Q4 2020 Interpublic Group of Companies Inc Earnings Call
Good morning, and welcome to the Interpublic group fourth quarter and full year 2020 conference calls all parties are in a listen only mode until the question and answer portion.
That time, if you would like to ask a question you May press Star one.
This conference is being recorded if you have any objections you may disconnect at this time.
I'd now like to introduce Mr. Jerry <unk> Senior Vice President of Investor Relations, Sir you may begin.
Good morning, Thank you for being with us.
This morning, we are joined by Felipe quick housekeeping, our CEO and by Alan Johnson, Our Chief Financial Officer.
As usual, we have posted our earnings release and our slide presentation on our website Interpublic Dot com.
We will begin our call with prepared remarks to be followed by Q&A.
And plan to conclude before market open at 930 eastern.
During this call we will refer to forward looking statements about our company.
These are subject to the uncertainties in the cautionary statement that is included in our earnings release and the slide presentation.
And further detailed in our 10-Q and other filings with the SEC.
We will also refer to certain non-GAAP measures.
We believe that these measures provide useful supplemental data that.
While not a substitute for GAAP measures of.
Allows for greater transparency in the review of our financial and operational performance.
At this point it is my pleasure to turn things over to Felipe Krakowski.
Thank you Jerry and thank you all for joining us this morning.
I'll begin with a high level view of our performance in the quarter and for the full year.
Allan will then provide additional details all of.
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 of 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 on 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're pleased to report a solid fourth quarter under conditions that continued to be challenging.
And full year performance that once again should place us at the top of our sector.
In the fourth quarter organic growth change of net revenue was negative five 4%.
Youll recall that our Q4 2019 results with organic growth of two 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.
Which we were essentially lapping in Q4 2020 was of five 6% growth number.
In the U S. Your organic decrease in the quarter was one 8% against a similarly challenging underlying U S comp of six 4% growth in Q4 19.
In international markets, our organic decrease group fourth quarter 2020 was 10, 5%.
For the full year organic net revenue decrease was four 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 continued to bear the brunt of the health situation.
Given the 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 health care, and retail, which had been our growth leaders for the duration of the health crisis continue to perform strongly in the fourth quarter.
With respect to operating expenses our teams once again demonstrated outstanding discipline.
As a result, we're pleased to report that our adjusted EBITA margin for the quarter, which excludes a charge for restructuring increased 70 basis points from a year ago from 21, 1% to 21, 8%.
For the quarter, our diluted earnings per share was 28 cents as reported and was 86 as adjusted for restructuring and other items.
As is evident in our results. This morning, we also continued to execute through to the close of the year with respect to our restructuring program.
We had previously mentioned to you that our focus would be on driving strategic long term actions and expense reductions as we evolve our business model to new operating realities.
A key component of that thinking is moving to a hybrid workplace and environment with a reduced need for real estate and an increased role from work from home in the delivery of our services.
During the year, our team was diligent in identifying a wide range of restructuring opportunities and related savings.
It was to better position the business going forward into 2021 and beyond.
As you can see this led to a fourth quarter charge that was significant.
It is largely non cash.
We now expect that our restructuring actions for the full year will yield permanent annual operating expense reductions in the range of $160 million.
While remaining very disciplined with respect to our expense structure.
It is important to point out that we continue to invest in our business during the year in.
In order to accelerate strategic development in areas of strongest secular opportunity and growth.
That investment continues to result in differentiated capabilities and offerings, which are in demand and are driving success in the marketplace.
We are aware of that as a result of the pandemic the velocity of change picked up even further last year in the digital space.
That's where consumers increasingly interact with our brands and businesses.
We're encouraged that our ability to create marketing and media solutions that bring together creativity technology.
Technology and data is resulting in growth with existing clients as well as new client wins.
For some time now we have spoken about the importance of our culture, and making IPG of destination for top industry talent.
This includes our commitment to strong agency brands with clearly defined identities and core capabilities.
In recent years, we have developed very strong and differentiated data resources and data management capabilities.
We bring these offerings together on behalf of clients and customized integrated solutions through.
Through our open architecture platform, which has been evolving over a period of many years.
Another key pillar of our culture is our commitment to doing better when it comes to equity and inclusion.
