Q1 2021 Omnicom Group Inc Earnings Call

Good morning, ladies and gentlemen and welcome to the Omnicom first quarter 2021 earnings release conference call at this time. All participants are in a listen-only mode later. We will conduct a question-and-answer session participate, please press one zero and if you need assistance during the call, please press star then zero as a reminder. This conference call is being recorded at this time. I'd like to introduce you to your choice for today's conference Chief Communications officer. Joanne trout. Let's go ahead. Good morning. Thank you for taking the time to listen to our first quarter 2021 earnings call back on the call with me. Today is John Wren our chairman and chief executive officer and fill angelastro our Chief Financial Officer. We hope everyone has had a chance to review our release we have posted to ww.w Omnicom group.

This morning's press release along with the presentation covering the information that we will review this morning. This call is also being simulcast and will be archived on our website before we start I've been asked to remind everyone to read the forward-looking statements and other information that we have included at the end of our investor presentation and to point out that certain of the statements made today, May constitute forward-looking statements and that these statements are present expectations and that actual events or results May differ materially, I would also like to remind you that during the course of the call, we would discuss some non-gaap measures and talking about Omnicom performance.

You can find the reconciliation of those measures to the nearest comparable gaap measures in the presentation materials. We are going to begin this morning's call with an overview of our business from John Wren dead angelastro will review our financial results for the quarter and then we will open the line for your questions Joanne. Good morning. I hope everyone on the call back safe and healthy. I'm pleased to update you on how we continue to respond to and overcome the challenges of the pandemic. I'll first discuss our financial results. Then we'll cover our performance with respect to our strategic priorities and operations and will end with our expectations for the remainder of 2021.

for the

First quarter organic growth was negative 1.8% which positions us for a very strong recovery for 2021 going forward. We expect to see positive organic growth.

Before I go into our results in more detail as you have seen in our investor presentation slides, we have provided a further breakdown of our CRM discipline. The new ones we have disclosed are as follows CRM Precision marketing which includes our martech Consulting digital and direct marketing agencies c a m Commerce and branding consultancy includes our branding consultancy Shopper marketing and Specialty production agencies CRM experiential includes our events agencies and CRM execution and support is unchanged for the most part from my prior reporting and includes primarily our field marketing research agencies and our agencies servicing the not-for-profit sector.

We believe this additional level of disclosure will allow you to have a better understanding of our operations getting back to organic growth by geography in the United States wage growth was down 1% and Improvement of over 8% from the fourth quarter.

Advertising media and CRM Precision marketing were positive in the US while the rest of our disciplines continue to be negative with CRM experiential having the largest negative impact on our growth Europe continue to face significant challenges due to the pandemic in q1, although overall the markets continue to improve well the rollout of the vaccine in Europe legs. Of the United States and the UK some countries like Germany and the Netherlands are starting to make progress the UK was down 6.4% about half the decline in the fourth quarter CRM Precision marketing CRM Commerce branding consultancy and health were all positive in the UK primarily offset by a significant reduction in CRM execution support due to our field marketing operations.

Euro and the non-euro markets were down 3.2% as compared to a negative 9.2% in Q4 multiple countries had positive growth in the quarter month and the majority continued to improve sequentially Asia turn positive in q1 with Organic growth of 2.5% Australia continue to perform well, and we saw significant return to growth in our events business in China, which combined with improvements in the other operations in the market resulted in double-digit growth.

Latin America experienced negative 2.4% growth in q1 a meaningful sequential Improvement compared to the fourth quarter even margin in the first quarter was 13.6% as compared to 12.3% in the first quarter of 2020 even improved due to the repositioning and cost management action. We took in 2020 and 2021. Our management teams are continuing to align cost with revenues and also saying contingent benefits from reductions in addressable spend.

Well, we expect addressable spend will not return to pre-code levels travel in certain other addressable costs will likely increase during the course of two thousand and Twenty-One long as conditions improve.

Overall our expectation is that operating margins for the full year of 2021 will exceed our 2020 operating margin excluding repositioning costs incurred in Q2 of 2020. Net income for the quarter was 287.8 million and Improvement of 11.5% from 2020. And I was a dollar thirty-three cents per share a year-over-year increase of 11.8% turning to our liquidity the refinancing steps. We took early in 2005 combined with our enhanced working capital processes and the curtailment of our share repurchase program have positioned us extremely well.

We generated $383 million in free cash flow in the quarter and ended with four point nine billion in cash.

