended how they seek to engage with audiences and live formats. As a real-world events have become to rebound, marketers are seeing that a hybrid component to events offers a path to reach larger new audiences and also to improve and deepen engagement. That’s why IPG recently announced that we are bolstering our capabilities in the hybrid and digital event space by acquiring a significant stake in the Famous Group, which is an award-winning fan experience technology company which creates connected, immersive, augmented and mixed reality experiences to enhance the reach and impact of live events. The capabilities at Famous Group demonstrate what we’re working to develop across all of our agencies, which is proprietary technology skills and IP that can help our agencies build deeper connections to our data resources and capabilities as well as the path to higher order consulting engagements with our clients. In assessing the overall IPG portfolio, we believe that we’re fully provisioned and well positioned for the future without notable gaps in our offering. That said, we will continue to look closely at strategic options to bolster our capabilities through targeted M&A, especially opportunities that further our technology capabilities and bring proprietary tools or platform skill sets into the company. On prior calls, you’ll recall that we’ve identified marketing technology and business transformation consulting as key areas of focus for us going forward. As we see these as areas that can help us build on our technology layer and further accelerate our evolution in the higher value partnerships with our clients. Staying at the holding company level. We’ve long been clear that for IPG. Our commitment to ESG is a key strategic priority. And this includes activity in five key pillars

Jason Bazinet:

Thank you for the new reporting segments. I guess over the last three years, it’s pretty clear that MD&E grew faster than IA&C, which in turn grew faster than SC&E. But we didn’t see that in the first quarter. And I was just wondering if you could provide a little commentary. Is that a function of sort of inflation sort of rising lifting all boats? Is it somewhat a function of the comps? And when do you think the sort of that three year track record from 2019 to 2021, with your larger segment growing more quickly sort of reassert itself? Thanks.

Jason Bazinet:

Okay, super helpful. Thank you.

Operator:

Thank you. The next question is from David Karnovsky with JPMorgan. You may go ahead.

David Karnovsky:

Hi, thank you. Hi. We’ve heard from a number of your peers these past two weeks who have said they aren’t seeing clients materially adjust budgets even while some see supply chain pressure or have real concern over macro inflation. So wondering if you’re hearing the same and then what do you think is driving that dynamic? Did marketers simply anticipate some of this to start to the year? Or are there competitive pressures that are keeping budgets and spend steady?

David Karnovsky:

Okay. Great. That’s good. And then, Ellen, maybe one for you. I think generally, in the past, you’ve noted organic growth as a driver of higher margins over time. And you did leave your margin outlook the same while raising organic. I just want to better understand the dynamic there and your costs are potentially coming in different than you had expected when you last guided or whether there’s other factors we should consider? Thanks.

David Karnovsky:

Great. Thank you.

Operator:

Thank you. The next question is from Tim Nollen with Macquarie. You may go ahead.

Philippe Krakowsky:

I mean that’s such a broad-based question in that I’m not sure that an opinion about what might or might not be impacting all of them. So could it be what we’ve seen with iOS Absolutely. Could it be a dawning that you’re seeing consumers more focused on. I talked a bit about what we’ve done in Acxiom with extending CCPA to – I mean, we believe that in the long term, the idea that you invest behind having the benefits of data. The precision that it gives you the ability to be kind of much more accountable to what that investment is yielding. And yet to do it in a way that is much more sort of future-proofed and built for a world in which you’re not necessarily assuming this extremely asymmetrical relationship between the platform and the individual consumer. So I mean it could be that. It could be that they’re dealing with clients for whom brand safety and the responsible deployment of media is an issue. I mean it could clearly be that there’s probably some share shift going on over there. And you definitely at least one or two, I mean TikTok is clearly showing up and making a really big impact. And then you’ve got some nascent categories be it a sports betting, be it a crypto that I think are looking at the space with a much cleaner, with fewer preconceived notions. So they might be much more democratic in their use of digital media, right? So that’s the question that I think you were asking at least in part. The question about us and the agency space, I think it’s the same thesis that we’ve had for some time, right? So the thesis has been, the complexity is going to continue to increase. So the ways in which fragmentation is both potentially there’s a challenge there as a marketer, there’s also an opportunity there as a marketer. Then there is the get more digital in the way in which you engage. So put more time and thought and then ultimately invest more money behind those kinds of channels and then ultimately kind of build one-to-one connections and relationships with individuals. And you do that with kind of the right both marketing technology suite and skill sets and then definitively with the right data infrastructure. So I mean, we see that all of what’s going on in the space that you noted is being, at least, I don’t know if they’re being disrupted, they’re clearly going through some changes. We see that as continued opportunity because clearly, marketers are saying, okay, what do we do about that? What are the implications of that? How do we make sure we’re making the right decisions? And we’re well positioned to help them as their adviser as a consultant who shows up and is able to help them with those kinds of opportunities and challenges.

Philippe Krakowsky:

Very few people ever say that about anything I do. So thank you, Tim.

Dan Salmon:

Hi great. Good morning everyone. Thanks for taking my question. I hope that I get as good as interesting answer that one, too. So Philippe, it feels like we’re hearing a little bit more. I guess this is a similar theme across the industry about developing solutions that reach more small and midsized businesses, maybe that goes a little bit hand-in-hand with more focus on data and technology and platforms and things that are naturally a little bit more scalable. So maybe ask my question this way. Do you expect the holding companies and obviously IPG specifically, do you expect the number of clients to grow significantly over time as historically thousands of clients with the sort of top 200, top 300 accounting for the majority of revenue. Do you see tens, hundreds of thousands of clients? Any thoughts on that would be great. And then, Ellen, thank you to both for the comments on the macro and a lot of talk about that lately. And I think the reality CMOs often do sit downstream from those decisions so to the agencies. So my question is, do you engage with your agency CFOs a little differently at times like this? So I’d like to you check in more often. Is there like a DefCon level that gets raised during periods like this maybe let us know what goes on inside in your organization to help check on these things or things like this. Thanks.

Ellen Johnson:

Yes. So our financial community, yes, it’s CFOs, but it’s broader than that, too. And it’s really a team sport, if I can use that analogy. And it’s not different now, but we always do talk and communicate and stay very close to our operators to make sure that we are very close to what’s happening in the business and on the clients. So it’s continuous. And this year is no different than the previous years. It’s just the way we do things. And we’re constantly speaking. We get together as a community; regularly share ideas, best practices and information.

Philippe Krakowsky:

Thank you.

Michael Nathanson:

Thanks. So Philippe, I will try to ask you the question that takes all the previous questions together, and then Ellen one for you. Do you think during the commentary about digital advertising, which is mostly SMB and e-commerce and there’s a lot of weaknesses. Do you think this environment is favoring multinational companies, larger companies, which is the backbone of your business versus maybe small enterprises? Is there anything that you thought in terms of size operating on cost, power with distributors? So that’s one. And second for you, Ellen, if the dollar keeps weakening, I’ve always thought that your U.S. operations have higher margins than cash operations. I don’t know if that’s true or not. That’s our assumption. So if a weaker dollar keeps strengthening, won’t there be a natural flattering of margins just simply from translation purposes. So those are my questions. Thanks.

Ellen Johnson:

And as far as FX, in general, our revenue and expenses are very well matched by currency. So impact on margin is de minimis from FX changes.

Philippe Krakowsky:

And I understand that, I guess, yes, we are at the hour. Look, again, we appreciate the time. We appreciate the continued support. We will get back to it. I don’t know if I can do perfection again even anytime the next week, but thanks for that. But as I said, look, the focus on execution here is very clear. And as always, we’ll keep you posted, and we look forward to our next conversation.

Operator:

Good morning and welcome to the Interpublic Group Fourth Quarter 2021 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you, Jerry, and thank you all for joining us this morning. I hope you're keeping well. As usual I will start with a high level view of our performance in the quarter and for the full year. Ellen will then provide additional detail. I'll conclude with updates on key developments at our agencies to be followed by Q&A. We're pleased to share our very strong fourth quarter and full year performance. Before turning to the numbers, however, I want to begin by once again thanking our more than 55,000 colleagues around the world. Their professionalism and dedication continue to be central to another year of outstanding results. Our people are delivering on the complex integration of creativity, technology and data to clients across industry sectors and around the world. This, in turn, is driving the consistent levels of growth and margin that have distinguished Interpublic for a number of years now. Turning to our results in the fourth quarter. Our organic net revenue growth was 11.7%, that's against the fourth quarter of 2020 when, as you'll recall, our organic change was negative 5.4% due to the impact of the pandemic. It's also important to note that our two year organic increase was positive 5.7% relative to the fourth quarter of 2019, which is a very strong underlying trend line. For the full year, organic growth was 11.9% and two year organic growth was 6.5%. Compared to 2020, growth in the quarter was again broad-based across world regions and client sectors. Organic growth was 12.1% in the U.S. and 11% in our international markets. Among client sectors, we were led by double-digit percentage increases in our other sector of public, industrial and services clients as well as double-digit growth in the retail, auto, financial services and tech and telecom sectors. We had strong growth again in healthcare and consumer goods. Staying in the quarter, both of our operating segments also grew at double-digit rates. Our IAN segment increased 11.2% organically and there we were led by our media, data and technology offerings, McCann, MullenLowe Group, FCB, R/GA and Huge. At our DXTRA segment, organic growth was 15.1%, reflecting strong increases by Jack Morton and Octagon, two of our offerings that were hardest hit by the pandemic a year ago. We also had strong performance by Weber Shandwick, Golin and Future brand. Turning to profitability and expenses. Our teams continued their disciplined execution and we were able to continue to invest in supporting our growth and further evolving our offerings. Fourth quarter net income was $357.9 million, as reported. Our adjusted EBITDA was $491.8 million, which is before an adjustment in the quarter relating to the 2020 restructuring program and our margin was 19.3%. That brings full year adjusted EBITDA to $1.53 billion and our margin to 16.8%, consistent with the expectation we shared with you in our October update. That compares to a margin of 13.5% a year ago and 14% in 2019. As has been the case throughout the pandemic, there were more than the usual number of moving pieces in our expense base this quarter. Our strong results led to a significant increase in performance-based compensation, as you'd expect. Expense for severance was also elevated and that reflects actions that we chose to take during the fourth quarter to further improve the efficiency of our operations and to benefit our expense base forward. Compared to last year, we delevered on our expense for base payroll in the quarter and that comparison reflects the temporary pay reductions that were still in effect a year ago, put in placed due to the pandemic and which expired at the end of 2020 as well as increased investment in talent in 2021, largely to support our growth, but also due to tighter market conditions. For the full year, we had strong operating leverage on payroll expense. Our expense for temporary labor increased from a year ago as a direct result of our very strong revenue growth. We've made significant progress in staffing to levels consistent with revenue. So that's a cost that should abate going forward. Going the other way, in our office and other expense, we had significant leverage on our expense for occupancy. Our bad debt expense decreased from a year ago, while our travel-related expenses continue to track at very low levels relative to our longer history, but they were at higher levels than last year's fourth quarter. Fourth quarter diluted earnings per share was $0.90 as reported and was $0.82 as adjusted for several items. In the sum, our fourth quarter completes a year of very strong financial performance, against the key metrics of growth, adjusted EBITDA and earnings per share. Further, we paid our maturing 500 million senior notes in October from cash as we continue to program a significant financial deleveraging related to the Acxiom transaction in 2018. Since acquiring Acxiom, we have grown EBITDA, paid down debt and strengthened operating cash flow, resulting in material improvements to all key credit metrics. With reflecting on the fact that since 2017, our last full year prior to Acxiom, we have grown our adjusted EBITDA by $574 million, a full 60% to $1.53 billion. Over the same four year period, we've expanded adjusted margin by 400 basis points from 12.8% to 16.8% and we've driven compounded organic growth of 16% over those four years, marking significant outperformance compared to our direct industry competitors. Our growth, therefore, reflects more than the cyclical economic recovery that we're seeing. We're successfully helping to move the business transformation journeys of our clients forward by delivering addressable and accountable marketing programs that are increasingly integrated with our world-class creative storytelling capabilities. Confused with data and technology, our solutions are driving higher value client relationships, as marketers seeking growth amid a rapidly changing and complex landscape look to adapt and enhance their business models. The success of our clients as well as our own performance validate our longstanding strategic focus and investments and underscore the caliber of talent and client focus of our operating teams. Heading into 2020, we're confident that the continuing strength of our offerings has us well positioned in an environment of dynamic change for media and marketing, which is coupled with a solid global macroeconomic environment. Of course, we are aware that the year ahead of uncertainties and challenges from COVID to inflation and geopolitical risk. Yet as we look ahead, we anticipate that 2022 will be another year of strong growth, on top of multi-year industry-leading comparables. As such, we are targeting full year organic revenue growth of 5% in 2022. And with that level of growth, we expect that, in 2022, we will consolidate the very significant gains achieved in adjusted EBITDA margin over the past 24 months at a level of approximately 16.6%. Our margin target incorporates a number of puts and takes as operations begin to normalize to a mostly post-COVID world. Certain expenses that have been running at unusually low levels during the pandemic should begin to return to levels closer to their historic norms. These include our travel and related costs and business development expenses, both of which are investments that build the future growth of the business. In light of the current environment, our outlook also includes a modest inflationary impact on our investment in employee compensation this year, which we're actively managing to support our strong growth. This is consistent with what I believe we're all seeing reported across a broad range of industries. We anticipate that our expense for employee performance-based incentives will retrace and fall within a more normalized range consistent with our longer-term history. That will help offset the trends in other categories. We also expect to continue to see the structural benefits of our 2020 cost actions, most of which we saw in 2021 and which will continue to be evident going forward. Further, we expect that the underlying healthy incremental margins generated with revenue growth, which we've consistently delivered over a period of many years, is a factor that remains at play. With that, under 5% organic revenue growth, we expect adjusted EBITDA margin of approximately 16.6% in 2022 and then continued opportunity to further expand margins with growth in the years ahead. Turning now to capital allocation. We have positive developments to share as well. Given the continuing strength of our operating results, we've announced this morning our Board's decision to once again raise IPG's quarterly dividend by 7% to $0.29 per share. This marks our 10th consecutive year of uninterrupted higher dividends, which continued through the period of pandemic. We're also pleased to resume our share repurchase program. You'll recall we had suspended share repurchase following our announcement of the Acxiom transaction in order to focus more of our resources on financial deleveraging. We're now resuming the program under an authorization of our Board of up to $400 million. And while we restart the program, we do plan to continue our commitment to operating in a manner and we'll maintain and enhance our balance sheet and financial flexibility as well as our debt credit ratings. On that note, this seems like an appropriate time to hand the call to Ellen for a more in-depth view of our results.