This is something I will remain focused on personally in my new role.
It also bears mentioning that IPG has taken a strong position when it comes to transparency and ethics and all of our business practices.
Well ahead of the current scrutiny on the digital media ecosystem and growing concerns regarding consumer privacy.
These are our strategic priorities going forward.
And at this point I thought it might be helpful to provide a few highlights of how they are coming together and the work we do on behalf of our clients.
As you know in May of last year, we launched matter kind of an innovative offering that optimizes client media investment holistically and in real time across all addressable media channels.
With access to unique data resources of axiom and pattern patented algorithmic software created a canister.
Better kind of played a role on several new account wins and client retention during the back half of last year.
In the auto sector, a leading global OEM awarded an open architecture team several multiyear contracts to oversee their CRM activity.
The first in North America.
As well as two others in some of Asia is the largest national markets.
This resulted from the pitch that included teams from our global AD networks, and digital specialty agencies as well as capabilities from axiom, Kenneth <unk> and our global production studio.
In the creative Arena, we had a sizable health care win with an existing global client in Q4.
Which brought together a number of our specialist health care and consumer advertising agencies again backed by axioms of an open architecture pitch.
Also within the creative space in the CPG sector.
We expanded our remit and doubled the size of our client relationships by using data driven insights to generate creative ideas tailored to specific audiences.
In Tech and telecom, we proactively propose an integrated solution to an existing domestic client of one of our large PR and one of our independent advertising agencies.
This resulted in adding responsibility from media as.
As well as of data layer to install informed all marketing decision making.
Again, nearly doubling our projected annualized revenue on this engagement.
The common denominator in each of these examples is our ability to broaden the range of business issues that.
We can help clients address.
Our goal is to become a more strategic partner supporting client needs as they seek to derive more value from connecting marketing and technology to power their businesses.
Over time, we believe this should also have the effect of opening new performance and IP based revenue streams for us.
Another key area of focus for US is E commerce and connected commerce.
We deliver on the promise of digital business transformation.
By bringing together marketplace analysis data services Tech enabled creative on customer experience for systems integration and performance media offerings.
This is another area, where open architecture is of vital approach since those capabilities reside within a range of our digital and media specialist agencies.
It's also an area that has seen significant acceleration as a result of the health crisis.
Heading into 'twenty and 'twenty, one we are confident of the strength and competitiveness of our offerings and the talent within our group.
The range of services, we provide is growing in terms of the potential impact it has for our clients and their businesses.
This means that looking ahead, we remain well positioned to fully participate on a global economic recovery.
There remains however, significant uncertainty driven by macro conditions that are beyond any of our control.
Does the timing and magnitude of economic recovery.
Nearly hinges on the resolution of the health crisis.
We fully expect to return to positive organic growth over the course of this year.
And to post full year, 'twenty 'twenty, one growth consistent with the industry.
On top of a relatively stronger 2020 performance.
But from our vantage point today based on a bottom up approach to building a financial plan as.
As well as conversations with clients, it's fair to say that visibility to the full year 2021 remains challenged.
To be clear. This is a question of timing and a function of the macro situations.
And not of the caliber of relevance of our offerings, which we feel of both strong and complete.
We will of course continue to align expenses with realized revenue from the disciplined way you've come to expect of us.
Further we will see the benefit of significant expense savings from our restructuring.
As always during our quarterly calls we will regularly review our perspective and provide details on the year as it unfolds.
Underscoring our confidence on our longer term prospects. We are pleased to announce this morning, our board's decision to raise ipg's quarterly dividend by 6% of 27 cents per share.
This marks our ninth consecutive year of dividend increases over which time on our quarterly dividend per share has more than quadrupled.
In summary, we believe that the drivers of long term value for all of Ipg's stakeholders are in place.
Namely the quality of our people and our resources our operating capabilities.
And that together these will continue to fuel our collective success.
On that note I'll now hand things over to Ellen for a more in depth of few of our results.
Thank you I want to reiterate police comments and hoping that everyone is safe and healthy.
As a reminder, my remarks will track the presentation slides that a company of our website.
Beginning on slide two of the presentation, our organic net revenue change was negative five 4% from the quarter in the U S. Our organic decrease improve sequentially from its only one 8% well in our international markets that decrease of 10.5% U S.