Given the continuing improvements in our operations strong liquidity and credit profile. Our board has approved the resumption of our share repurchases beginning in the second choice this follows our recent decision to increase our dividend by 7.7% to seventy cents per share. Both actions are a testament to the stage and our results and our expectations for further Improvement for the remainder of 2021.

Our traditional uses of our free cash flow paying dividends pursuing accretive Acquisitions and using our remaining cash for share repurchases is now dead fully back in effect fill cover our first quarter performance in more detail during his remarks.

Turning natural our strategy and operations in the midst of the pandemic our key strategic objectives serves as well. These strategies are centered around hiring and retaining the best talent driving organic growth by evolving our service offerings improving operational efficiencies and investing in areas of growth. It's probably this process we continue to make internal investments in our agencies across all practice areas during a very difficult year.

We made good.

I guess I'm enhancing our capabilities throughout our portfolio. And we continue to pursue Investments with a specific focus in Precision marketing martech and digital track Commerce media and Healthcare. We are also accelerating our pursuit of Acquisitions in these areas, and we've recently completed two transactions off.

Omni County Health Group acquired US based Archbold Consulting Archbold helps pharmaceutical and biotech companies design build and optimize marketing operations product distribution and patient access helps. These capabilities will deepen Omnicom Health groups consultative services offered by oh Tech and Pharma companies across a broad spectrum from operations to marketing.

Also in the quarter credera our marketing and digital transformation Consulting business and part of Omnicom Precision Marketing Group acquired rtn's rtn's wage. There's depth and digital transformation digital marketing and e-commerce the company specializes in the design delivery and implementation of real-time interaction and Digital customer relationship management for some of the world's largest Brands. It expands our operations in Australia India, New Zealand and Singapore and the UK. I want to welcome both companies and their entire teams to Omnicom.

Turning to Omni our data and insights platform as I mentioned in our last call looking beyond our media business practice areas are increasingly leveraging on need to identify insights for their specific disciplines and clients.

Last quarter Omnicom public relations group launched Omni a solution that allows clients to evaluate the outcomes of earned media with the same Precision paid media more recently are Health Group launched Omni Health, which integrates key Healthcare data sets within a privacy compliance ecosystem. Thanks to this momentum. The Omni platform has trained twenty thousand years in more than fifty markets and it has become the foundation of our agency operating systems company-wide.

Since we launched on me three years ago, we've continued to invest in his credentials as the industry's leading marketing orchestration and insights platform as compared with other Solutions built unlimited proprietary data sets omni's open-source approach connects more data sources across more media and commerce platforms to deliver better outcomes to our clients.

The future we will be launching Omni 2.0 using next-generation API connections to seamlessly orchestrate identity sources and Platforms in one bag of work space. I I agree to speed better and faster orchestration of data leads to more actionable insights and Superior decisioning for our clients walk across all our networks and practice areas just as important Omni 2.0 continues to build on our commitment to Consumer privacy and transparency are both neutral approach which results in the most diverse compilation of data sets continues to be rooted in a robust data privacy compliance methodology.

This approach puts us in a strong.

For a post cookie world a few points on this arm through our pioneering work creating data clean rooms. We have direct connections to the first party data of many of our clients because we are open source and data neutral Omni Works seamlessly across wall Garden environment as well as the broader ecosystem at the same time. We all straight data sets from about a hundred privacy compliance sources to provide a comprehensive view of the consumer across devices as the marketplace and technology is continue to rapidly Advance. We're confident our talent platforms and strategies built on a foundation of our creative culture. Give us a competitive advantage in effect of having both new and existing clients.

As Testament to the success, we've had several key new business wins this past quarter including a multi-year agreement with Allianz a leading financial services provider for Creative development and Production Services through this master framework agreement Omnicom will produce work for Allianz on a global and local level offering Creative Solutions to activate the global brand strategy for more than seventy countries where aliens operates in addition after recently selecting long as it's us media agency of record. Home Depot is named bbdo as its creative agency of record avocados from Mexico. Hi, Jess D&M as its agency of or TWA. She was named agency of record for three new clients Behr Paint moderna and Schwan's company.

Dream is picked up the Strategic and creative accounts for Vanguard advantage and Cowan media business for dr. Scholl's in summary. We made significant strides in evolving our services capabilities and organization the better service our clients with data science and technology while remaining grounded in our course of creativity.

I'm proud to lead a company with an extraordinary group of people who continually deliver the best creative work in our industry from their unwavering dedication creativity and Innovation came a number of Industry Awards and recognition. Here are just a few highlights.