Philippe Krakowsky:

Thank you, Ellen. As you can see from our strong results, the combination of strategy, talent and culture we've built at IPG, continues to drive innovation, collaboration and creativity that fuel client success. Previously, we've discussed the ways in which the pandemic accelerated technology-driven shifts in media and consumer behavior, that IPG had anticipated and invested in going back for quite a few years. As marketers increasingly look for partners with expertise in first-party data management, performance media, creative ad tech and direct-to-consumer commerce, we remain well-positioned with a range of expertise that can help our clients win in the digital economy. Throughout 2021, our best-in-class agency brands were increasingly able to tap into IPG's foundational technology and data layer, inclusive of Acxiom, Kinesso and Matterkind. Across disciplines, channels and use cases, this democratization of data is contributing to a growing range of effective client solutions and outcomes. We also remain highly focused and capable of delivering highly customized, integrated teams, which we call open architecture teams. That are specific to client needs, all of them backed by the strong and deep data and tech capability. And this ability to integrate disciplines and expertise builds on the creative excellence of our branded agencies. In 2021, this combination helped us to be named Holding Company of the Year at the New York Festival's Advertising Awards and Data Holding Company of the Year by the One Club. We were also recognized as the most effective holding company at the USFC Awards. And now drilling down and looking at specific highlights from the quarter, I think results were led by our media, data and technology offerings. Within media, where we continue to see major changes in the digital ecosystem, marketers require partners who are well resourced. And we have the right tools to realize the benefits of increasingly addressable media, investment in e-commerce channels and a deep granular understanding of audiences. That's why with our consultative media model, we continue to see strong growth in the sector. Media brands is once again a leader. During the quarter, we saw a significant global win at UM with Dyson. And UM also successfully defended its H&M and Henkel business. It was named a Best Place to Work by Ad Age in January, and also quite recently won the Grubhub account in a highly competitive review. Initiative closed out a very strong year, with a Q4 win of QuickBooks domestically as well as being named by ING Group as its media partner in a number of key international markets. Our data and technology assets, inclusive of Acxiom, continued to be strong contributors to how we operate and to our growth. Our agency's predictive analytics tools are built in collaboration with Acxiom, and they can optimize the consumer journey with a foundation that's built on identity resolution, which delivers experiences across all touch points with timeliness and precision. In the farfetched pitch, which was won by Mediahub, Acxiom and Kinesso capabilities helped develop a strategic road map for the client's data and identity infrastructure, and that was instrumental to that new business win. Kinesso and Matterkind capabilities, such as Kinesso Intelligence Identity, which we refer to as Kii and high-value audiences or HVAs, as well as addressable activation across many digital channels, are playing a significant role in all of our media, go-to-market. On our last call, we discussed the launch of Kii, which helps clients stitch together multiple large data sets with maximum efficiency and effectiveness, and that's across both the ad tech and the MarTech ecosystem. And during the quarter, we continued to see double-digit percentage increases in campaign improvement for our clients who are using Kii. In October, Acxiom announced that it had teamed up with Toyota Motor in North America to create a flexible platform solution that elevates customer experiences without the use of third-party cookies. And that's a solution that's replacing the client's traditional data management platform. Acxiom also announced that its real identity solution can now seamlessly integrate with the Adobe Experience Platform. And this is a partnership that transforms the identity model by placing the brand at the center and all third-party data, tech or identity providers, as contributors to a brand's proprietary identity management system. And that's something that's critical as third-party cookies go away. Now the agencies within IPG Health also continue to deliver outstanding results for us. Having a singular focus and a comprehensive set of global services, the network has been able to leverage many of the data-infused tools we're building for clients. Worth mentioning that one of our largest wins of 2020 – excuse me of 2021 was in the health care space. So it didn't receive trade press attention. It was more significant in size than many of the headline names that were known to be in review. And this is increasingly characteristic of the services found throughout our portfolio, because they called upon our more consultative strategic and specialized capabilities and they're often more technical and higher value. Such work needs to clear a high bar when it comes to compliance and confidentiality, while at the same time, empowering consumers. In this case, to play a more proactive role in their health and well-being. Our global advertising networks continued to earn widespread industry recognition for high levels of creativity, while furthering their delivery of client-centric integrated services. FCB again won significant industry accolades that confirm its place as one of the industry's most creative networks. At the Campaign U.S. Big Awards, FCB was named Agency of the Year. And at the Global Best of the Best Effie Awards, FCB New York and FCB/SIX, which is the agency's creative data and CRM offering, both won Grand Effies. During the quarter, the network also continued to win in the market, with FCB/SIX adding new work from its Janssen client and FCB Canada bringing home Hersheys. McCann Worldgroup named a new Global Chief Creative Officer. He's one of the most accomplished and awarded brand marketers and creative storytellers in the world of consumer marketing, known during his career at Nike for rallying the best creative ideas and implementing them across platforms. In addition, the World Advertising Research Center named McCann Worldgroup the top network globally for effectiveness. And at the Epica Awards, which are the only creative prizes judged by the industry press, McCann Worldgroup was named Network of the Year. In terms of new business, notable wins in the quarter included MRM partnering with our PR specialist Current Global to win the BISSELL Homecare business; and McCann U.K.'s win of Thomas Cook. In MullenLowe Group, new business continued strong as it had throughout the year with a decision by Credit Karma in the U.S. to make the agency its creative AOR, which was followed by the U.K. Department of Health, choosing the Network's London office to oversee the government's integrated COVID-19 communications efforts. Mediahub won three Adweek Media Plan of the Year Awards and continues to build on a strong partnership with our Acxiom and Kinesso teams. Among our independent agencies domestically, the Martin Agency was named at Adweek’s 2021 U.S. Agency of the Year for the second year in a row, and it won the Sabra account during the quarter. The other outstanding performer from across this group is Deutsch LA, which continued to post strong growth through great work and deliver innovation for a broad range of national and regional clients. At DXTRA, Weber Shandwick continues to win significant assignments from major brands, including recently being selected as AB InBev's Global Corporate Reputation agency of record. Weber Shandwick ranked number one and promotes media global creative index and was named PRWeek's Purpose Agency of the Year for the second year running. The launch of its new Weber collective positioning, which showcases the agency's full range of capabilities, coupled with an increased focus on earned media, are indicative of the next evolution in Weber strategy. During the quarter, Weber Shandwick, Octagon and MRM came together as part of an integrated team to win the global communications, digital sponsorship and marketing strategy for DXT Technologies. Octagon was also selected by ADP to develop its sponsorship strategy and to manage multi-platform sports programming. Golin was chosen by NAPA Auto Parts as the brand's first PR agency, and Current Global was named PR AOR for Kellogg brands like RXBAR, Kashi and Pure Organic. Our specialist digital agencies are among the most innovative within the IPG portfolio and continue to develop their offerings for the world of Web 3.0. And the opportunities that will provide to consumers and create for marketers. R/GA added a number of new business wins during Q4, notably CVS Experience and Samsung Home Appliances. R/GA was named top agency – the top agency performer, on R3's new business league table for the U.S. in 2021, and that report notes that the agency's outperformance and the creative sector demonstrates that clients are leaning more heavily into digital transformation work. R/GA also continues to innovate in the metaverse. The agency recently launched a direct avatar commerce experience for a retail brand, which marks an evolution of direct-to-consumer selling. The agency created a scavenger hunt in the metaverse and experience for a large telco client, and R/GA opened its first virtual office in Decentraland. Under its recently installed CEO and his team, Huge is continuing its internal transformation process, building on the leading position that it holds in creating customer experiences from the digital marketplace. The agency is increasingly focused on using data, power more precised dynamic content and experiences, and we'll also continue to build out an even more robust consulting practice. Turning now to the holding company level as it were. I think that, as you know, we've got a long-standing commitment to ESG as a key strategic priority at IPG. And this includes sustainability, diversity, equity and inclusion. During the fourth quarter, we were pleased to be named to the Dow Jones Sustainability Index North America for the second consecutive year, and this is a distinction that recognizes the top tier of sustainability performers among the 600 largest U.S. and Canadian companies. At the start of this year, we were named to the Bloomberg Gender Equality Index for the third year in a row, another important honor. And in the HRC Corporate Quality Index, we were once again named the Best Place to Work for LGBTQ+ talent. So the business in which attracting top talent is vital to our success, whether that's in the creative services area or in our growing data and technology capabilities, an intentional approach to ESG is an important part of our strategy. for making IPG a place people want to join and one where they can build long and successful careers. Looking forward, we believe IPG is well-positioned for the future. Much of our growth in the quarter and the year was fueled by disciplines and client sectors that most actively tapped into our technology layer, whether that's data capabilities, analytics or precision marketing. We see significant opportunity for more of our creative agencies and our marketing services specialists, which is live events and sports marketing to be a part of this connected ecosystem. This will help a broader range of our agencies make their thinking and their work, more fully informed by a deep understanding of audiences. And as a result, it will make that work more accountable and effective which can help us to continue to build on our industry-leading growth trajectory. As stated earlier, we expect to deliver strong growth in 2022, with a target of 5%, on top of an industry-leading record that goes back a number of years. Consistent with that level of growth, we foresee adjusted EBITDA margin at a level of approximately 16.6% as we consolidate the gains made over the last 24 months and position ourselves for further margin expansion in the years ahead. Another key area for value creation remains our very strong balance sheet and liquidity. Our ongoing commitment to capital returns is clear in the actions announced by our Board today, which also speak to confidence in our future prospects. We're pleased with the dividend increase and also by our return to share repurchase through key components of a balanced approach to capital allocation. Alongside these actions, we'll further invest behind the growth of our businesses by developing our people and continuing to differentiate our offerings. This will be supplemented by our disciplined approach to M&A, focusing on opportunities that are consistent with strategic growth areas, especially in connected commerce and digital consumer experiences. We thank our clients, our people and those of you on this call for your continued support. And with that, let's open the floor to questions.

David Karnovsky:

Hi, thank you. Philippe, I was hoping you could expand on your thoughts on the advertising market generally at the moment. How much of the strength in ad spend do you see is driven by cyclical recovery versus some of the structural factors you highlighted, like marketers trying to capitalize on outsized changes in consumer behavior, changes in media consumption?

David Karnovsky:

Okay. And then just two for Ellen, if I could. I think some inflationary impact the base salary was mentioned for 2022. I don't know if you can quantify that and expand on some of the actions you're taking to manage? And then second on the buyback, any sense for how investors should think about the pace? Is it fair to look at your repurchases pre-Acxiom has gone? Thank you.

David Karnovsky:

Very helpful. Thank you.

Operator:

Thank you. The next question is from Ben Swinburne with Morgan Stanley. You may go ahead.

Philippe Krakowsky:

Hi, Ben.

Philippe Krakowsky:

Sure. Look, I mean, if you look at Q4, which I think it kind of helps to sort of think, okay, what are we seeing as we head into the new year? I think the sort of strongest areas of growth aren't going to surprise you in the lease bid. So media, data tech if you sort of pull it from a disciplined point of view. Health care, if you think about it as a sector point of view. Clearly, the U.S. is a region where there we had strength kind of across the board. I mean, Media brand is strong. McCann and FCB were strong, as to help, in particular. Acxiom had a really good quarter. So I think to my mind, it's where you've got more of those data capabilities and that ability to connect what we do on the marketing services and the kind of creative ideation side of things through the line to this data and tech layer. But in terms of the recovery, as we called out, when you look at on the experiential and events businesses, they're clearly helped by the fact that you're comparing to fairly depressed levels in 2020. I think that what's positive there is that we're clearly not going to see lockdowns of the kinds of restrictions, societal response to whatever the lingering effects of COVID seems to be kind of normalizing. And so I think we're going to – we see continued opportunity there. It's a modest part of the portfolio. It's probably sub 5% of the portfolio. But as I say, we see it as a place where we can integrate all the way through with our other assets. But I think we all see it as a place where smart marketers are going to look at some of those areas as places where they can do something that a lot of clients are very focused on, which is build their repository of first-party data. So they're interacting with consumers in live settings. And so when you think that through on a going-in basis, you can build those experiences in a way that I think is going to be really beneficial for a marketer.