Outperform international because of a mix.
The mix of client sectors and offerings in the U S that were less impacted all of the current macroeconomic environment and what the effects of the pandemic and lockdowns on the U K Europe and in some parts of Asia Pacific, which weighed on revenues.
Fourth quarter adjusted EBITDA margin was 21 eight per cent for restructuring charges compared to 21 point of 1% a year ago.
Our EBITDA was 244 9 million.
And with $498 8 million before the restructuring charge.
With $512 7 million a year of gas.
For the quarter diluted earnings per share was 28 cents as reported on.
Adjusted diluted earnings per share of the 86 cents.
Steve jobs.
The after tax impact of the amortization of acquired intangibles net charge for restructuring and non operating losses on the sales of certain small non strategic businesses.
Our cash flow from operations was strong as of year at $1 8 billion.
And our liquidity continues continues to be solid at $4 5 billion of cash flow of committed credit facilities at quarter end.
Our restructuring program resulted in charges of $413 8 million during the year, which we expect will result in annualized permanent expense savings of approximately $160 million.
We have concluded our actions under the program.
This morning, as Felipe noted our board approved a 6% increase to our quarterly dividend of <unk>.
27 cents per share.
Turning to slide three you'll see our P&L for the quarter.
Couple of revenue and operating expenses in detail in the slides that follow.
Turning to Q4 revenue on slide four.
Our net revenue from a quarter with 2.28 billion.
Compared to Q4 2019, the impact of the change in exchange rates was positive 10 basis points.
Net divestitures of negative 80 basis points.
As the impact of the disposition of certain small non strategic businesses over the past 12 months.
Our reviews are ongoing.
To continue to have additional small dispositions as we move forward.
Our organic net revenue change was a decrease of $5 four per cent.
As you can see on the right hand side of the slide that brings our organic change for the full year of negative four eight per cent.
At the bottom of this slide we break out our segments.
The organic change in our Ian segment was a decrease of three eight per staff.
As a reminder, Ian includes our global and domestic creatively led integrated agencies, our media data from technology offerings and our digital specialists.
Ipg's extra rebranded CMG.
Elbow group of highly collaborative marketing services specialists.
Organic change in the quarter was negative $15 one per cent, which reflects the disproportionate weight of live events and sports marketing within this segment, which has been most significantly impacted by the pandemic.
Moving on to slide five organic revenue change by region.
In the U S.
61% of our fourth quarter net revenue our organic decrease was one 8% against challenging comparisons from a year of Dallas.
The international markets, which make up 39% of our net revenue in the quarter declined organically 10, 5%.
By region, our organic change to net revenue was negative 17, 4% in Asia Pac negative nine 7% in the UK negative seven 3% from Continental Europe and negative 14% of in our other markets group Latam increase two 3% organically.
Moving on to slide six and operating expenses in the quarter.
Our net operating expenses decreased 7% from a year ago, when excluding the restructuring charge in amortization, which was more than our decrease in revenue and as of results. Our adjusted margin expanded by 70 basis points.
As you can see on this slide.
Ratio of total salaries and related expense as a percentage of net revenue was $58 nine per se.
Unchanged from the fourth quarter of 2019.
Underneath that our expense per base payroll benefits and tax and absolute dollar terms decreased by four 6%.
Although the ratio increase because of lower net revenue.
We had very significant leverage on our expense per performance based incentive compensation, which was three 3% of net revenue.
Compared with four 7% of a year ago.
And we delivered on our expense for severance and temporary labor.
At quarter end total worldwide head count was approximately 50000 of 287, 6% decrease from a year ago as a result of our restructuring regular severance of nutrition and business dispositions.
Also on this slide on office and other direct expenses decrease of 130 basis points to 16% of net revenue.
We continue to have a significant decrease in our expense for occupancy in Chile.
Our SG&A expense was 1% of net revenue, which is the same as of year of golf.
As you can see on the lower right hand side of this slide are charged to restructure our head count and real estate was $11 one per cent of net revenue on the quarter.
Slide seven is a summary of the restructuring program, we executed in order to make structural changes to our real estate footprint and head count over the last nine months.
As you've seen the total charge was $413 8 million of which $265 6 million was noncash.