So the drums World creative rankings Omnicom was the number one holding company for the fourth year in a row and one the network category could be Silverstein and partner of his name campaign us is 2020 advertising agency of the are critical mass was named at ages 2021 best places to work with month. Wa in good be Silverstein and partners were all named too fast company's for species list of most Innovative companies for 2021 making the only holding company to have three agencies ranked in the top ten in the advertising sector and PhD was named May as media network of the and UK home media agency of the year ad campaigns UK agency of the Year Awards.

our people have a wealth of

No, it's experiences and perspectives that lead us to this Innovation and forward-thinking work. The diversity of our group is something that needs to be celebrated priority off an improved upon and it's a strategic Focus for us in the year ahead with our launch of open 2.0 last year. We have made it clear action plan for achieving suspect Equity across Omnicom. We have more than doubled the number of leaders throughout Omnicom and we are establishing specific apis for our networks and practised to deliver on and to be measured by I look forward to sharing the progress. We are making on and I on our future calls as I discussed earlier. We're confident with our organic growth expectations and ebit performance for 2021.

It is taking some time to turn the corner and we are now on a clear path to return to growth at the same time. We know that we must continue to monitor the COVID-19 situation and to adapt to any unforeseen challenges that may arise if 2020 taught us anything. It's to expect the unexpected and we will move forward maintaining our Vigilant as we continue to enhance our operations. We are also evaluating what the future of work looks like at Omnicom our leadership on a local and office level are working on Gathering feedback from employees and clients to help us decide what the new normal will be one where we can service our clients efficiently while also connecting with colleagues in the safest and most flexible way possible.

The incredible Talent within Omnicom has helped us maintain business continuity through the lows of 2020 and overcome its challenges. We would never be here without their dedication. So, it's Sierra. Thank you to everyone as we are at the beginning of the end of the pandemic. I will now turn the call over to Phil for a closer. Look at our results Phil. Thanks, John and good morning as John said as we moved through the first quarter of 2021, we continued to see an improvement in business conditions particularly when compared to some of the pandemic during the second quarter of 2020.

As we anticipated weekend saw a sequential improvement in our organic Revenue performance a decrease of 1.8% in the first quarter of this year, which is a considerable amount in comparison to the last three quarters of 2020.

And now that we've cycled through a full year of operation since the start of the pandemic we expect to return to positive organic growth in the second quarter and for the full year.

We continue to see operating margin Improvement year-over-year resulting from the ProActive Management of our discretionary addressable spend cost categories and the benefits from our repositioning actions taken back in the second quarter of 2020.

Turning to slide three for a summary of our Revenue performance for the first quarter organic. Revenue performance was -60.6 million or 1.8% for the quarter the D Club represented a sequential Improvement versus the last three quarters of twenty-twenty including the unprecedented decrease in organic revenue of 23% in Q2.

11.7% in Q3 and 9.6% in Q4 regionally, although we continue to experience declines in the Americas.

We continue to see Improvement when compared to what we experienced over the previous three quarters in Europe F X Games help to offset negative organic growth on our asia-pacific region. So positive organic growth with a mixed performance by country the impact of foreign exchange rates increased our Revenue by 2.8% in the quarter above the 250 basis point increase. We estimated entering the quarter at the dollar continue to weaken again, some of our larger currencies compared to the prior-year the impact on revenue from Acquisitions negative disposition decreased Revenue by four tenths of a percent in line with a previous projection and as a result reported Revenue in the first quarter increased, six tenths of a percent off to 3.43 billion when compared to q1 of twenty-twenty. I will return to discuss the details of the changes in Revenue in a few minutes returning to slide one or reported operating Pub.

For the quarter was $465 million dollars up 10.8% when compared to q1 of twenty-twenty and operating margin for the quarter improved 13.6% off compared to 12.3% during q1 of twenty-twenty our operating profit and the 130 basis-point improvement in our margins. This quarter was again positively impacting our actions to reduce payroll and real estate costs during the second quarter of 2020 as well as continued savings from our discretionary addressable spend cost categories, including teen a general office expenses professional fees Personnel fees and other items including cost savings resulting primarily from the remote working environment.

David off of the quarter was $485 million and even on margin was 14.2% also up 130 basis points when compared to q1 of like last year.