Ben Swinburne:

Would you guys like to be acquisitive again in 2022? Is that something you're looking to lean into now that you've delevered post Acxiom?

Ben Swinburne:

Right. Thank you very much both.

Philippe Krakowsky:

Thank you.

Michael Nathanson:

Thanks. Philippe, I have one short term and one long term. Short term is, in the fourth quarter, it looks like the UK and Europe kind of came in mid-teen digit organic growth. Was there anything in those regions that you wanted to call out? And is that part of the reason for your guide in 2022? Is there anything there that consistent for 2022? And then just stepping back and thinking about how you position the company and the tailwinds coming out of the pandemic or the things that you've thought about, why wouldn't the next two or three years organic growth be better in the two-year stack that you just gave us, right? So I'm trying to figure out like why aren't we in an accelerating period of organic growth, given the positioning of your company and where marketers are going? So, thanks.

Michael Nathanson:

Okay. That’s what I asked. Thank you.

Operator:

Thank you. Our final question comes from Jason Bazinet with Citi. You may go ahead.

Philippe Krakowsky:

Look, I mean, to your point, I think the thinking behind adding that additional segment view is it's unlikely that we could give you line of sight into how the business is run, because in the case of many of our really large clients, it is a very integrated broad range of services that are brought to bear. And because we're continuing to try to evolve the business, right? But clearly, our thinking in going to a third segment or a three-segment view will be to give you better line of sight into precisely the question that you've asked. And then I think that the other thing that we clearly try to do is call out where the strong performers are and then be very direct with you about the fact that the places where we've seen growth over the last few years in media, in data and tech, in health care are not only our stronger growers, but they're also – they're accretive to growth, and they're also accretive to margin. So they are building, as you say, – there is clearly disciplined cost management, and we've got terrific teams in that regard. There's clearly the benefit of the restructuring. But there's also, as you say, the fact that the nature of what we do is generating more value for clients, and we're still work in progress in terms of evolving the business model as well in terms of how our commercial model, in terms of how we engage with clients, but we're going to keep trying to – as we move through this process, give you some line of sight into how that's going.

Philippe Krakowsky:

No, please, thank you.

Philippe Krakowsky:

Well, look, again, just thank you all for the time. We know there's a lot to cover on this particular call because we're both recapping a quarter a year and giving you line of sight. But as we said, we're excited about what's ahead. And we're very focused on the fact that that's going to require everybody on our side to execute. So thank you, and we'll talk to you in relatively short order. We've got the call coming up.

Operator:

Good morning, and welcome to the Interpublic Group Third Quarter 2021 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thanks, Jerry, and thank you all for joining us this morning. I hope everyone is keeping well. As usual, I'll start with a high level view of our performance in the quarter. Ellen will then provide additional details. I'll conclude with updates on key developments at our agencies and then we will follow that with Q&A. We're pleased to share our very strong third quarter performance, but before turning to the numbers, I'd like to begin by recognizing and thanking our people across all of Interpublic, who continued to show a high level of dedication and support to our clients and to one another. They're the principle reason we can report such strong results again this quarter. So, people are delivering insight and execution required for the complex integration of creativity, technology, and data at scale and marketers across industry sectors need in order to accelerate their business transformation journeys. This kind of work is helping set a standard for our industry and further build on IPG's record of industry outperformance and margin expansion. As we've moved through September and now into October, it's also been rewarding to begin welcoming our people back to office settings and to see many of our teams together again, in the places where creativity, collaboration, and culture are ultimately rooted and regularly renewed. Turning to our results in the quarter. Our net organic revenue growth in the third quarter was 15%, that's against the third quarter of 2020 when as you'll recall our organic change was negative 3.7% due to the impact of the pandemic. It's also important to note that our two-year organic increase with 10.7% relative to the third quarter of 2019, which is a strong result. Compared to 2020, our growth in the quarter was again broad-based by region of the world, discipline as well as client sector. Organic growth was 14.7% in the U.S. and it ranged between 11% and 20% in our international regions. Both of our operating segments also grew at double-digit rates. Our IAN segment increased 14.4% organically, with all major agencies contributing high single to double-digit percentage increases. We were led by media, data and technology, R/GA and Huge, as well as by MullenLowe, McCann and FCB highlighted by notable contributions from their healthcare and advertising disciplines. At our DXTRA segment, organic growth was 18.6%, reflecting double-digit increases across each of our DXTRA agencies and furthering the rebounds from the sharp impact of the pandemic last year on our sports and entertainment, as well as experiential businesses. Looking at client sectors, the picture is also want to balance growth, but nearly every one of our eight major client sectors increasing at a double-digit percentage rate, led by the auto sector, our other sector with government and industrials and the tech and telecom, retail, and healthcare sectors. Turning to profitability and expenses. Our results, again, demonstrate outstanding focus and execution by our operating teams even as we continue to invest to support areas of accelerating growth and to enhance our offerings. Third quarter net income was $239.9 million as reported. Our adjusted EBITDA was $369.5 million. And our margin of adjusted EBITDA before restructuring was 16.3% compared with 16.2% a year ago, and 14.7% in the third quarter of 2019. There were several factors worth noting within those comparisons. We have solid operating leverage on our expenses for base payroll, as we continue to see the structural benefits of the strategic cost actions taken last year. Those are reflected in our base payroll, as well as our occupancy expenses. To-date our very strong top line growth is also outpacing the associated hiring and therefore, our expense for temporary labor increased from a year ago. Our travel and related expenses continue to track at low levels, but still we're somewhat higher than last year. As we look ahead T&E expense will pick up over the remainder of the year. Our expense accrual for employee performance based incentive compensation, however, increased as a percentage of net revenue, which is a direct result of our strong operating performance. Third quarter diluted earnings per share was $0.60 as reported and was $0.63 as adjusted for the after tax expense of the amortization of acquired intangibles and other items. In sum, our quarter as well as our year-to-date, speak to strong financial performance across the key metrics of growth, EBITDA and earnings per share. Our for growth reflects the cyclical economic recovery, as well as the important structural occurrence that favor the kinds of higher order expertise with which we're well-resourced. The work we're doing solves for the increasingly complex world faced by our clients in a marketing and media environment. That's defined by a very rapid rate of change. This is a validation of our long-term strategic focus on building offerings that help clients integrate brand experience across all consumer touch points, improve their capacity to apply data in the way their business goes to market and capitalize on the benefits of technology and digital channels. Going back a number of years, we've anticipated transformational opportunities of this type of environment. Other important drivers of our continued success, our ability to deliver fully integrated solutions through our open architecture model and our emphasis on strong agency brands and best industry talent, so as to deliver breakthrough creative ideas and content. We've also fostered a culture that respects the individual, is transparent with respect to clients and is accountable when it comes to data privacy and media responsibility. Turning to our outlook. With our seasonally important fourth quarter still ahead, we're pleased to increase our financial performance objectives. We now expect that we can deliver organic growth for the year of approximately 11%, which is ahead of the 9% to 10% range we had previously indicated. With growth at that higher level and given our strong results through the nine months, we would therefore expect to achieve adjusted EBITDA margin of approximately 16.8%, which is an increase of 80 basis points over the level that we had previously shared with you. Our outlook is based on expectations of a reasonably steady course of public health and global economic recovery. We begin the fourth quarter well-positioned and the strong operating moment, and the tone of the business remained solid as we head into the year-end and holiday season. As such, we see 2021 as another year, a strong value creation for all of our stakeholders. And on that note, I'll now hand over the call to Ellen for more in-depth view of our results.

Philippe Krakowsky:

Thank you, Ellen. The combination of our exceptionally talented people and a balanced portfolio of offerings and capabilities continues to set the standard for growth in our industry. The strategic steps we've taken over the long-term have positioned IPG as a high value business partner to our clients. We're able to combine the power of creativity and narrative storytelling with the benefits of data and technology in order to deliver growth for marketers across a broad range of sectors. These strategic steps are evident in our strong results and position as well going forward. By helping clients to better understand audiences and to engage with them with greater precision and accountability, we can help company succeed the digital economy. Today, marketers are responsible for increasing business innovation, building new content platforms and e-commerce platforms, as well as adopting emerging tech and leveraging data, all while complying with an evolving data privacy landscape. Our clients are also at the forefront of addressing societal issues and corporate purpose on behalf of their companies and brands. As a partner, we're helping them solve for all of these challenges, with our ability to deliver complex integrations, focused on business results and outcomes. Our ability to help marketers proactively address these issues is further assisted by our intentional focus on ESG priorities as core business imperatives. That's why we've been focused and working on ESG for many years at IPG. We continue to build on a strong industry record in DEI initiatives, which are integral to nurturing the highest quality and most representative perspectives, insights, and creative voices across our company. More recently, we've launched our first formal human rights policy and our work with clients around social issues includes campaigns focused on LGBTQ plus rights, mental health awareness, ways in which we can remove implicit bias from core datasets, and also use data to increase the health of our planet, as well as sustainable consumption models. With respect to climate, we're now measuring our total greenhouse gas emissions around the world. We're committed to setting a science-based target and to reaching net zero carbon across our business by 2040. We've also agreed to source a 100% renewable electricity by 2030 for our entire portfolio. Now turning to the highlights of performance from across that portfolio. During quarter, a key sector that continues to show strength for us is healthcare. As you know, IPG has significant operations in healthcare marketing, totaling approximately a quarter of our total revenue. This includes specialized global healthcare networks, as well as significant healthcare activity and client relationships at our media and public relations operations and within some of our U.S. independence as well health and wellness continue to be a top concern for people, companies and governments around the world. We've seen an increased need for sound healthcare information to be delivered at speed in ways that are highly personal, culturally relevant, as well as respectful of privacy regulations. Within the healthcare sector as well as across other clients sectors, our ability to deliver open architecture solutions will continue to drive success for our company. We have deep experience providing customized integrated client service models to many of our largest client partners. And we continue to perform well and winning new business on this sort of work, especially in pitches that leverage the IPG data stack as a key part of the strategy. This past quarter, for example, Morgan Stanley, and E-Trade named Mediahub as Media Agency of Record following a highly competitive review. Data strategy was a key component of the brief. For this reason our customer intelligence company, Acxiom was placed front and center in our winning proposal. The Mediahub team is leading media strategy, planning and activation in the U.S., leveraging Acxiom's consumer data and expertise to fuel tightly targeted and effective communication solutions. In media brands, we continue to see a high degree of engagement with many of the world's most sophisticated marketers across our two largest brands, UM and Initiative. During the quarter, Initiative U.S. won Adweek's prestigious Media Agency of The Year Honor for 2021. Last year at this time within media brands, we launched Reprise Commerce, the global specialty e-commerce offering. And since then, e-commerce revenue within that unit has increased significantly as we've helped clients build out holistic approaches to e-commerce, including E-retail, supply chain and warehousing, marketplaces and direct-to-consumer programs. There's never been a more important time to connect the e-commerce opportunity with a full power of clients, media and marketing investments. In addition, we can create and deploy consistent cross-channel experiences that dynamically adapt to consumer needs and goals in real-time, thanks to our outstanding creative and content capabilities. As expertise as a key part of the news last week that the owner of workers original candy Storck USA had selected UM as its Media Agency of Record. UM want to take on all strategy planning buying an analytics duties, including the implementation of Storck shopping e-commerce activity. Our data and technology offerings continued to be key drivers of performance for us as well, featuring in all major open architecture and new business activity of significant scale. This month, March 3rd anniversary of Acxiom becoming part of IPG. During the third quarter, Acxiom continued to post strong performance and to win in the marketplace, bringing in major new clients from the media, retail and financial services sector. Most recently, a top 10 financial services company engaged Acxiom to build their unified enterprise data layer, which again shows the strength and depth of Acxiom technology expertise. During Q3 Kinesso launched, we're calling the Kinesso intelligence identity product, also called Kii. And this is a new identity solution that works across the open web, as well as the walled gardens and has already live with clients across a broad range of verticals. Along with IPG media brands, the trade desk among the first media partners using Kii. And the launch comes at a particularly important moment as brands and agencies work to create and bolster privacy first identity solutions that can assure addressability as third-party cookies and mobile ad IDs begin to be phased out. Kii can match a brand's first party CRM data and map it to key identifiers, significantly increasing match rates and reducing the need for third-party onboarders. When it comes to the strength of our brands in the creative advertising space, McCann, FCB, and MullenLowe continued to distinguish themselves this quarter. McCann Worldgroup was named Global Network of The Year at the 2021 Gerety Awards, which recognizes the best creative communications from the female perspective. Also notable, McCann Worldgroup named the new President and Global Chief Creative Officer who joins us from Nike, where he served in Senior Brand Marketing and Creative Leadership roles for more than 20 years, most recently leading Nike's men's brands globally. During his tenure at Nike, he was responsible for many of the world's best known and most iconic campaigns across a range of marketing disciplines and channels. At FCB, The agency's Chicago office is ranked as the top creative agency in North America in the Alliance Creativity Report. And that same report FCB was ranked among the top networks in the world. And FCB was also named North American Agency of The Year at the 2021 New York Festival awards. MullenLowe was named the second most effective agency at the recent USFW awards and MullenLowe Group was named the number two most effective network globally, in both cases, punching well above its weight against larger competitors. During the quarter, the agency won the TJ Maxx creative account. And just this week, Mediahub won three ad week media plan of the year's awards, as well as seeing its U.K. office when global media duties for Farfetch, which is a luxury fashion e-commerce brand. R/GA launched what they're calling a direct avatar capability. And that's going to create virtual stories for brands within metaverse platforms. And that really steaks out new territory in direct to consumer sales. On the growth front, R/GA added projects, but digital forward partners like Tonal, Slack, CVS, and Roku. Huge also launched a new commerce offering the experience stack of the future, and that's a tool that consolidates various elements of SaaS into an integrated growth solution for brands. I think we're also going to see the agency's newly appointed CEO, further his plans to infuse data into Huge as core offerings. IPG’s DXTRA growth in the quarter was broad-based and it benefited from the return of live events. Jack Morton, one new client assignments with Amazon and Twitch. And along with Octagon Sports and Entertainment was listed among event marketers ranking of the top 100 Event Agencies of 2021. Audio, social media app clubhouse added Golan as its global agency lead agency. Weber was named the supplier of the year by GM and security software company McAfee also named Weber Shandwick its global agency of record to help redefine the firm as a consumer brand. Lastly, Weber launched media security center in partnership with Blackbird AI to address emerging information threats. And this is an offering that's built to offer solutions to a business leader say is a really leading reputational issue, which is the spread of misinformation and disinformation. During the quarter, we also saw continued positive momentum at our U.S. independent agencies. The Martin agency won Hasbro's Nerf brand of products. Our Michael Lynch was named strategy and creative lead for H&R Block where they'll take on responsibility for strategy creative and social media, as well as public relations, added energy drink Frank a Shock to its roster. All-in, we're in a positive position from a net new business standpoint for the year. And our new business pipeline continues to be active. As is typical at this time, we don't have full visibility on project work as we head into the fourth quarter, which will include the crucial holiday shopping season. Now in line with the growth we're seeing across much of the portfolio, our companies are adding staff with a requisite contemporary skillsets as well as expertise. So hiring is yet to fully keep pace with a very strong growth we've seen to date this year. We've become seeing travel restrictions lifted in certain key markets as infection rates decline, and we fully continue to use technology and practices developed during the pandemic to reduce travel and other carbon intensive parts of our business where an as appropriate. But we believe that some of what we can call standard costs of doing business will return in Q4 and larger measure in 2022. Earlier on the call, we shared with you our perspective on the full year and our updated expectation that we'll deliver approximately 11% organic growth and adjusted EBITDA margin of approximately 16.8% for the full year 2021. That view is predicated as we indicated on the assumption that they'll continue to be reasonably steady course of macro recovery. And we're very proud to have delivered a very strong nine months thus far this year on top of the most challenging comps in the industry. Current performance combined with the continued execution of our long-term strategy should continue to be significant drivers for sustained value creation for all of our stakeholders. We're committed to sound financial fundamentals, as well as continuing to grow our dividend as we've consistently done, including through the pandemic and returning to our share repurchase program also remains a priority as we turn our focus on planning for the upcoming year. We'll, of course, keep you updated on our progress on that front. We're confident as well that the investments in talent and capabilities we continue to make position IPG well for the future. As Ellen said, this is an unprecedented time, but we have a highly relevant and differentiated set of offerings, underpinned by a sound financial foundation and a strong balance sheet. As always, we want to thank our clients and our people. Those are the key pillars of our success, and we want to thank you as well for your time this morning. So, now let's open the call for your questions.