As we went through the year our teams continued to identify opportunities and we were ultimately able to reduce our real estate footprint by 15 per se.
Between our real estate and head count actions, we expect to realize a significant level of permanent annual savings of approximately of hundreds of $60 million.
Turning to slide eight we present detail on adjustments to our reported fourth quarter results in order to give you better transparency and a picture of comparable performance.
This begins on the left hand side with our reported results and steps through to adjusted EBITDA, excluding restructuring adjusted diluted EPS.
Our expense from amortization of acquired intangibles from the second column with $21 5 million.
The restructuring charge was $253 9 million and their related tax benefits was $56 9 million.
Hello operating expenses in column four we had of what's in the quarter of $15 2 million and other expense due to the disposition of a few small non strategic businesses.
At the foot of the slide you can see the after tax impact per diluted share of these adjustments, which bridges, our diluted EPS as reported at 28 cents per <unk>.
Adjusted diluted EPS of <unk> 86 cents.
Right now on depicts similar adjustments for the full year again for continuity and comparability.
Our amortization expense was $85 9 million.
Oh, your restructuring charges of $413 8 million.
Dispositions over the course of the year resulted in a book loss of 60.
Seven loans.
Impact of of discreet items of the benefit of $122 6 million.
The result is adjusted full year diluted EPS of $1 73.
Note that our adjusted effective tax rate for the full year was $26 five per se, which is at the low end of the range we had targeted.
On slide 10, we turn to cash flow for the full year.
Cash from operations was $1 8 billion, which is the highest level on our company's history.
That compares to $1 5 billion a year ago.
The comparison includes 900 million generated from working capital in 2020, compared with $443 million in 2019.
While working capital can be volatile as we pointed out in the past a couple of factors drove a particularly strong result for the year.
One was a return to growth in areas of our business that with growth typically generate cash from working capital, notably in our seasonally strong fourth quarter on the other hand, some of our businesses that use working capital with growth have yet to fully recover from the ongoing impact of depends on mix.
Continue to focus on and invest in insight and management of this area.
Our investing activities used $216 million of the year, mainly affecting our capex of about hundreds of 68 million.
Our financing activities was $346 million, you'll recall that we raised 646 million in March with the issuance of our new long term debt.
Pretty fond of the repayment of 504 millions of of long term debt that matured in October.
We used $398 million over the course of the year bar of common stock dividends.
Our net increase in cash was $1 3 billion.
Slide 11, if of current portion of our balance sheet.
We ended the year with $2 5 billion of cash and equivalents.
Our 500 million, 375% senior notes matures in October of this year and it is reflected under current liabilities.
Plan on repaying these notes with cash on hand.
Slide 12 depicts the maturities of our outstanding debt and our diversified maturity schedule, having paid off October maturity. Our total debt at year end was $3 5 billion.
In summary on slide 13, our teams continue to execute at a high level and an unprecedented environment and I would like to reiterate our pride in and gratitude for the efforts of our people.
The strength of our balance sheet and liquidity.
We remain well positioned both financially and commercially and with that I'll turn it back to police.
Thanks Alan.
As you know a hallmark of our long term strategy has been to invest behind our people and our agency price 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 brand and the evolution of our talent strategy.
Highlights of our creative integrated networks were led by FCB, which was.
Named Global agency of the year by Adweek from.
The recognition of the agency's bold creative work and highly collaborative model as well as its embedded data and CRM capabilities.
The health operations of 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 and Eminem.
More on low group closed the year with a number of new business wins, notably at media hub with the addition of the NBA account after a very competitive pitch.
Group was also named network of the year of the U K's IPA effectiveness awards.
Low group UK was recognized by campaign and it's 2020 agency new business rankings as the market's top performer with a net new billings that were two and a half times those of its nearest competitor.
At Mccann Worldgroup, we implemented a succession plan that sees of long term executive with broad experience across the company stepped into the CEO role.
And the elevation of key team members into leadership roles in executive management as well as senior strategy in 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 media brands, we saw the launch of the media brands content studio, which pulls together creative capabilities from agencies in 12 key markets.
Ranging from long form documentaries and branded content.
On initiative to dynamic digital content from low price.