On slide two of our investor presentation we presented the details of our operating expenses as we've discussed previously we have and will continue to actively manage our costs to insure are aligned with our current revenues in addition to the overarching structural changes. We made during the second quarter. We continue to evaluate ways to improve efficiency throughout the organization focusing on real estate portfolio management back office services procurement and IT services as for the details are salary and service costs are valuable and fluctuate with Revenue increased by about $7 in the quarter, but excluding the impact of exchange rates. These costs were down by about 2.6% off.

while it was

The reduction in base compensation overall from the Staffing actions. We undertook during the second quarter of last year it varies by agency and certain of our agencies have added people as long as conditions improved in their markets in addition third-party service costs were effectively flat on a reported basis and down slightly on a constant currency basis money in comparison these costs which are directly linked to changes in our Revenue decreased nearly 40% in the second quarter of last year 20% of the third month and 12.7% in the fourth quarter of 2020 consistent with the decline of our revenues across all of our businesses in those Quarters off.

Occupancy and all the costs which are less linked to changes in Revenue decline by approximately $18 reflecting our continuing efforts to reduce our infrastructure costs as long as the decrease in general office expenses, since the majority of our staff has continued to work remotely.

In addition sg&a expenses declined by fifteen point two million in the quarter and finally depreciation and amortization declined by 3.7 million.

Net interest expense for the quarter was 47.5 million dollars up 1.7 million compared to q1 of last year and down $500,000 versus Q4 of 2018. When compared to the fourth quarter of 2020 are gross interest expense was down 1.5 million an interesting come decreased by a million.

When compared to the first quarter of 2020 interest expense was down four point seven million dollars mainly resulting from seven point seven million dollar charge. We took in q1 of 20000 in connection with the early retirement of six hundred million dollars of senior notes that were due to mature in Q3 of 2020 that was offset by the incremental increase in interest expense from the additional interest on the incremental six hundred million dollars of debt. We issued at the onset of the pandemic in early April 2020.

Net interest expense was also negatively impacted by a decrease in interest income of 6.4 million dollars versus q1 of 2020 due to lower interest rates on our cash balances.

Based on our current debt portfolio structure and FX rates. We're anticipating that interest expense to be relatively flat in 2021 when compared to twenty $20.

Our effective tax rate for the first quarter was 26.8% up a bit from the queue 12020 tax rate from 26% But in line with the range we estimate for 21 of 26.5% to 27%

Earnings from our Affiliates was marginally positive for the quarter representing an improvement compared to last year.

And the allocation of earnings to the minority shareholders and certain of our agencies Was Eighteen point two million dollars during the quarter up about four point six million dollars when compared to q1 last year reflecting the improved performance this year and are less than fully owned subsidiaries.

as a result

Reported net income for the first quarter was 287.8 Million up 11.5% or 29.7 million when compared to q1 of 2028.

Our diluted share count for the quarter decreased three tenths of a percent versus q1 of last year to two hundred sixteen point eight million shares as a result our diluted EPS off. The first quarter was a dollar $33.

Up fourteen cents or 11.8% from the dollar $19 per share when compared to our key one a PS4 last year returning to the details of the pages in our Revenue performance on slide three organic Revenue performance improved again compared to the reductions inclined spending. We experienced during the last three quarters. We can check to see our clients across a wide spectrum of Industry sectors and geographic regions modify spending as they assess the continuing impact of the pandemic on their businesses.

Well help ifx reported revenue for the first quarter was 3.43 billion or up twenty million dollars or six tenths of a percent from q1 of 2028.

Part of our continuing efforts to provide meaningful information to our investors the expanded the presentation of our CRM disciplines to give additional detail regarding the performance package agencies, which are now grouped within four disciplines.

CRM Precision marketing which includes our Precision marketing and digital direct marketing agencies, which were previously included in our CRM consumer experience discipline.

Zero in Commerce and brand consulting which is primarily comprised of the Omnicom Commerce group and our brand Consulting agencies both previously included in CRM consumer experience.

CRM experiential which includes our events and Sports Marketing businesses, which was also included in CRM consumer experience.

End or CRM execution and support this point which includes our field marketing merchandising and point-of-sale research and not-for-profit Consulting agencies and Renee's largely unchanged.

Turning to the FX impact on a year-over-year basis. The impact of foreign exchange rates was next when translating our foreign revenues to US dollars.