Alexia Quadrani:

Hi. Thank you. Thank you. So you gave some great color in terms of where you're really standing out at IPG in terms of seeing this outsize revenue growth, and obviously the revenue growth has been sort of industry leading for a while. I guess, my question really is when you look at the overall growth that you've been seeing as a company, how much of this sort of outperformance do you think is due to the fact that you have leaned into areas and made investments in like Acxiom, which clearly and examples you gave made a difference in terms of winning incremental business, or how much do you think, again, sort of high level is just you're just positioned very well for the recovery, given your exposure to healthcare and such. Thank you.

Alexia Quadrani:

I guess, put a different way. Do you think your sort of elevated growth rates that you been seeing to a certain degree it's sustainable. Maybe not to this level, given the where you're on the recovery, but you do sort of envision it's possible that IPG has an elevated growth rate, organic growth versus what it did sort of pre-pandemic, given all the changes in your positioning. And maybe that's a better way to ask the question.

Alexia Quadrani:

And then maybe just a quick follow-up for Ellen on profitability. Any high-level comments you can give us in terms of how we should think about next year? I know you've mentioned that the costs haven't kept up with the revenue growth. So I assume that you could potentially see some contraction next year as things normalize, but any other sort of puts and takes we should be thinking about for profitability in 2022.

Philippe Krakowsky:

Alexia, I would just add one thing, which is, I think we closed if I recall correctly, our last call on a question that was actually pretty much on this very topic. So I think I'd say we're pleased that we're making it necessary for the question to be asked again. And as Ellen says, I think we're comfortable that we see continued upside margin opportunity for the business going forward on a multiyear basis.

Operator:

Thank you. The next question is from John Janedis with Wolfe Research. You may go ahead.

Philippe Krakowsky:

Well, it's a very broad question. Well, look, I mean, I think that the kinds of questions and issues that need to be solved if you're running a business today and you’re looking to achieve whatever your goals are imply that you're looking for partners that can help you address kind of a range of things that are sort of digital economy related. So whether that is your own business transformation, whether that is your data strategy at the enterprise level, and then ultimately how you're going to take increasingly your own first party data and put it to use so that you are either I think increasingly being more effective with your investment, but also more efficient. And then lastly, how you show up and how you go kind of direct to the consumer and therefore, e-commerce very, very broadly construed, right? Because I think that so much of what's happening now and e-commerce is happening in -- on owned platforms and channels that companies and marketers own, it's clearly going to be happening in areas that go sort of from the ad tech world where we've generally or largely been focused as an industry for a number of years MarTech. But it'll -- whether it's in the app world and the gaming world, et cetera. So I think that, it's both a fairly broad playing field. You've got some -- maybe smaller entities with deep specialization in some of those areas. It's interesting from where we sit, because we think it creates a broader kind of addressable marketplace. And if you look at our immediate competitive set, I mean, I think they're clearly looking at and thinking about sitting where they are in with a portfolio they have, how do they approach these things. In terms of the bigger or the broader competitive set, you see some activity, but I think the headlines are ahead of the reality there. And then I think you need to figure out ways to partner up, particularly kind of in the data and the tech world, because I think that as everything changes there, there's going to need to be -- universal identifiers is going to need to be kind of ways to -- privacy compliant way, engage with consumers and help again clients go to market. And so that will clearly imply being able to work with the folks who are solving for that, whether it's from a measurement point of view or from an activation point of view. So, I don't know that I'm seeing anything that we think is unexpected. I think probably if anything, the pandemic has probably moved us forward faster along this track. But it's a direction or an avenue that we were heading down anyway.

Ellen Johnson:

Good morning. We're tracking well. I think you see it coming through our numbers. I think you see the leverage that we're getting from. So, we're absolutely on target and on plan with that. We have a lot of them already subleased and a few more to come, but we're feeling really good about it.

Philippe Krakowsky:

Thank you.

Michael Nathanson:

Good morning. Philippe one for you and one for Ellen. Starting with anniversary of Acxiom. Congratulations. And I know some of us questioned the deal. I wonder when you look back on the three years, how did it do versus maybe what you expected? And looking forward, the business was mostly US-based I believe, are you seeing demand come from either new geographies or new client verticals that may be unexpected, that's one. And then for Ellen, I guess the only thing I worry about broadly is just wage inflation and the lack of people hired at this point. Are you concerned at all? We've not seen wage inflation in the US in a while, or is that factored in at all to your thinking longer term about potentially some margin pressures down the road. So thanks.

Ellen Johnson:

Okay. As far as inflation, we're not seeing materially higher broad-based inflation in our numbers to-date. But we're seeing what everyone else is seeing. The talent market clearly has become more competitive and attrition is higher post the pandemic. We went through a period of time or no one left. So you're seeing, I think, a two year attrition rate this year. And as a result, specifically because we're growing so fast, our hiring is not kept up. So what we're focused on is really innovating our recruitment techniques. We're doing all kinds of different things on that front, including talent referral bonuses, looking for different places for our workforce, including bringing working moms maybe back into the workforce. We're also trying to create opportunities for our people by creating promotion opportunities. And it's not all about the compensation, although we do pay people competitively. It's also really about the quality of the work environment that you provide, training and development, your values that you stand for as a company, including DE&I and ESG. So we're really focused on all of those things. One other thing I would point out is that our company typically, or industry benefits from higher level of economic activity. So that could actually turn out to be a positive from a revenue perspective. And I think it's also important to note that we aren't investing in some of these more innovative ways of solving higher order client problems for our clients. So whether it's digital transformation or getting, as Philippe said, direct to consumer e-commerce, we think all those things will do well in this environment as well.

Michael Nathanson:

Thank you guys.

Operator:

Thank you. The next question is from Julien Roch with Barclays. You may go ahead.

Philippe Krakowsky:

Yes.

Philippe Krakowsky:

That is a big question. I think it's an interesting question, but I think that we don't look at the year on a quarter-to-quarter basis. So I would ask that you then let me give us some broader context in answering it, right? I think that the variability that we see in the business on a quarter-to-quarter basis reflects the flack that client activity has to do with their needs and their competitive situation, and then also with a macro. And so, we've always framed up our expectations and we manage the business in terms of the full year, right? So, if I look at the full year with organic growth, as we've said in the range of 11%, on top of what are definitely the most challenging comps in the sector, that's a very strong result. And if I look at a two-year compound stack, if that 11% comes in that still has us at just under six, when -- without us in the mix, the industry is probably flat. I think if you get under that quarterly number and you think about the fluctuations, I think the point that you raised feels to me like it's about timing from where I sit, right? And so, Q4 last year, timing clearly favors Q4. Whether that's, as you know, obscured somewhat by the recessionary environment that we were navigating at that point. So, you had pullbacks early in the pandemic, then our clients get their bearings. They figure out how to go virtual. They lean into a lot of what we've been talking about digital e-comm. And so there's pent-up demand that clearly benefited Q4 from where we were sitting. We saw it in digital media spend very strong, spend in the retail category. There was a lot of COVID related government communications work, which thankfully is going -- hopefully be a little less necessary now, and this year we've seen this marked acceleration in Q2 and Q3. And I think that reflects, at the macro level, the progress that's been made broadly on public health and the fact that economic activity is up, but also the acceleration of the digital behaviors, which IPG has been anticipating for many years with strategic actions. And so those two quarters have been very, very strong. And so going into Q4, I'd say to you that what we're seeing is, tone of the business is solid, where net new business positive, but delta has definitely created some uncertainty at the macro level. The pent-up demand, that was a plus in Q4, isn't necessarily there. And so, that's where -- as I said to you, we look at the year, we feel very comfortable with a year. We look at the two-year stack, we think that that is very strong as well. And so, to my mind, I don't see it -- as you, I don't read it the way that you do. I think that when you then -- when we have a discussion about what 2022 looks like, then we have the question that you put out there.

Philippe Krakowsky:

We also have stronger Q2, Q3 and stronger comps in the prior year.

Philippe Krakowsky:

We're giving you our best line of sight into where the business is today and how we think we're going to finish the year. If what you just suggest is conceivable, then I think you will see further margin upside, but I don't know that it's constructive to sort of speculate on what that could be. And again, to Alexia's question at the outset, we feel good about our long-term margin expansion case and we've proven it, and we think it will prove out. But I don't know that I can speculate on that one. I don't think -- I don't know that it -- it's -- as I said, I don't see it as constructive.

Philippe Krakowsky:

Thanks for the question.

Philippe Krakowsky:

Thanks, Su. Well, again, just we appreciate the time and the interest and the continued support, and we will get back to work and focus on the fourth quarter. Thank you. And I hope everybody's staying safe and well.

Operator:

Good morning, and welcome to the Interpublic Group Second Quarter 2021 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thanks, Jerry, and thank you all for joining us this morning. As always, I'll start with a high level view of our performance in the quarter. Ellen will then provide additional details, and I'll conclude with updates on key developments at our agencies to be followed by Q&A. I'd like to begin once again by thanking our 53,000 fellow employees around the world for the professionalism and dedication that continue to see us through the many challenges of COVID. These include the transition to work from home, and now are planning for return to office in many parts of the world, as well as the significant personal difficulties presented by the long course of the pandemic. It's due to the efforts of our people, their commitment to their craft, our clients and to each other that we can share with you today these very strong results. Performance that demonstrates our resilience represents a remarkable rebound from the impact of the pandemic, and is also the largest second quarter in our company's history. Our strong results in the quarter build on IPG's consistent record of industry outperformance and margin expansion. Our growth across regions, disciplines and client sectors speaks to more than a recovering global economy. It underscores the elevated value that marketing and media partners can deliver in the integration of creativity, technology and data at scale made the significantly increased velocity of digital transformation. At Interpublic, we're confident that we are attuned to the powerful currents that are transforming consumer behavior and are required for business relevance. And then we are increasingly delivering differentiated and higher-end solutions that help our clients win in a world of accelerated technological and societal change. That takes creativity and precision, data and accountability, all of which we're able to bring together in customized teams that drive talent from across our portfolio. Ultimately, our growth speaks to our ability to drive outstanding business results for our clients.