This offering meets the increasing need we're seeing in the market for custom multi form content that strategically integrated with media and brand purpose.
In January initiative continued the new business streak that hasn't seen it named as retina is fastest growing media agency with a notable addition of T mobile.
Our view is that culture drives commercial success.
It's also worth noting that the agency was named a best place to work by AD age.
In Latam initiatives took home agency network of the year honors in that regions Festival of Media Awards competition.
In the U N. It was recently announced that the agency had one of major automakers.
Pan European media planning and buying duties after a highly competitive review.
Net axiom as I indicated earlier the companies tools expertise and data assets continue to play a role in an increasingly wide range of our offerings.
Axiom provides the foundational data layer for our holding companies.
And along with <unk>, 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.
Our G. A out of the number of new business wins in Q4, including Uber and beam Suntory.
At CES in partnership with IPG, The agency hosted of virtual leadership innovation lounge.
Featuring top women leaders from clients like ally Bank me too and read it.
At huge the agency secured further global CRM business for S K too.
And announced work with Verizon launch full transparency, which is of blockchain verification system that has the potential of transforming the way in which companies disseminate news to their principal audiences.
Fusion of RGA were listed among the top 30 agencies for clients to work with in 2021 by our three worldwide independent consultancy, which also cited both agencies and 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.
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 it's open for delivery campaign for door Dash was recognized some of the best creative work of 2020.
Average also named Carmichael Lynch and Campbell equal to its industry list of best places to work.
Turning to our IPG extra segment during the quarter Weber Shandwick unveiled a permanent hybrid model towards global work force 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.
Golan named a new global chairwoman and added general Mills and Roche to its client roster.
The agency was also recognized at the 2020, a N a multicultural excellence awards.
Along with FCB, Canada <unk>.
W Group and the Martin Agency.
Turning to the holding companies.
For many years, we have made ESG income.
Including diversity equity and inclusion of key area of focus.
As a leader in marketing services and of citizen of the communities, where our employees live work and vote.
We welcomed responsibility to operate sustainably contributing to a healthier society and of 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've made steady progress on sustainability planning action and reporting.
As a result during the quarter and for the second year in a row.
P. G was named to the FTSE for good index.
Our 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.
And just this past month, we were recognized with two further ESG honors, including the Bloomberg gender equality index for the second consecutive year.
In 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 a growing technology capabilities and 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 companies.
Understanding data and its power.
Absolutely essential to the current and future success of <unk>.
Every company.
As isn't ethical and conscious approach.
Specs 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.
More accountable marketing for brands.
Ultimately our vision for IPG has to be the key partner and 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, it'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's remain burdened by Covid.
But it is especially true given the significant variables that we all face related to public health and economic policy decisions in major world markets.
Because we get better visibility.
These larger issues as well as the rate of recovery and industry sectors that have been most impacted by the pandemic.
Of our progress will become clearer.
And as always as of year unfolds.
We will regularly review our perspective with you on our quarterly calls 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 longstanding focus on maintaining a strong balance sheet and financial flexibility, we intend to continue.
Continue to pay down debt.
Our ongoing commitment to the dividend as clear actions 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 position to return to share repurchase as part of a balanced approach to sustained value creation.
Thanks again for your time, we look forward to your questions.
Thank you at this time, if anyone would like to ask a question. Please ensure that your phone is on muted.
Star one and record your name clearly when prompted.
You do need to withdraw your question press Star two.
Again to ask a question please press star one.
Our first question is from Alexia.
<unk> with Jpmorgan you May go ahead.
Hi, Thank you so much on and welcome Felipe.
I had a couple of two questions first of who you could elaborate a little bit on the softness in Europe. You know really any color you can give us in terms of how widespread it is across client verticals or disciplines and you know any indication of maybe of that softness has continued into the start of the year I know it's really early.
And I guess staying on that kind of vein. His account movements, you know maybe pause a little bit now in Europe as well.
Hi, Alexia. Thank you for the question look I think that the Delta that you saw in the fourth quarter.
When it came to international vis vis the U S was really just a continuation of a trend that we'd seen during the course of the year, but I think it's really just a matter of degree and not something that's indicative of.
Of you know, what we're going to be looking at or expecting I wouldn't project that into 'twenty 'twenty, one and so in terms of.