The net impact of changes in exchange rates increased reported Revenue by 2.8% or 95.7 million dollars in revenue for the quarter all the dollar weakened against some of our life major foreign currencies. We also saw some strengthening against a handful of others in the quarter the dollar weakened against the Euro the British pound the Chinese one thousand anything Australian dollar. Well the dollar strengthened against the Brazilian Rain by the Russian Ruble and the Turkish lira

in light of the

And strengthening of our basket of foreign currencies against the US dollar and we are currency rates currently. Our our current estimate is that FX could increase our reported revenues around 3 and 1/2 to 4% in the second quarter and moderate in the second half of 2021 resulting in a full year projection of approximately 2% positive. These estimates are subject to significant adjustment as we move forward in 2021.

The impact of our acquisition and disposition activities over the past twelve months resulted in a decrease in revenue of 15.1 million in the quarter or four tenths of 1% which is consistent with our estimate entering the year our projection of the net impact of our acquisition and disposition activity for the balance of the year including recently completed Acquisitions and disposition is currently similar to q1 as previously mentioned organic Revenue decreased 60.6 million or 1.8% in the first quarter, when compared to the prior the impact of the COVID-19 pandemic on the global economy and on our clients planned marketing spend appears to be moderating in certain major markets as long as the comb 19 pandemic remains a public health threat global economic conditions will continue to be volatile.

We expect global economic performance and the performance of our businesses to vary by geography and disciplined until the impact of the COVID-19 demek on the global economy month. We expect to return to positive organic growth in the second quarter and for the full year.

Turning to our mix of Business by discipline on page for for the first quarter. The split was 59% for advertising and 41% for marketing Services office or ganic change by discipline. Advertising was up 1.2% or media business has achieved positive organic growth for the first time since q1 of twenty-twenty and our global national advertising agencies again, showed Improvement this quarter when compared to the last three quarters, although performance remains mixed by agency.

CRM Precision marketing increase 7.2% on continued strong performance and the delivery of a Superior Service offering CRM Commerce and brand Consulting was down 4.2% Mainly related to decrease activity in our shop or marketing businesses due to client losses in Prior quarters.

CRM experiential continue to face significant obstacles do the many restrictions from holding a large events in the quarter. The discipline was down over 33%

CRM execution and support was down 13% as our field marketing non-for-profit and research businesses continue to lag.

Was negative 3.5% in q1 on mixed performance from our Global PR agencies.

And finally our health care agencies again facing a very difficult comparison back to the performance of key 12020 when they experienced growth in excess of 9% off or flat organically, but the businesses remained solid across the group.

Now turning to the details of our regional mix of business on page five. You can see the quarterly split was 54.5% in the US 3% for the rest of North America.

10.4% in the UK 17.1% for the rest of Europe 11.7% for asia-pacific 1.8% for Latin America and 1.5% for the Middle East and Africa interviewing the details of our performance by region mechanic Revenue in the first quarter in the US was down $18 or 1% off or advertising discipline was positive for the quarter on the strength of our media businesses and our CRM Precision marketing businesses while their health care agencies facing a very difficult time to key one of 20 20, we're down 2.4%

Wall setting these performances was our events businesses, which once again experienced our largest organic decline over 34% in the US while our other disciplines were down single digits organically.

Outside the US or North American agencies were down 3.2%

r u k agencies were down 6.4% organically our CRM Precision marketing CRM Commerce and brand Consulting and healthcare agencies continue to have solid performance. Say again, we're offset by reductions from our advertising CRM experiential and CRM execution and support businesses.

The rest of Europe was down 3.2% organically in the Eurozone among our major markets Belgium Italy and the Netherlands were positive organically Germany, Ireland and France were down single digits while Spain was down double-digits outside. The Eurozone organic growth was up around 5% during the quarter and organic new performance and asia-pacific for the quarter was up 2.5% positive performance from our agencies in Australia greater China and India were able to offset decreases in Japan and New Zealand Singapore and Indonesia.

Latin America was down 2.4% organically in the quarter all our agencies in Mexico and Colombia were positive in the quarter a double-digit decrease from our agencies in Brazil offset that performance and lastly the Middle East and Africa was down 10% for the quarter.

6 we present our Revenue by industry information for q1 of 20 21 again. We've seen General Improvement. The performance across most Industries when compared to the previous few quarters.

But the overall mix of Revenue by industry was relatively consistent to what we saw in Prior quarters turning to our cash flow performance on slide seven. You can see that in the first quarter generated $382 of free cash flow excluding changes in working capital, which is up about twenty million dollars versus the first quarter of last year.

As for our primary uses of cash on slide eight dividends paid to our common shareholders were 140 million dollars effectively unchanged when compared to last year off the $0.05 per share increase in the quarterly dividend that we announced in February will impact our cash payments from Q2 forward.