Philippe Krakowsky:

Thanks, Ellen. While we remain very pleased with our results, it's worth reiterating as Ellen just said that this is an unusual, in fact, unprecedented environment in which we're operating. Now importantly, it bears noting that when compared to our non-pandemic results in 2019, Q2 results show our company is performing at a very high level. We continue to feel this is the result of strategic decisions that we've taken over a number of years to position our company for the future, investments and actions that have created a sustainable advantage for our organization. Today's IPG delivers addressable and accountable digital marketing programs, combined with our world-class creative storytelling capabilities. These solutions make us higher value partners to our clients. One of our many priorities over the years has been the creation and implementation of open architecture solutions, where we bring the best of IPG together in collaborative teams that are customized to client-specific business needs and increasingly a key element of this approach. Open Architecture 2.0, as it were, is Acxiom whose data management expertise and data assets play a role in an increasingly broad range of our offerings. In addition, Kinesso powers many of our applications and services that provide clients with a deep understanding of audiences. In order to provide insights that inform creative work, segments for media delivery and line of sight to the effectiveness of the work that we're doing together. We saw this model come to life in the quarter with a Cigna count win, which combined talent from McCann Worldgroup, Initiative, and R/GA powered by Kinesso and Acxiom. This is a continuation of several years of strong performance in integrated pitches, especially those that include creative and media, as well as media and data. And other another key decision that's contributed to our success has been our continued investment in strong agency brands, which helps us attract and retain top talent and deliver breakthrough creative ideas across a range of marketing disciplines. As a result of this strategy, IPG companies across our portfolio earned a number of important accolades during the quarter. Most notably, we have an impressive showing at the 2021 Cannes International Festival of Creativity. IPG agencies took home eight Grand Prix, the festival’s highest honor. Wins across the network represented a broad range of clients, categories, agencies, disciplines and geographies. FCB’s performance was a standout, as the agency took home four Grand Prix and was named Global Network of the Year. The agency's creative community and its leadership deserve credit for this terrific accomplishment. FCB Health was also named Healthcare Network of the Year and Area 23 and FCB Health Agency was named Healthcare Agency of the Year. McCann Client Microsoft was named Marketer of the Year at the festival, which is another major honor. And the agency also won a Grand Prix in brand experience and activation for its remarkable true name work for Mastercard, which empowers transgender and non-binary cardholders to use their true name when using their credit card. In PR, McCann Paris earned a Grand Prix, partnering with Weber Shandwick for a campaign that ran across the Middle East, which teaches women in a culturally sensitive way to perform self-checks for early breast cancer detection. FCB Chicago and Weber Shandwick teamed to earn a Grand Prix for work for AB InBev. And R/GA continues to be recognized for its ability to humanize technology, winning a Grand Prix in social and influencer marketing for disruptive work it did for Reddit on the Super Bowl. On Ad Age’s annual A-List and Creativity Awards, both Deutsch LA and the Martin Agency were named to the prestigious A-list. Initiative was named Media Agency of the Year and FCB Health’s CEO was recognized as our industry's Executive of the Year. At the holding company level, we made a number of announcements that position us for further success. Chief among them was our launch of IPG Health earlier this month. The move will align our top performing companies, FCB Health and McCann Health under a new global network, IPG Health, led by a dynamic and proven CEO and a skilled executive leadership team. In this new operating structure, the distinct agency brands within FCB Health and McCann Health will remain active and continue to go to market independently. They will also benefit from access to additional specialty services, knowledge sharing, proactive career management, shared investment in new capabilities and skill sets, highly complimentary geographic coverage, as well as an even higher level of collaboration. Around the world, healthcare and wellbeing are areas of growing importance for our clients and society at large. As an industry sector, healthcare represents an increasingly vital part of the economy, and one where innovation is becoming an ever more important driver of success. So the alignment of IPG’s fully dedicated healthcare networks under the banner of IPG Health strengthens our leadership position in this dynamic sector. The scale, reach and most importantly, quality of our people and our work makes for an exciting combination. And it's why we think this new offering will continue to deliver great things in the years to come. This month, we also added to our strong roster of marketing technology and e-commerce providers with a launch of Performance Art, a data-led creative CRM agency, whose leadership team is known for delivering platform level creative ideas that are at home in a client's e-retail flow as they are in a 30-second spot. Turning to performance at our agencies, growth at IAN in the quarter was once again highlighted by media, data and tech and FCB led by healthcare. UM saw significant wins in the quarter with Enterprise Holdings, Behr Paint and most recently NYC & Company, New York City's official marketing and tourism organization. UM also saw an important account retention for the Australian government. At the Campaign Agency of the Year Awards, UM earned Global Media Agency of the Year honors and UM APAC was named Best Media Network in that region. At Initiative, the agency was named 2020’s Most Competitive Network Globally in Media Pitches and saw a major win in the UK with banking insurance company, NatWest Group. We also continue to see terrific momentum at Reprise, especially as relates to their growing e-commerce capabilities. Acxiom, Kinesso, and Matterkind are also performing well. And they're key to how we help clients thrive in the addressable media market, which requires flexibility, given the quickly shifting landscape. At Acxiom, we continue to invest behind innovative new products and services, such as customer data platforms, and identity resolution, with which we are seeing increased client adoption. Another important development saw Acxiom deploy their latest customer intelligence platform on the cloud with a key financial services client. At our creative integrated networks, FCB, McCann and MullenLowe Group were named to Act Responsible 2020 Good Report, a unique ranking of the world's best use of creative communications to promote sustainability and social responsibility. On top of its exceptional showing at Cannes at FCB Global, the network continues to invest in talent and new offerings, hiring a head of data science and connections to expand its expertise and commerce, data and technology fueled creativity. McCann also continues to prove a creative powerhouse. As we saw, in the network was recently named Webby Network of the Year and McCann New York was named Webby Agency of the Year. MRM continues to leverage its more tech expertise, missing strong growth with its MRM commerce division, which helps marketers drive engagement, interaction and conversion on commerce platforms. And MullenLowe Group, Mediahub continues a strong new business momentum and during the quarter, added Hallmark's parent company, Crown Media, as well as Tally Financial. MullenLowe is also a global leader in purpose driven work. And we saw that as it continues to partner with governments and a number of countries around the world to inform people the benefits of being vaccinated against COVID-19. At R/GA, campaign named the London office is the UK’s Digital Agency of the Year. And R/GA London added two new clients, financial services company, Allianz and Vollebak clothing. We named the new CEO at Huge, who joins the digital agency after a very successful tenure at Initiative, where he helped turn the agency into a leader in the media space. During the quarter, Huge also saw strong new business activity, adding Sub-Zero Appliances, Wakefern, Tezos Foundation and Nikko Asset Management. The Martin Agency continues to impact culture and drive strong business results for its clients. Notably, the Agency’s Soul of the City short film for DoorDash, premiered at the Tribeca Film Festival last month and had captured the resilience of New York City's restaurants and the role they play in the cities like. At IPG DXTRA, we also saw recognition as a number of companies were called out for their ability to deliver creative solutions. Weber Shandwick was the most awarded PR agency at Cannes this year. Current Global demonstrated their commitment to closing the disability and inclusion gap by creating guidelines and toolkits for marketers, so as to make content more accessible for consumers with sight, hearing or other cognitive impairments. And this program was recognized as one of Fast Company's World Changing Ideas for 2021. Jack Morton launched what they are referring to as the return-to-live dashboard, and that's a tool for brand marketers to access where, when and how businesses in the U.S. can safely get back to hosting live experiences. Golan continued its strong performance in new business, was selected as LinkedIn’s global social media agency of record and also agency of record for Yamaha music. Golan was also named PRWeek's Global Agency of the Year. And at Octagon, the Sports and Entertainment Network won Best Talent Representation at the 2021 Sports Business Awards. Pivoting now back to the holding company another key area that BEHR's mentioned is our long-term focus on ESG, including diversity, equity and inclusion. As a leader in marketing services, and a citizen of the communities where our employees live, work and vote, we welcome the responsibility to operate sustainably and contribute to the healthier society and planet. In all of our operations and activities we are working to build on and more fully live into this commitment. And this includes reassessing how we hire, train and promote a diverse workforce, incorporate rigorous practices around data ethics and media responsibility, as well as reduce our greenhouse gas emissions further around the world. Key accomplishments on this front include IPG being recently named by Forbes, to their top ten list of America's Best Employers for Diversity. During the quarter, we also created a new position, our industry's first Culture Officer, to focus on long-term thought leadership relating to a broad range of social justice issues for underserved and underrepresented communities. During the quarter, as part of our integrated ESG efforts, we also announced an action plan that consists of three climate roles, committing to set a science-based target; sourcing 100% renewable electricity by 2030 and joining The Climate Pledge co-founded by Amazon and Global Optimism. In addition, we've published our first SASB report, becoming the first company in the advertising and marketing sector to publish an alignment with SASB’s industry standards. Our agencies also contribute significantly to our ESG profile. And importantly, here in the U.S., we saw media brands take a leading role in the industry conversation about promoting greater media equity. And they announced that they are committing to invest at least 5% of client budgets in Black-owned media by 2023. Octagon launched an accelerator program with historically black colleges and universities for students interested in sports and entertainment as a career. And RGA created an innovative program to raise money for environmental organizations through a dedicated YouTube channel that plays nature videos, which have become hugely popular during the pandemic. And it directs all the ad revenues generated on this channel to environmental NGOs. Now, as we sit here at the halfway mark of 2021, the success we've seen, is thanks to the talent, efforts and commitment of our people. And we continue to be highly focused on supporting their physical and mental well-being as we plan return to office. Like many of us, I look forward to working live with colleagues and clients, especially given that we're an ideas-driven service business. Our culture, our capacity for innovation and the ways in which we combine creativity with technology and data are all enhanced by in-person interactions. Now here in the U.S., we expect to have more people returning to our offices in a flexible, hybrid model, beginning in mid-September, as is already the case in certain other parts of the world. We will of course, be mindful of the public health situation, and of the learnings we've accumulated during the past 16 months, when it comes to flexible work practices. We expect the costs associated with live collaboration with colleagues, as well as travel will begin to return as a normal part of how we work and therefore be reflected in our operating results. For example, as we look forward to the remainder of the year, we expect an increase in travel costs in the fourth quarter, which could return to levels consistent with what we saw in the fourth quarter of 2019. As we said earlier, these are unprecedented times. None of us have previously been required to adapt to the constraints of living and working through a pandemic. And likewise, none of us has experience in emerging for one. Thankfully, as a company, we are well positioned to do so. Earlier on the call, we shared our perspective on the balance of the year. Based on the assumption that there will continue to be a reasonably steady course of macro recovery, that people continue to become vaccinated to protect themselves and their communities. And then we're able to adequately mitigate the impact of dangerous new variants. We've delivered a very strong first half of the year, on top of the most challenging comps in our industry. Further, despite continued macro uncertainty, we have greater clarity to the balance of 2021. We therefore believe that current performance, combined the continued execution of our long-term strategy are significant drivers for the sustained enhancement value for all of our stakeholders. As always, we're committed to sound financial fundamentals, including debt reduction, as well as continuing to grow our dividends. We also remain focused on getting back to our share repurchase program. And we will keep you apprised of our progress as the year develops. As always, we want to thank our clients and our people, who are ultimately the two key pillars of our success. I'd also like to thank you all for your time this morning. And with that, turn the call over for questions.

Alexia Quadrani:

Thank you very much. I just have a couple of questions if I might. The first one is really kind of a broad question on the really impressive organic growth you guys delivered in the quarter. I'm wondering what surprised you on the upside versus your internal budgets? Like where did you see kind of incremental growth versus what you expected? And I guess along those lines, I guess, how much do you think of the strong growth is IPG sort of gaining share of wallet, from the clients versus just a bounce back in their budgets or their spending?

Alexia Quadrani:

And then just a quick follow-up on margins, sort of also a high-level question. You obviously have some great margin improvement this year with the benefit of expenses being cut back and also the bigger picture, permanent cost cut you took, that you announced earlier on. When you think about margins longer term though, I'm not sure if you can still achieve margin improvement in 2020, given the comp, but is there still the plan to continue to improve margins longer term post this year?

Ellen Johnson:

Good morning Alexia. How are you? Thank you for the question. I'll start with the actions that we took last year as part of the restructuring, and they were clearly structural and strategic, and that is why we are so confident in them and that we will realize the savings that we've committed to. So, if you break them down and you look at the fact that we took out 15% of our real estate portfolio, or that we eliminated certain regional or other layers of management to become more agile, or that we were able to nearshore or offshore certain roles, that gives us great confidence that those savings are permanent, and they will not come back with revenue growth. Turning to some of the more variable expenses, if you look at travel and meetings, they will come back. And initially they may come back pretty full as there is pent-up demand for people to get back together to get out and see clients and to see our people for training and development. Do they go back fully to pre-pandemic levels? That remains to be seen. I am hopeful that the learnings from the pandemic with using technology and really thinking carefully about the environment will help us be more efficient, and prevent them from fully going back to pre-pandemic levels. And then I would just reiterate the fact that what Philippe said is that we've demonstrated over a period of time that with revenue growth, we can expand margins. And we're incentivized to do so. Our incentives are largely based on organic revenue growth and margin improvement. And that makes me pretty optimistic.

Operator:

Thank you. The next question is from John Janedis with Wolfe Research. You may go ahead.

Philippe Krakowsky:

Hi John.