Sort of getting underneath that for you I'd say that that the key driver of that was really sector mix alright, So first and foremost I'd point out that healthcare was our strongest performer all year and.
Skewed very heavily to the U S by factor of probably of about two to one and.
Just a function of how interpublic was built over time and I think it is also reflective of the fact that our direct to consumer advertising, obviously is not something that exists in most of world market. So I would think of health care is a place where we had much more sales of the wind in the U S.
And elsewhere in <unk>.
Around the globe in what is clearly one of our strongest client sectors and healthcare also is has a lot of Q4 project revenue. So we saw more of that realized here the second piece.
Piece of how I would think about that split is media was a strong performer for us in Q4.
So you know we talked.
When the pandemic hit about the fact that you know that had been dialed back in Q2 clients reacted to what was going on with the economic situation by shutting down largely the digital media. So we started to see that come back in Q3 of it came back stronger in Q4, and so again there by virtue of the fact that the U S is our largest market.
There was there was more upside.
And then and then the other two.
Factors that I think has to do with this are you know axiom has a significantly larger business in the U S than in rest of world. It's clearly of less cyclical business. So it was much less susceptible to what I guess, you could call kind of of Q4 project squeeze.
And then where the project based businesses and then and then lastly, you know on on.
A couple of our calls as we went through the year of last year, we did call out of the fact that the pandemic was probably going to have an impact and there was of risks to the Q4 project spend right and that definitely played out and it played out to two of much greater degree of.
On the international side of things.
And I think that there were clearly more pandemic restrictions on.
On gatherings on holiday themed events, even actually on on kind of retail level of activations. So experiential on events, where you know as we said to you.
It's about five per cent of our business and it was clearly impacted throughout the year.
Ex U S. The the impact of that was again about two to one outside of of the U S. And clearly you know not on anybody's favor. So hopefully that will sort of get you a sense of and then in terms of you know one of the things. That's good about about a succession that has a lot of continuity to it is that.
Our clients on our people feel comfortable I think one of the things that maybe not so good. He said I still have to tell you that we we don't you know we're not we're not planning on kind of reporting on a quarter by quarter, you know on a month by month basis, sorry about that so what we're seeing the very early stages of 'twenty one is.
It's a very limited small sample size and and not something we're likely to give anybody insight into <unk>.
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 returned to shareholders and it will return at some point are there certain metrics that you look to you know whether it's returned to positive organic growth or just really more clarity on the on the virus from on the vaccines I'm curious sort of what you look to just sort of make that determination of.
When do we start to buyback.
I'm going to ask Helena to jump in here good morning of let's see how are you.
Thank you for the question listen return of capital as we mention remains a priority.
I think he can see that by that you'd be asking the board did stay against our dividend.
Our our priority.
Is to maintain a strong balance sheet, we plan on paying down our death of is due in October.
But it's share repurchases is something we are looking to get back to the resume.
So that we maintain or a capital return mix that we have in the past so definitely we definitely want to get back to that balanced capital return.
Thank you very much.
Thank you. The next question is from John <unk> with Wolfe Research you May go ahead.
Thanks, Good morning.
You talked about the velocity of change of 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 out of that 50 of hundred clients are sort of growing organic at a rate faster than any of our company.
And then separately for Alan you talked about the cost savings can you talk a little bit more in terms of is it split fairly evenly between salary of real estate and on the real estate side I assume that may take more time to flow when based on on some lease expirations. So do those savings come in beyond 2021.
So the supposition about our share of wallet and about the fact that our top 100 or so clients are likely outpacing the rest of the portfolio is a fair one I would say that that's definitely something that we're seeing and that's something that we would like to see more of obviously because of.
<unk>.
Oh there. It is it's a it's a smarter way to grow than to.
They rely on.
Reviews, and things of that nature, and then I also think that the.
The fact of the matter is that that.
Confluence of.
Marketing and technology is having an impact.
Every company and I think that as you said.
The pandemic has brought forward the need for companies in a very broad range of of spaces.
<unk> companies and industries that are probably not as data rich or that you know, we're not as reliant on certain.
Mechanisms to be reaching consumers sort of be thinking about sort.