David ends page were not controlling it for shareholders totaled $14.

Capital expenditures in q1 with $12 down as expected when compared to last year as we mentioned previously. We reduced our Capital spending in the near-term. The only those projects that are essential were previously committed.

Acquisitions including earnout payments total $9

And since we stopped stock repurchases the positive 2.7 million in net proceeds represents cash received from stock issuance has under employee share plan as a result of our continuing efforts prudently manage the use of our cash. We're able to generate 210 million of free cash flow during the first three months of the year.

Regarding our capital structure at the end of the quarter or total data is 5.7 $6 billion dollars up about $650 million since this time last year, but down $50 as of this past year end.

When compared to March 31st of last year the major components of the change where the issuance of $600 of 10-year senior notes doing twenty Thirty which were issued Thursday at the outside of the pandemic along with the increase in debt of approximately eighty million dollars resulting from the FX impact of converting our billion euro-denominated borrowings thousand dollars at the balance sheet date.

Well the change from December 31st was the result of just the FX impact of converting the Euro notes.

Our net debt position as of March 31st was $863 up about $650 million from last year end, but down 1.5 billion when compared to q1 of twenty-twenty.

The increase in that debt, since your end was a result of the typical use of working capital that historically occur in our first quarter which totaled about $840 and was partially off the 210 million. We generated in free cash flow during the past three months.

over the past

12 months the Improvement of net debt is primarily due to our positive free cash flow of $860 positive changes in operating capital of $5,037 and the impact of that fax on our cash and debt balances which decreased our net debt position by about $190.

As for our debt ratios are total debt-to-ebitda ratio is 3.1 times and our net debt-to-ebitda ratio was 0.5 times and finally moving storical Returns on slide ten.

For the last 12 months or return on invested Capital ratio was 19.9% while I return on Equity was 34.5% both reflecting the decline in odd results driven by the economic effects on the pandemic as well as the impact of the repositioning charges. We took back in the second quarter of 2020, and that concludes our prepared remarks. Please note that we have included several other supplemental slides in the presentation materials for your review, but at this point we're going to ask the operator to open the call for questions. Thank you.

Thank you. Ladies and gentlemen. If you'd like to ask a question, please press one and zero on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you're using a speaker phone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press one and zero at this time. And one moment, please for your first question.

Your first question comes from the line of Alexia quad Ronnie from JP Morgan, please go ahead. Thank you very much. My first question really is I guess the progression of Life recovery if you can elaborate a little bit on sort of how you saw it in q1. I'm not asking for like month to month, but just sort of any Trend you saw and if you if you saw a faster pace of improvement, maybe then you expected anything surprised you and then given I guess given what, you know, you know, you're due date. I'm I'm curious if any more color about Q2. I know you said that there should be a growth in the second quarter, but, you know given the super easy comps, I guess shouldn't we see outsized growth sort of at least mid-teens not hiring in Q2. So any color you can provide would be really helpful. Thank you.

Oh you to First sure.

As far as the months Alexia, I'm not sure.

You know, we focus on them and and treat the trends that we might see as as meaningful especially given COVID-19 month, but I think I think given the comps in q1 going into the quarter. We expected the first quarter to be a challenge but things took a broadly speaking things have been improving throughout, you know, the end of the second half of 2020 and into twenty Twenty-One pretty consistently. So we've seen those Trends improved. We've seen it in our results, um as we've gone through the year and as we've gone through the quarter from which is why we're optimistic about the rest of 2021 as far as key to growth

you know from from

The day that we have today and will be getting an update again and over the next two weeks and our meetings with our operating companies, but we're certainly optimistic that our growth expectations are not going to be you know, what we would consider a normal or typical quarterly growth pattern given the comps of June 2020. We certainly expect to do better than than than we normally would and you know, there's a lot of positive Trends there are some things that you know are happening or could happen that are out of our control in terms of you know, some of the larger markets in Europe and and some of the challenges they've been having with COVID-19 but the vaccine continues to roll out in the US and globally our growth expectations certainly for Q2 are are pretty robe of

And then just a follow-up by May. Thank you for giving us further detail on CRM that's very helpful in the in the releasement in the commentary. I'm just curious though money outside decline in experiential, you know, even before the pandemic, you know, it looked like it was underperforming. I'm curious what you're thinking is about that business long-term.

the business that we have Alexei really like it long-term to tell you the truth domestically our clients are generally a big events, um Olympic type of events and and very well-established have been Saddam is going to decline once people can actually return to attend a

activities and

is all of a sudden when it's looking at domestic Market.