Philippe Krakowsky:

Well, look I mean, to date, we’re seeing the benefits of the progress that, any number of places around the world has seen. And then I think, as we’ve discussed previously, I think a second or third wave, or whatever it is that any country might be experiencing, is not going to necessarily be the same as the first because there is a sense that you’re still making progress toward an outcome. So you’re still either getting people vaccinated, or in the case of many of our clients, you’ve pivoted into an accelerated your ability to operate, whether it’s through e-com or other ways, in which you’re going direct to consumers, you’re clearly leaning more heavily into digital as part of your mix and transforming your business. So I think that, again, means that we don’t necessarily see that, the impact will be as significant. And then, specific to certain markets for us, as we’ve also said before, client mix can have a pretty significant impact for us on the ground in any given market, so to my mind, TBD as to whether we’re getting there on those two markets. They’re fairly modest in size for us. I think China is probably the one we focus on the most as a place where we want to be delivering for our global multinational, and we’re doing some interesting things in that market with Acxiom and some of our relationships with some of the large platforms there and what we can do with data. So still work in progress. I couldn’t put a date on that for you.

Philippe Krakowsky:

All right, I let Ellen start with that piece of the question. And then whatever she’d like to, speak to on your talent question. I’ll, sort of add on.

Philippe Krakowsky:

No, look I mean, there’s not a lot to add there. I think its fair question. I mean, we’re in a professional services business, we’ve always been focused on the importance of talent as a driver of, our competitive advantage, and we’ve been evolving the offering. So clearly, we’ve been dealing with the pressures of the talent market for the kind of digital, in tech talent that, has been in demand for a while, I think to Ellen’s point, some of those, turnover numbers feel as if we’ve yet to see what it normalizes out to because there, it does feel like they were lower in 2020. They’re picking up now, I think that, people were, understandably, sitting still last year, and now that the world feels like a place where you might get out and about again, you’re looking, and so it’s a topic that comes up in our conversations with the operators. We’re, keeping a close eye on it, look into how we – how do we manage it? And how do we stay ahead of it to mitigate, the impact, and we’ll keep you posted on kind of what we’re seeing, but, people come to work across our portfolio because, a range of things, that have meant that whether we were competing for talent with startups or with large tech companies for the last few years. We’ve been, fairly successful at it. So we got to just keep, to Ellen’s point, figuring out how we put, what are our advantages to work in those conversations.

Operator:

Thank you. Next question is from Michael Nathanson with MoffettNathanson. You may go ahead.

Philippe Krakowsky:

Yes. Hi, Michael.

Philippe Krakowsky:

All right, I will take the first one. I guess we’re both to your point take the second one. We’ll say we’ll be vehemently in agreement on the second one, Ellen and I.

Philippe Krakowsky:

Look, I think it’s any number of things which you would assume so clearly, the need to be conversant in and to put into effect programs so that you are, we call it what you will, so people call it e-com and there’s a lot going on there. I mean, socials becoming a big part of what happens somewhere in the funnel, in the middle of the funnel actually, and moving upstream in the funnel. So everybody is clearly wanting to talk about and engage in conversations around, call it digital marketing, calling e-com et cetera. Increasingly, everybody is also, we’ve had some really interesting conversations with, regional clients in the CPG space that’s, for example, you might not think of who are very, very focused, on data and on either assessing their first party data assets and understanding how they get organized so that they can begin to put them to work or if they’re further behind in terms of the readiness there, how do you take businesses that traditionally have not been particularly data-rich and begin to interact with consumers, so that you’re going to basically pull those that kind of information in, to the question Alexia asked earlier, in the experiential event space, we’re clearly seeing the need to get more digital and to use that as a way to so from to my mind, those are the two really big questions that have risen to the top of most everybody’s list, right? And then in terms of the balance sheet, question you asked us, as I said, we are committed to – we’ve returned, what is it $4.8 billion, we believe that’s a big part of our story, and how it is that we should be thinking about kind of balanced growth for the company. So we’re currently focused on that.

Michael Nathanson:

Okay. Thanks, you guys would come such a long way from way back when. Congratulations.

Operator:

Thank you. Our next question is from Julien Roch with Barclays. You may go ahead.

Philippe Krakowsky:

Hi, Julien.

Philippe Krakowsky:

I’ll let, Ellen go first on your first one.

Philippe Krakowsky:

Look, and I think, there’s pent-up demand, as we were saying, John’s question around potential turnover. I think there’s pent-up demand, for travel absolutely. So I think that, you’ll see people wanting to, there’s definitely things that get done when we are working to physically together that are much harder to do remotely. And then there is growth and we want to be sure that, that’s getting staffed appropriately and that we’ve got, clients who are giving us these new remits or new net new clients to us. You’re getting the appropriate level of service in terms of the philosophical question; it’s interesting, because I don’t know that I would call it philosophy. But, as we said, the restructuring positions us well, we’ve said all along, we want to come out of the pandemic, a stronger company, and I think we’re showing that we’re well on our way there. And then you do begin to see the transformation into certain of the areas, which we think will be accretive, because they’ll take us to more performance based kinds of models and to higher value or, instances in which our IP can be licensed out or can give us access to. So I think, to my mind, it’s not philosophy because I can’t give you a tenant that says this will be good forever, I can tell you that at the moment, we see continued opportunity and upside. And therefore, whether it’s in 2022, 2023, that’s going to be what we’re making our objective to Ellen’s point, that’s also how we reward our people. And if there comes a point at which we began to believe or see that the ceiling that you mentioned is there, then as always, we’re going to be very transparent and walk you collectively through what we’re seeing and why what we believe is what we believe. But I can’t, say something now that is going to be kind of evergreen in that way because, our business is in the midst of evolving. And right now, we see opportunity.

Ellen Johnson:

Thank you.

Operator:

And that was our final question. I’ll now turn it back to Philippe for any final thoughts.

Operator:

Thank you and that does conclude today’s conference. You may disconnect at this time.

Operator:

Good morning, and welcome to the Interpublic Group First Quarter 2021 Conference Call. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you all for joining us this morning. I'll start with a high-level view of our performance in the quarter. Ellen will then provide additional details, and I'll conclude with updates on the highlights at our agencies to be followed by Q&A. First and foremost, as Jerry said, I hope that you and your families are keeping well. As we all know, around the world, the pandemic is still with us to a significant degree. With all that entails, it bears mention that our people continue to navigate the many challenges, both personal and professional, presented by the health crisis. Their extraordinary resilience and capacity for innovation as well as their care for one another and their commitment to our clients are inspiring. Against business conditions that continue to be demanding, our people have driven the solid growth and the high level of first quarter profitability that we are reporting today. Turning to those results, beginning with revenue. We are pleased with our start to the year. First quarter organic net revenue growth was 1.9%. That reflects solid performance in the U.S., an organic decrease of 20 basis points and strong international growth of 6.3% with increases in every world region. In the U.S., you'll recall that we are comparing to very strong underlying performance in the first quarter of 2020 when we face headwinds of nearly 4% due to certain 2019 client losses that we previously identified. Domestically, during this year's first quarter, we saw increases in areas such as media, data services and technology and our health care specialist agencies. Our international performance was paced by 12.4% growth in Continental Europe, where we had a strong start to the year by our media, data and tech offerings as well as McCann Worldgroup. Worldwide, our health care and retail client sectors, which were consistent outperformers last year were again our growth leaders in the first quarter.

Philippe Krakowsky:

Thank you, Ellen. It's worth repeating that Q1 is our smallest seasonal quarter, but nonetheless, we are pleased by our start to the year. The return to organic revenue growth is a signed that our clients have begun to pivot to an investment mindset as they look to build their brands and grow their businesses in line with the broader economic recovery. Our performance is also a reflection of the strength of our people, our offerings and of long-term strategies that have helped us drive consistently strong performance over time. We all know that the pandemic has accelerated a range of underlying trends, whether in business or society at large. As a result, many of our clients are undertaking meaningful transformation of their companies. This means adopting new ways in which they go to market in order to keep pace with rapid digitization of consumer behavior and economic activity. In a world that's more cluttered than ever with messages and channel all vying for our attention, the most critical challenge is to combine great ideas that come from the human storytelling side of our business with strategies and insights that can be generated by our technology and data capabilities. We've increasingly seen the amounts of time people spend online, picking up content that's engaging informative, entertaining or some combination of all 3. Content is undoubtedly more important than ever, and that's what makes the creative side of our business so vital. Equally important is getting those messages to people in ways that are relevant, respectful of their privacy and ultimately connect with them in meaningful ways. It's also key to take the information flow that results from all those digital interactions and apply it at every step along the process from audience definition to creative ideation in order to better understand the impact that our clients' communications are having on their businesses. Our differentiated capabilities include a range of data-driven offerings that can do this both at scale and at speed. As you know, we've been developing a data and tech infrastructure that underpins the full portfolio of our agencies and deliver solutions to a broad range of business problems through what we call the open architecture model. All of our major clients are seeing the benefits of this integrated approach as our prospective clients. During the quarter, it was gratifying to see that the Kinesso behavioral sciences teams are engaging with more of our advertising and marketing services agencies than at any time since we launched those offerings. Despite the challenging external circumstances that we continue to deal with in the quarter, certain key elements of our business remain constant. We will always succeed by adapting rapidly in our ways of working and how we are meeting the needs of clients. Since the start of the year, we onboarded or promoted top talent across the organization, once again received high levels of industry recognition and saw solid new business performance, where we remain net positive for the past 12 months. As you've seen in our results, growth in the quarter was driven by contemporary offerings in which we've consistently invested, including media, data and tech, health care and digital user experience. Another area where IPG has invested significant resources is in our environmental, social and governance programs. For some time, we focused on building a culture of high ethical standards by adhering to a set of values centered around respect for every individual as a company responsible for creating some of the world's most well-known marketing campaign. We have an obligation to ensure that the work we do as well as how we deliver it supports the long-term well-being of our communities. This quarter, IPG released its sixth annual sustainability report using the global reporting initiative standards framework. The report can be found on our website, and it represents another step forward for us in our commitment to ESG. In terms of climate action, we track IPG's global energy usage and greenhouse gas emissions across our entire portfolio. Next month, we plan to announce several strategic priorities focused on tackling climate change including a science-based target for reducing our emissions globally. The report also aligns with the UN Global Compact and focuses on human capital disclosures. Further, we make clear that we operate with a core expectation that individuals deserve control over their data and that we are responsible for promoting high ethical standards in terms of data privacy and security. Equity and inclusion also remain areas of focus for us. Our agencies are attuned to this priority, and they are held accountable because we have to show further progress when it comes to diversity in our ranks. IPG's latest MSCI ESG ratings report, which is a key ESG data provider for our various stakeholders, saw an increase in our company's score to an A rating. Our improvement was the result of increased disclosure when it comes to human capital management, our position and capabilities related to data privacy and certain governance enhancements. More recently, we joined Civic Alliance, as well as many of our clients, in calling for the protection of voting access here in the United States. We continue to be committed to promoting democracy, and we'll work to support safe, accessible and fair elections as well as to encourage our employees to participate in civic life. As a business in which attracting top talent and advising clients is crucial to our success, a robust approach to ESG is a key part of our long-term strategy and important to all stakeholders. Turning now to highlights from our portfolio. During the quarter, we issued our second media responsibility audit, addressing in a structured and consistent manner one of the most topical issues in the digital media ecosystem. This framework and the principle it sets forth continue to be well received by clients as well as key industry groups. Mediabrands' MAGNA unit also hosted a first-of-its-kind equity upfront, a week-long event intended to raise visibility and receptivity for black owned media and media that serves Black audiences. In addition, the network announced that it would be joining forces with TikTok for a creator and content accelerator. Two of our most dynamic units were in the media space. where we continue to leverage our deep data resources and capabilities. We're seeing strong growth in Matterkind, which is customizing addressable media activation at scale for more of our clients. At Reprise commerce we have rapidly scaled operations on a global basis as we address growing needs in e-commerce, particularly for insight, content and analytics. Following on a series of new business wins, Initiative elevated its U.S. leader to global CEO, where we believe she will have an even greater impact on the network success. At UM during the quarter, we added a global rental car client as well as an auto OEM in EMEA and HBO Max in LatAm. UM was also named an outstanding company for working mothers, and 3 of its executives were named Adweek Media All Stars, a distinction that was also earned by leaders of Reprise and Mediahub. At our creative integrated global agencies, both McCann Worldgroup and FCB were named to the top 5 most awarded networks of 2020 in the Drum's world creative rankings. Both also had work in the Super Bowl that was well received in a number of polls and rankings. Following the implementation of our succession plan, at the end of 2020, McCann Worldgroup posted a solid first quarter. Along with most awarded networks of 2020 in the Drum rankings, McCann New York came in at #4 on that list In terms of the top 100 agencies worldwide. At MRM, the agency was again named a leader in Gartner's 2021 Magic Quadrant for global marketing agencies based on their ability to serve as key strategic business partners for clients and to execute on critical marketing priorities. Huge and R/GA also featured on that list. The health operations at McCann and FCB performed strongly in the quarter and continue to take share in the marketplace. The notable program I'd like to call out was FCB Health's launch of the trial for #clinicalequality to shine a light on racial bias in clinical oncology trial. In MullenLowe Group, Mediahub continued on its new business streak for the addition of Global wins Slack and -- as well as New Balance in the U.K. Mediahub also introduced its inaugural diversity own Media Day and revamped its U.S. leadership team with a series of internal promotions. The MullenLowe advertising network continues to be a leader in purpose-driven work. Partnering with several independent casting agencies, The agency recently launched a campaign for Unilever's Dove to promote inclusivity in commercial testing. In the U.K., the agency has continued to do important work on behalf of the government to inform and educate the British public concerning the pandemic. The campaign U.S. Agency of the Year awards, the Martin Agency was recognized with multiple honors. And the agency also teamed with Mediahub for an integrated win of Terminix in Q1. Huge posted strong results during the quarter and saw two big wins, adding Coppertone and Wakefern to its client roster. The agency also announced the return of its Huge XD school with a renewed equity centered purpose that seeks to use education to increase the participation of underrepresented identities in the design industry. And in R/GA, the agency's Venture Studio program announced the launch of a new coalition venture studio with a mission to support Black start-up founders. IPG DXTRA companies continue to deliver specialized capabilities and integrated solutions for clients in our evolving world. Bowen was once again a standout in new business arena. Weber Shandwick was named PR Agency of the Year of the Campaign U.S. Awards, and the agency also launched the planned VX open playbook, a communications program that draws on extensive vaccination and public health communications expertise to help companies play a role in getting America vaccinated. At Octagon, leader in sports marketing, we recently promoted a longtime executive to the role of CEO. Performance at Acxiom was consistent with our expectations and in line for a year of solid growth in 2021. The company continues to carve out a position as an authority in the integration of marketing and advertising technology. During the quarter, Acxiom expanded its partnership to better manage and measure campaign execution through the cloud in order to provide tangible improvements in campaign efficiency and speed. Acxiom is also accelerating its development in client verticals where it sees opportunities. Recently, Fortune named Acxiom one of 2021's Best Workplaces in Technology. Working closely with the Acxiom data teams, Kinesso deployed its enhanced identity solution with half a dozen large clients. This has already driven double-digit lifts in campaign efficiency. Kinesso also expanded its range of direct data integrations with prominent platforms and ad tech companies. As I mentioned earlier, we are pleased to see the Kinesso API connecting data and analytics capabilities across more of the IPG portfolio. Since we see this as a growth driver for our business and a source of potential new revenue streams. Acxiom, Kinesso and Matterkind, are working together to bring end-to-end data and identity solutions to clients in collaboration with a number of IPG agencies, We've seen the impact of this recently in new wins and expanded assignments in the telecom, auto, health care and financial services sectors. Looking forward, we will stay focused on unlocking the enormous opportunities that exist due to the changes and disruptions that have accelerated during these past 12 months. We worked over the years to embed digital capabilities throughout our organization and build a foundational layer of tech and data infrastructure that informs all our work. As a result, we have a deep understanding of audiences at the individual level based on the strong legacy of ethical data practices. Personalization, privacy and accountability are only going to grow in importance and value going forward. Our vision is, therefore, for IPG to become a key partner in ensuring that clients businesses thrive in the digital economy. The success we have seen at the start of the year is thanks to the talent, efforts and commitment of our people. As you'd expect, we are focused on supporting their physical and mental well-being and listening to them in planning a return to office. That likely is to begin the meaningful degree in September, dependent on continued progress and matters related to resolving the public health crisis. It will be a gradual and iterative process in which we obviously were going to have test and learn as we go. As such, on the cost drivers that go hand-in-hand with live collaboration with colleagues as well as calling on clients in person, which have, of course, been reduced as a result of lockdowns, we'll begin to work their way back into our ways of working as well as our operating results. We've already shared with you our perspective on the balance of the year, which is based on the assumption that there will continue to be a reasonably steady course of macro recovery. As is clear, we view our current performance and long-term strategy as significant factors that will continue to enhance shareholder value. As always, we're committed to sound financial fundamentals, including debt reduction as well as continuing to grow our dividend. We also remain focused on getting back to our share repurchase program when appropriate. We will, of course, keep you apprised of progress as the year develops. As always, we very much want to thank our clients and our people who are the key drivers of our success. Thank you all for the time this morning. And with that, let's open the call for questions.