Sort of lifetime customer value with consumers things of that nature. So it's definitely something that we're very focused on and it was one of the reasons I wanted to call out in the opening remarks.
To give some give some sort of detail and color into the kinds of engagements and how.
When you have media that allows you to really understand audiences and engage with them and then when you bring data into the core on it informs everything from you know the insights that lead to the ideation all of the ways in which the messages are served out and then you begin to have.
Kind of essentially the capacity to optimize not just in some of the traditionally sort of digital capabilities, where you could do that everything clearly is becoming more and more addressable. So that's definitely an area of focus.
For for US and then casino for the management teams at our the bulk of our agencies.
And then with regards to your question regarding restructuring them first of all I have to say that our teams did an amazing job with the program on 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 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 on linear so you will see some savings in 2021, but you'll see more thereafter as the leases start to get sub leased.
So on and we said that as you imagine have a longer payback, so I think of throw over several years.
So hopefully, but again, we're very confident that we'll realize these permanent savings and on.
Really grateful for all the efforts of our teams and undertaking it.
Thank you.
Thank you. The next question is from Julien Roch with Barclays. You May go ahead.
Yes, good morning, good morning, Helen Good morning Gerry.
My question is on media you said he was a it was strong in Q4, and then talk about working capital. So it looks like it's a positive number in Q4 after being positive in Q3. So I was hoping you could give us more color on on media performance in Q4, and the full year.
And then staying on media WPZ did give us the median on those are the Investor day, where a group in a group seven 5% in the farthest of 2019.
Do you feel Greenock I was hoping you could give us some color there as well and then the last question is.
I mean, it's hard to build a every day on the client told me that so you don't need an agency because you can go straight to Google and Facebook up I'll be retired by now the media has been one of the best business.
Of the agency space and Oh two to explain.
If you could explain to us why that is why as media being so strong and unwind the majority of investors, which could be media has been an area of.
Headwind yeah.
All of them on.
Keith.
Sure.
I'm trying to figure out which are maybe I'll go I'll go from the back of the front. So I think I think media has been an area where by virtue of the fact that you have very sizeable 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 it's also fair to say that you know it is an opaque ecosystem and that and then some of the expectation of accountability that people.
It took a while for us to really understand what was going on there, but I think I think what we've had is we've had the ability to.
You don't have conversations with clients in the media space that are of.
About more than perhaps just the marketing side of their business. They really are there other business conversations around the ROI around those investments and so I think that across most of the groups.
You know there's been investment behind that.
We've taken a different approach perhaps than our peers as you 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 tended to find was that again.
Again, there was a lot of interest in what we were able to do by pulling together of.
Understanding of audiences by launching initially R.
Our own programmatic platform or at least are on programmatic trading desk and then.
The data stack that we began to develop ourselves prior to the investment that we've made into axiom. So I think that.
Those are all of the logical reasons why Y media has been a growth driver and just the huge fragmentation that we've seen and the complexity that has that has come with the media channels and.
As we all remember Michael all of which used to say complexity is good complexity definitely created opportunity for us to provide consultative services to clients.
Now on on sector disclosure, that's a tougher one from for me to to to you know I understand and respect that.
That's 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'll understand and respect that my answer is not going to conform directly to that because.
It's not actually you know how we run the business. So you know as I 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 know of ground those solutions in a layer of data.
<unk> 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.
You know 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 agencies offerings more relevant but it also does give us that common.
<unk> for working together right and so you know going back quite a few years now.
When the industry was becoming much more digitized the number of our peers started to highlight this this percentage of digital revenue and we didn't and we believe that the best barometer to see whether this strategy is working and so and to gauge our performance is.
Is organic growth right.
Look at the last four to five years for us five to six years even.
Of 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 of all of the agencies is quite solid and where we do highlight the strong performers. So media health care in recent years clearly have to be north of that range, but I would point out that during that timeframe.
That five to six of your timeframe.
Rate of agencies have posted growth right and and you you know when you look at of sector like health care.
Its positively impacting not just on health care specialist agencies, but it's it's an important driver in media. It's in some of the AD agencies.
Right now it's in it's in the PR space. So the focus for us as of the client.
The their consumers.
Supporting the brands and then driving to this collaboration is starting to pick the pieces. Apart I think I think runs counter to philosophically, what we're trying to build.