Things that we do with respect to recruiting people for the government, which will keep us on the road for for quite a while back. I mean so positive in once movement in schools reopen and people are increasing number of people are allowed back into long-standing events and with respect to our international business. That's very exciting. I mean the big biggest aspects of that busy when it returns. He's trying know which is already started.

Established clients, you know big car companies very well-established very well-financed markets in the Middle East and just the biggest markets. In fact, you know in Western Europe. So it's a business that you know, we've held onto and with all the critical people and in fact, some instances are individuals have

Explorer

Eastern certain categories that their clients have continued to pay as at least something with the promise that we keep them on board and don't lose them because with the clients feel that they have great knowledge that products and and what their strategies are. So it's not a huge business. It's it's big enough to hurt you walk in down times and makes a contribution both from a profit either point of view as well as a revenue point of view when it when things open up.

And since we are positive about it, probably more positive than other people in some of their competitors that might even be an additional boost when things do open up because a lot of people have been had the staying power to to continue those businesses during this period of time. The only thing I would add like say is that they're dead as we've gone through the pandemic. I think we've we've found out that we're the numbers have demonstrated internally that is quite a bit especially in the domestic business wage, you know strategic work is that our businesses are doing for their clients not just purely big event driven. So there's a base of business that clients find strategic value and engaging with our our businesses that that has been

You know leads us to kind of conclude that yes, there's a little more downside in the type of environment. We've just been in but there should be even more upside as we get back to a more normal environment in the future.

Thank you. Sure.

Your next question comes from the line of Julien Roch from Barclays, please go ahead.

Yes, good morning, John. Good morning, Phil. Thank you very much for the better disclosure and the recasting of CRM from 2 to 4 to continue to steam of improve disclosure publishes. Am not gives me the organic the US sixty percent of the revenue was at Mid single-digit in q1 just gives me the organic for the group and then switch gives me the organic for international. So could we get off the media organic secure and or indication of what media did in q1 and approximately, how much is Media total revenue? My first question. The second one is John said in his opening remarks, that would be up you own your ex last year reposition cost. So can we have more color? I mean, is it up 10 basis-point? Twenty Pages 130 basis-point and the last one is just another welcome news resumption of buyback. Can we have an idea of the kind of size you're going to do for the next quarter's?

Thank you.

So I'll start Julien but could could you just repeat the margin question for clarity? Yes, John said Martin will be up. Can we have some more color? I mean, I'm not sure what does up mean does it mean time 20 basis-point? So just to start on the on the media Point God. Yeah, we we don't we don't break out the specifically and you know, frankly when you go through the the practice areas and found, you know, the disciplines that we report the vast majority of those disciplines actually have media in their numbers. So we don't we don't carve it out and look at it that way essentially businesses like PR and health care and precision marketing there are media components of those wage.

This is they're integrated into those businesses several markets throughout the world advertising and media are integrated. Um, and um, yeah, it would it isn't as simple as just pulling out a media number certainly. We we did indicate that media grow and the first quarter I'm not I would say not robustly relative to the first quarter of last year, but we're comfortable with you know, the disclosures we make as far as how long the disciplines and providing what we think is very useful and helpful information similar to how we look at the business from a management perspective. As far as margins go off. I think what we've said, you know, we we still hold to which is we look at 2019 as the best proxy of what time

Going margin expectations should be for our business. Um, you know, I think I think we look at the first part of coming out of the pandemic when I'm not likely to travel and related and some of the other controllable costs can continue to be, you know, reduced relative to past relative to the page as likely benefiting or margins in the near term. But in terms of looking at the business prospectively, you know, nineteen probably the best proxy and you know, I can tell you what what we've always said which is we always are looking for efficiencies and trying to expand our operating margins, but we're mostly focused on our operating ebitda and the margins kind of fall into place wage.

going to continue its

To invest where we believe, you know, the best organic growth opportunities are and you know, we're going to continue to drive operating profits off and on margin performance. We think will be will be a positive result. If we continue that approach last question on the buyback front page. I don't think we have today sitting here a margin a sorry a buyback dollar amount in mind. You know, I think I think I'm certainly expect to continue with a very consistent approach to Capital allocation will continue to pay a healthy dividend not going to be more aggressive in pursuing acquisition opportunities in the areas where we think there's the most promise um in our disciplines that were involved.