Alexia Quadrani:

I guess my first question really is on the guidance, sort of clarifying a bit more at 5% to 6% organic revenue growth. I think you mentioned -- I think you just mentioned sort of a steady recovery is the assumption behind it. But I'm wondering if you're anticipating things like sports and events come back later in the year sort of the -- in your assumptions for that guide. And then just a follow-up question is really on the new business activity. I'm wondering if there was maybe a low in 2020 and that has created kind of a pent-up demand or backlog, a more robust pipeline potentially for 2021, which could ultimately have an outsized influence to the full year organic growth.

Alexia Quadrani:

And then if I could ask one more. On the buyback, is that still -- we should still think about that as sort of maybe something for -- in 2022 or the tail end of this year? How should we think about the timing of that?

Ellen Johnson:

Thank you. No, listen, I will reiterate that we believe capital return is very, very important. I believe we have a track record of showing that. We were very pleased to see the rating agencies change their outlook on us. We have a debt paydown in October, and we will continue to be focused and analyze the situation. And yes, I really do believe it's not a question of if but when.

Operator:

The next question is from John Janedis with Wolfe Research.

Philippe Krakowsky:

Look, I mean I think there are lots of ins and outs here, so we can obviously unpack that for you. I would sort of say we've been clear that, that $160 million is a commitment that we, as a management team, have signed up for. So that's definitely the case. You see growth in Q1. So the strategic structural actions are beginning to kind of, in essence, get leverage, and so that's clearly very encouraging. And then we also talked about the fact that a lot of that $160 million would be evident in the '21 results and that real estate actions would not all be realized that we'd see some in '22 depending on the pace of the subleases, right? So the stated objective of we want to emerge from the pandemic as a stronger company, it feels to me like we have early indications given the quarterly results that, that's clearly what we're doing. And then there are clearly other factors at play. So the ins and the outs of -- independent of the restructuring over a bunch of years, we've demonstrated the ability to grow margins with revenue growth. So there's growth now. So there's -- some of what's in the results just shows what Ellen and her team and what our operators are able to do in terms of discipline and focus on operating leverage, And then we're also starting to get into some higher value services and revenue streams. And the tailwind that is -- I think the unknown is that growth has come back prior to normalization of what, I guess, we'd call kind of pre-pandemic business travel meetings and all the costs that are associated with that. And I think that, over time, that's going to reverse. We go back to office, we go back to in-person interactions. And those are positives. I think there will be things that come out of those ways of working that will be good for the business and for what we're able to do with clients. And as some of those then costs come back into the model, then real estate savings materialize as we go into '22. So on all of those moving parts, I think we've got more detail in the various categories that had significant positive impact on margin. I think Ellen can probably unpack some of that with a lot of specificity for us.

John Janedis:

That's helpful. And then maybe if I could shift gears. I was surprised that all of your international regions put up positive organic growth. Obviously, there are headlines in some markets, like India or Europe around COVID resurgence. Is it your sense from your people on the ground that you've turned the corner and that growth generally is sustainable?

Operator:

The next question is from Michael Nathanson with MoffettNathanson.

Philippe Krakowsky:

Two small questions, wow. So I guess on the latter, Michael, I'd say to you that for quite some time, what we clearly believed was the right course of action was to invest in talent and to build the capabilities and embed them across the portfolio. And so I think that, largely speaking, we're pretty -- we're confident in what we can control. And so we don't see gaps in the portfolio. We see that we've got a full suite of offerings. We like the assets of those offerings, and we think we've got great people. And then integration, open architecture feels like it's always going to be a work in progress, but relatively, we see it as a strength. And then underlying that now, we have kind of data and tech powering all of that. So I would assume that we will get back to an M&A posture that is more what you would have anticipated for us -- from us in the past. And we'll definitely look for areas where the technical skills that are required or the rates of growth we're seeing are such that we do want to make bets to supplement what we've got going on. And it could be that an area like e-com is one of them. But I don't see some of the need for something really dramatic and significant at this point. And a few years from now, we'll ask again. In terms of kind of the first question, we are compounding kind of a number of years of consistent outperformance, and clearly, we're seeing a shift in where the demand is. But to answer the question about whether we can get to these consistently kind of next level or higher growth numbers this early in the stages of kind of an economic recovery feels like it is probably premature to make that determination, right? I mean it's clearly, aspirationally, we see that, as I said, higher value services are definitely something we want to lean into. But everything works well because it's part of an integrated whole, right? And so we've been successful because we've evolved the offerings, not because we've kind of tried to jump to a whole other model of how we serve clients and how do we deliver value for clients. So I think that we'll see that play out over time.

Julien Roch:

Yes. Philippe, Ellen Jerry, congrats on the results, especially the margin. My first question is on organic and the second one on margin. Anything that would change the 2-year run rate in Q2? So in Q1, 0.3 last year, 1.9 this year. So about 2% 2-year run rate, which would put Q2 up about 12% last year minus 10. So is 12% a better real estimate in Q2? That's my first question. And then the second one is on the margin. What has changed in terms of your thinking regarding margin? The new full year '21 guidance is quite ahead of consensus. Could it be that return to work is taking longer, so the savings are there for longer in 2021? And if that is the main explanation, could margin fall next year? Or would they be at least flat? So some more color on the significant upgrade in the margin perspective.

Ellen Johnson:

No, listen, given the big assumption, right, that the economic recovery is steady, we feel pretty confident in the 5% to 6% revenue growth. And with that, we feel pretty confident that we can deliver the 15.5 margin. And that's from a bottoms approach, meeting with our operators very frequently. So we will continue to do that for.

Operator:

And that was our last question. I'll now turn the call back over to Philippe for any closing thoughts.

Operator:

Thank you. This concludes today's conference. You may disconnect at this time.

Operator:

Good morning and welcome to the Interpublic Group Fourth Quarter and Full Year 2020 Conference Call. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Philippe Krakowsky:

Thank you, Jerry and thank you all for joining us this morning. I will begin with a high level view of our performance in the quarter and for the full year. Ellen will then provide additional details. I will conclude with some updates on our agencies to be followed by our usual Q&A. First and foremost, I hope that you and your families continue to remain safe and healthy during the pandemic. As we all know, across much of the globe, the virus is still very much a presence in our daily lives. As such, our first priority continues to be to mitigate the impact of the health crisis on our colleagues and our clients as well as in our business. It’s important to acknowledge the fact that over the past year, across IPG, our people have been subject to a range of extraordinary challenges. Their achievements have been remarkable and I want to very clearly express our admiration for their resilience and our appreciation for their ongoing commitment and effort. Moving now to our results, we are pleased to report a solid fourth quarter under conditions that continue to be challenging and full year performance that once again should place us at the top of our sector. In the fourth quarter, our organic growth change of net revenue was negative 5.4%. You will recall that our Q4 2019 result was organic growth of 2.9%, which included significant headwinds from certain client losses. So, for context, it’s worth noting that our continuing book of business from last year’s fourth quarter, which we were essentially lapping in Q4 2020, was a 5.6% growth number. In the U.S., the organic decrease in the quarter was 1.8% against a similarly challenging underlying U.S. comp of 6.4% growth in Q4 ‘19. In international markets, our organic decrease for fourth quarter 2020 was 10.5%. For the full year, our organic net revenue decrease was 4.8%. As you would expect, those results continue to reflect the effect of the pandemic, which has had widely varying impacts on our businesses and clients. Our event companies, in particular, which are typically strong in the fourth quarter, continue to bear the brunt of the health situation given that restrictions on public gatherings remained in place in most markets around the world. Conversely, during the quarter, we continued to build positive momentum in disciplines such as media planning and investment. Additionally, client sectors such as healthcare and retail, which have been our growth leaders for the duration of the health crisis, continued to perform strongly in the fourth quarter.