Okay Yep.
Thank you very much.
Thank you. The next question is from Michael Nathanson with Moffett Nathanson you May go ahead.
Yeah, Thanks, Hi, Felipe how are you.
I have a couple of I have two questions for you one is on the U S and I think we've all been surprised by the speed of which depending as bounce back on digital on advertising.
N V shaped, but I wonder I know you've got some businesses of lag within within agencies. When you look at your portfolio within the U S where are you seeing in the lag and what are the gating factors to get some of those services.
Back to growth. So that's that's in the U S and internationally.
Have you had mentioned has been on moving back to Lockdowns have client behaviors change now versus the first lockdown scenario given what's happened in terms of you know people who spent it looks like it looks like they succeeded so I just want understand what's the psychology as markets return to lock down versus where they were before.
Hi, Michael Thank you.
Look I mean, I think I think that in the U S.
Knowing that we came into the year comping against the year last year, where where there was growth.
And you know we had those three pretty sizable client losses.
As you say there has been it's been really it's been remarkably resilient and obviously that might be because theres been a little bit less in the way of of restrictions on certain kinds of behavior and.
No.
You know there may be other extenuating factors, but I would think day.
What we're seeing here and what we're seeing in Europe vis vis <unk>.
Changes in behavior goes goes to.
People are definitely moving faster to trying to understand you know.
What is what is E comm do for them what is connected commerce sort of you know to what extent can you take.
Social and other channels and I think you've probably just sort of just a day you know tick talk kind of clearly, making any number of things sort of shopper bull on the on the platform and so I think that it's fairly intuitive whats going on which is that clients are either looking at ways.
To use.
On 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.
Yeah, I mean, there's there's no there's no kind of you know magic wand on this one is it's pretty much what you would expect.
And then in terms of the psychology of it yeah.
I think it's part of what is contributing to.
The just the caution that people have is they look to this year I mean, you know I would bet you that.
No there isn't anybody I know and I'm sure that you know.
These are pretty extraordinary circumstances, right. So would any of us have bought that we'd still be working from home or in lockdown of year. After the pandemic began right. So that's just informing the fact that people are being deliberate I don't think people are.
On reacting quite as of.
There isn't as much of a pullback because there was when the initial shock hit but now there's this 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 timeline that we were hoping for or might there be some from <unk> on the road on the weight of that so I think that psychologically, it's just about people being thoughtful and a bit cautious, but you know people are still engaged.
Alright, Thanks Lee.
Thank you.
Next question is from Craig Huber with Huber Research Partners you May go ahead.
Oh, great. Thank you I'm just curious can you just explain a little bit further.
Even quantify it the rate of decline of organic growth from the fourth quarter was obviously, a little bit worse than what you experienced of third quarter. If you took out the project base piece of that was it more in line. That's my first question and then also wanted to hear a little bit further.
And out of Europe, if you could just tell us the major countries. There if there's any wide disparity in the performance of Germany versus Italy vs, France et cetera. Thank you.
Look I mean, I think I think that.
That's what I'm trying to that's a lot in one go but yeah.
The project based businesses.
As we pointed out we're the ones that were most impacted and so I think if you. If you look at you know what.
Where the where the decline in the quarter was felt most of you know.
What what dragged so if you look at again not that for us the sectors of how we're running the business, but if you looked at you know what the.
With the CMG sector had and then you think about where our overall performance was you can see you can see that that's where the disproportionate amount of the of the drag was and then on a on a country by country basis in in a market like Europe. You know when you think about the fact that you know the continent for us is 8% of.
Total revenue.
You know, it's down seven 3% some of those markets are actually not really all of that big for us and so what you have happening there I think is less kind of of macro or a secular trend and it's really really very sector specific.
It's really comes down to client mix and some of those markets, where if you have exposure to certain areas.
It it it hurts you more than others.
Thank you.
Thank you and that was our final question I will turn the call back to <unk> for any closing thoughts well. Thank you. Thank you all for joining US. We appreciate the interest. We appreciate the support we look forward to continued conversations over the course of this year and.
It's a long game, so everybody stay safe thanks.
Again.
Thank you and this does conclude today's conference you may disconnect at this time.