Philippe Krakowsky:

Thanks, Ellen. As you know, our hallmark of our long-term strategy has been to invest behind our people and our agency brands and to embed digital across the portfolio so as to create a level of expertise that allows for greater collaboration when we activate integrated teams to address client opportunities. During the quarter and for the year, we continue to see evidence of the vibrancy of our brands and the evolution of our talent strategy. Highlights at our creative integrated networks were led by FCB, which was named Global Agency of the Year by Adweek in recognition of the agency’s bold creative work and highly collaborative model as well as its embedded data and CRM capabilities. The health operations at FCB continued to be the key driver of growth for the network and we saw both FCB Health New York and FCB Cure named 2020 Best Places to Work by healthcare industry publication, MM&M. MullenLowe Group closed the year with a number of new business wins, notably at Mediahub with the addition of the NBA account after a very competitive pitch. The group was also named Network of the Year at the UK’s IPA Effectiveness Awards. And MullenLowe Group UK was recognized by Campaign in its 2020 agency new business rankings as the market’s top performer with net new billings that were 2.5x those of its nearest competitors. At McCann Worldgroup, we implemented a succession plan that sees a long-term executive with broad experience across the company step into the CEO role and the elevation of key team members into leadership roles in executive management as well as senior strategy and client leadership roles. At MRM, the agency’s CEO added the title of Global Chairwoman and she brought in a highly regarded Global Chief Creative Officer to the agency. At Mediabrands, we saw the launch of the Mediabrands content studio, which pulls together creative capabilities from agencies in 12 key markets, ranging from long-form documentaries and branded content at UM and Initiative, the dynamic digital content from Reprise. This offering meets the increasing need we are seeing in the market for custom multiform content that’s strategically integrated with media and brand purpose. In January, Initiative continued the new business streak that has seen it named as RECMA’s fastest growing media agency, with a notable addition of T-Mobile. Our view is that culture drives commercial success. So, it’s also worth noting that the agency was named a Best Place to Work by AdAge. In LatAm, Initiative took home Agency Network of the Year honors in that region’s festival of media awards competition. And at UM, it was recently announced that the agency had won a major automakers and European media planning and buying duties after a highly competitive review. At Acxiom, as I indicated earlier, the company’s tools, expertise and data assets continue to play a role in an increasingly wide range of our offerings. Acxiom provides the foundational data layer for our holding company. And along with Kinesso, which is the technology applications layer, these are becoming core to our open architecture model with existing clients as well as in much of our new business activity. RGA added a number of new business wins in Q4, including Uber and Beam Suntory. At CES, in partnership with IPG, the agency hosted a virtual leadership innovation lounge, featuring top women leaders from clients like Ally Bank, Mitu and Reddit. At Huge, the agency secured further global CRM business for SK-II and announced work with Verizon of launch of full transparency, which is a blockchain verification system that has the potential of transforming the way in which companies disseminate news for their principal audiences. Huge and RGA were listed among the top 30 agencies for clients to work with in 2021 by R3 Worldwide, the independent consultancy which also cited both agencies in the top three spots in its latest U.S. new business league rankings. MRM, RGA and Huge also earned a place in the 2020 Gartner Magic Quadrant for global marketing agencies based on their ability to serve as key strategic business partners for clients and to execute on critical marketing priorities. The Martin Agency was named U.S. Agency of the Year by Adweek and its open for delivery campaign for DoorDash was recognized some of the best creative work of 2020. AdAge also named Carmichael Lynch and Campbell Ewald to its industry list of Best Places to Work. Turning to our IPG DXTRA segment, during the quarter, Weber Shandwick unveiled a permanent hybrid model for its global workforce called Juice, which puts employee flexibility at the core. The agency also announced new wins with existing clients, including work with the CDC to promote immunization across the lifespan of all Americans. named a new global chairwoman and added General Mills and Roche to its client roster. The agency was also recognized at the 2020 ANA Multicultural Excellence awards, along with FCB Canada, IW Group and the Martin Agency. Turning to the holding companies, for many years, we have made ESG, including diversity, equity and inclusion, a key area of focus. As a leader in marketing services and a citizen of the communities where our employees live, work and vote, we welcome the responsibility to operate sustainably, contributing to a healthier society and a healthier planet. We are working to build on and more fully live into this commitment, including by reassessing how we hire, train and promote a diverse workforce as well as further reduce our greenhouse gas emissions around the world. In recent years, we have made steady progress in sustainability, planning, action and reporting. As a result, during the quarter and for the second year in a row, IPG was named to the FTSE for Good Index, the global index that identifies top public companies with strong ESG practices. We were also included on the Dow Jones Sustainability Index in North America, which recognizes the top quintile of sustainability performers among the 600 largest U.S. and Canadian companies. In just this past month, we were recognized with two further ESG honors, including the Bloomberg Gender-Equality Index for the second consecutive year and the Human Rights Campaign Corporate Equality Index for the 12th year running. As a business in which attracting top talent is vital to our success whether in creative services or our growing technology capabilities, an intentional approach to ESG is an important part of our strategy. Another aspect of our strategy going back several years has to do with our decision to incorporate data expertise into the core of the company. Understanding data and its power is absolutely essential to the current and future success of every company. As is an ethical and conscious approach that respects consumer privacy and promotes brand safety, all of which will be crucial as we look ahead to increased regulation in the digital media space. Going forward, we will continue to enhance the technology layer within our offerings and to build tech-enabled marketing solutions, informed by a holistic understanding of audiences. This is what will allow us to deliver personalized user experiences and more accountable marketing for brands. Ultimately, our vision for IPG is to be the key partner in ensuring that clients’ businesses thrive in the digital economy. This is what makes us confident in our long-term prospects. Looking at the year ahead, we know IPG is well positioned to participate in the global economic recovery. As I stated earlier, we fully expect to return to positive organic growth over the course of the year, in line with a macroeconomic recovery, and to deliver growth for the full year that’s consistent with the industry on top of our outperformance in 2020 relative to our peer group. The timing of our progress during the year does remain an open question. And this is in part due to the fact that last year’s first quarter was largely unaffected by the pandemic while this year has remained burdened by COVID, but it’s especially true given the significant variable that we all face related to public health and economic policy decisions in major world markets. As we get better visibility to these larger issues, as well as the rate of recovery in industry sectors that have been most impacted by the pandemic, the pace of our progress will become clearer. As always, as the year unfolds, we will regularly review our perspective with you on our quarterly call and we’ll keep you updated on our expectations. We will, of course, continue to invest behind the growth of our businesses and in developing our people just to further differentiate our offerings, which is what ultimately creates value for clients and has helped us establish a position of leadership in our sector. In keeping with our long-standing focus on maintaining a strong balance sheet and financial flexibility, we intend to continue to pay down debt. Our ongoing commitment to the dividend is clear in the action announced by our Board today, which also speaks to confidence in the longer term prospects for our company. And return of capital remains a priority for us. So we look forward to being in a position to return to share repurchase as part of a balanced approach to sustain value creation. Thanks again for your time. We look forward to your questions now.

Alexia Quadrani:

Hi, thank you so much and welcome, Philippe. I had a couple – two questions. First, if you could elaborate a little bit on the softness in Europe. Really any color you can give us in terms of how widespread it is across client verticals or disciplines, and any indication maybe if that softness has continued into the start of the year? I know it’s really early. And I guess staying in that kind of vein has account movement maybe paused a little bit now in Europe as well?

Alexia Quadrani:

No, I understand that. No worries. And then just a quick follow-up is on the buyback, I know you touched on it in your opening comments about capital return to shareholders and it will return at some point. Are there certain metrics that you look to whether it’s return to positive organic growth or just really more clarity on the virus and the vaccines, I am curious sort of what you look to just sort of make the determination of when do we start to buyback?

Ellen Johnson:

Good morning, Alexia. How are you?

Ellen Johnson:

Thank you for the question. Listen, return of capital, as we mentioned, remains a priority. I think you can see that by the actions the Board did today against our dividend. Our priority is to maintain a strong balance sheet. We plan on paying down our debt that is due in October. But share repurchases is something we are looking to get back to the resume so that we maintain the capital return mix that we have in the past, so…

Alexia Quadrani:

Okay. Thank you very much.

John Janedis:

Thanks. Good morning. Philippe, you talked about the velocity of change and becoming more of a strategic partner. So can you talk about your share of wallet with larger clients? And based on some of the examples you gave, would it be fair to say that your top I don’t know, 50 or 100 clients are still a growing organic at a rate faster than the overall company? And then separately for Ellen, you talked about the cost savings. Can you talk a little bit more in terms of – is it split fairly evenly between salary and real estate? And on the real estate side, I assume that may take more time to flow in based on some lease expirations. So do those savings come in beyond 2021?

Ellen Johnson:

And then with regards to your question regarding restructuring, first of all, I have to say that our teams did an amazing job with the program. All throughout the year, they continue to look for opportunities to really take the learnings from this time period and take actions against it that would result in the permanent savings that we’re projecting. So we do expect to see savings, both on the SRS line and on occupancy as a result of it. The accounting for leases is neither intuitive or linear so you will see some savings in 2021 but you will see more thereafter as the leases start to get subleased. So – and leases, as you imagined, have longer paybacks, right, because they’re over several years. So hopefully – but again, we are very confident that we’ll realize these permanent savings and are really grateful for all the efforts of our teams in undertaking it.

Operator:

Thank you. The next question is from Julien Roch with Barclays. You may go ahead.

Philippe Krakowsky:

Sure. I am trying to figure out which maybe I’ll go from the back to the front. So I think media has been an area where by virtue of the fact that you have very sizable budgets that are being invested and by virtue of the fact that the shift to digital in recent years has allowed there to be greater precision and a degree of accountability, because I think that it’s also fair to say that it is an opaque ecosystem and that some of the expectation of accountability that people had. It took a while for us to really understand what was going on there. But I think what we’ve had is we’ve had the ability to have conversations with clients in the media space that are about more than perhaps just the marketing side of their business, they really – their business conversations around the ROI around those investments. And so I think that across most of the groups, there’s been investment behind that. We’ve taken a different approach perhaps than our peers. As you know, when it comes to building a model that was much more consultative in nature, and it was not really one that was predicated on volume. And so what we tend to define was that again, there was a lot of interest in what we were able to do by pulling together understanding of audiences, by launching initially our own programmatic platform or at least our own programmatic trading desk and then the data stack that we began to develop ourselves prior to the investment that we made into Acxiom. So I think that those are all the logical reasons why media has been a growth driver and just the huge fragmentation that we’ve seen and the complexity that has come with the media channels and as we all remember, Michael always used to say, complexity is good. Complexity definitely created opportunity for us to provide consultative services to clients now on sector disclosure, that’s a tougher one for me to – I understand and respect that the question from your point of view is if I’m trying to analyze the space and to model performance, I clearly would want to bucket and quantify the sectors. And then hopefully, I think you will understand and respect that my answer is not going to conform directly to that because it’s not actually how we run the business. So as I mentioned initially, and as we were just discussing on the prior question, increasingly, we engage with clients by bringing multiple agencies and competencies to the table. That’s the integrated approach with open architecture. We now ground those solutions in a layer of data and/or technology services. Clearly, media is an important part of that. So the performance of the disciplines is tied very closely together. And one of the things that I think the operators get tired of hearing me say is the word interdependence. So there’s that there’s the fact that for many years, we’ve embedded digital into all of the agencies. And I think that it makes the specific agency’s offerings more relevant, but it also does give us that common language for working together, right. And so going back quite a few years now, when the industry was becoming much more digitized, the number of our peers started to highlight this percentage of digital revenue, and we didn’t, and we believe that the best barometer to see whether the strategy is working and to gauge our performance is organic growth, right. You look at the last 4 to 5 years, for last 5 to 6 years even and you have an average of 4% to 5% per year organic growth. So, this is pre-pandemic, right. So I think you conclude from that, that the performance of all of the agencies is quite solid. And we do highlight on performers. So media, healthcare in recent years clearly have to be north of that range. But I would point out that timeframe during that 5 to 6 year timeframe the creative agencies have posted growth, right. And you – when you look at a sector like healthcare, it’s positively impacting not just our health care specialist agencies, but it’s an important driver in media. It’s in some of the ad agencies, right. It’s in the PR space. So the focus for us is the client, their consumers, supporting the brands and then driving to this collaboration. So starting to pick the pieces apart, I think, runs counter to philosophically what we are trying to build.

Operator:

Thank you. The next question is from Michael Nathanson with MoffettNathanson. You may go ahead.

Philippe Krakowsky:

Hi, Michael. Thank you. Look, I mean, I think that in the U.S., knowing that we came into the year comping against the year last year where there was growth. And we had those three pretty sizable client losses as you say, there has been – it’s been remarkably resilient. And obviously, that might be because there has been a little bit less in the way of restrictions on certain kinds of behavior. And I think that there may be other extenuating factors. But I would think that what we are seeing here and what we are seeing in Europe vis-à-vis changes in behavior goes to people are definitely moving faster to trying to understand what is e-com do for them, what is connected commerce sort of to what extent can you take social and other channels. And I think you probably just saw today, TikTok kind of clearly making any number of things sort of shoppable on the platform. And so I think that it’s fairly intuitive what’s going on, which is that clients are either looking at ways to use digital channels to drive commerce or they’re looking at ways to use their first-party data and to do much more CRM-like activity. I mean, there’s no kind of magic wand on this one. It’s pretty much what you’d expect. And then in terms of the psychology of it, I think its part of what is contributing to the – just the caution that people have as they look to this year. I mean, I would bet you that there isn’t anybody I know, and I’m sure that these are pretty extraordinary circumstances, right? So would any of us have thought that we would still be working from home or in lockdown a year after the pandemic began, right. So that’s just informing the fact that people are being deliberate. I don’t think people are reacting quite as there isn’t as much of a pullback as there was when the initial shock hit. But now there’s the sense of even though we are beginning to see the light at the end of the tunnel, are we really going to get there on the time line that we are hoping for or might there be some forks in the road on the way to that. So I think that psychologically that’s – it’s just about people being thoughtful and a bit cautious but people are still engaged.

Operator:

Thank you. The next question is from Craig Huber with Huber Research Partners. You may go ahead.

Philippe Krakowsky:

Look, I mean, I think that – I am trying to – that’s a lot in one go, but the project-based businesses, as we pointed out, were the ones that were most impacted. And so I think if you look at where the decline in the quarter was felt most – what dragged. So if you look at again, not that for us, the sectors are how we are running the business. But if you looked at what the CMG sector had and then you think about where our overall performance was, you can see that that’s where a disproportionate amount of the drag was. And then on a country-by-country basis, in a market like Europe, when you think about the fact that the continent for us is 8% of total revenue, it’s down 7.3%. Some of those markets are actually not really all that big for us. And so what you have happening there, I think, is less kind of a macro or a secular trend and it’s really, really very sector specific. So it really comes down to client mix in some of those markets where if you have exposure to certain areas, it hurts you more than others.

Operator:

Thank you. And that was our final question. I will turn the call back to Philippe for any closing thoughts.