Day as we've said before and in the amount of money we spend on BuyBacks is going to be the residual if we can find more Acquisitions. Um, we're going to put more of our free cash flow in any one year into those Acquisitions that we last for BuyBacks as a result in in certainly that approach in that strategy off what planning on on consistently following that as we emerge from from the pandemic can get back into growth mode.

Thank you very much.

Thank you.

Your next question comes from the line of Michael Nathanson from moffettnathanson, please go ahead.

Thanks. I want for John went to fill John. I know we're still early in our recovery, but I guess want to take you to wherever The New Normal looks like and I wonder what's your name of organic growth for your company when we get out of this right? All the structural changes we've seen in digital and consumer Behavior. What what's your view will become grow faster speeds because of that when we get back to whatever that you see, it looks like that's one and fill. Can you talk a bit about the impact of the pandemic on the field marketing business, right? It's got a ton off and aging and share about me with a Cadence when that returns back to normal that's hurting the exclusion support business not be helpful, too. So thanks sure. I know absolute proof points of this. I've been in the business and shoot out forever, right and and I'm

Really?

confident that

because of changes minor strategic but but shifts in our portfolio doubling down and focused on area growth that emerging from COVID-19. We will see when you compare it to the past couple of years since she can you grow at a faster pace for certain and as we've always said on and for a number of years this was difficult to achieve over our objective is ddb GDP plus and

and

I really think that that is what's in our future over the very bullish as we emerge from from COVID-19 on.

The positions the strategies we put in place some of the other actions that we've taken and and so there's a lack of confidence not mind you against that when we get into that accelerated growth going out 18 months 24 months. I'd probably expect wage pressures to to to go up for certain key positions and things that we want to focus on so so

Would that being terribly specific time?

I'm very I feel very very confident about.

You know the near term end in the near longer-term getting back to better growth rates.

On on the field marketing front. I think you know the business our business is is largely page Europe Ian. We've done some dispositions over the years throughout, you know, the group and really streamline the group quite a bit but we expect we expect the field marketing business to be back in growth mode as well. Just like the rest of our business office, you know, I'd say 4 if we're looking at the nine months beginning April 1st, we expect few marketing and grow for the rest of 2021. It may be a bit choppy in in, you know, the 3/4. I'm not quite sure I'd commit to every quarter being kind of sequential growth, but birth

The field marketing business given its pan-european. They've had some setbacks recently in some of their key markets because of some of the shut-downs that happened recently in Europe. Um, but we do expect them to get back into growth mode. And you know, I think I think off

I think that we you know, we're confident that the business itself will perform once some of the external factors are kind of removed that that took it back throughout the pandemic. We also have part of the business in India that seems to be holding up pretty well right now.

Okay. Thanks guys. Sure.

Your next question comes from the line of Steven kale from Wells Fargo. Just go ahead. Thanks. So maybe first I wanted to just touch on that m&a commentary that you made sounds like you're you said you wanted to be a bit more aggressive in certain areas. I think that commentary like just maybe sound a little stronger than the way you've discussed it in the past. So I'm just curious there's some more sizable acquisition opportunities are out there the last few years. It's rarely exceeded a few hundred million in a single year. So just curious if you're seeing some things that might be a little bit more strategic than the the tuck in that you've done more often historically.

Yeah.

I think I think you're reading of that is correct. We've certainly got more of an emphasis and more of a focus that we've been placing on Earth, you know, not just dealing with inbound m&a candidates. But but also, you know seeking appropriate opportunities in the thing is that we want to invest in and you know, we've been um, I think clear on our last call in particular where we're focused certainly wage oddly speaking the Precision marketing space, um eCommerce media and health care and in Johns prepared remarks he commented on that specifically off. So yes, we we do currently plan to be a little more aggressive in terms of looking for the right opportunities. We won't lose our discipline in terms of birth.

You know pricing expectations, but we will be more aggressive in terms of pursuing those opportunities. I don't think there's going to be a dramatic change though, Um while we'll look at big deals the deals we can successfully integrate with our existing platforms are the ones that we've found work best off. We're going to consider, you know, any and all deals in in the areas that we're committed to and want to invest in. Um, but we are we are going to do with you know, where I'm going to pursue acquisition opportunities in in a variety of sizes and to the extent that we can do more rather than less. You know that certainly Our intention.

yeah, the only thing I might add is I'm happier today with our m&a team and the efforts that they're

They're going through then certainly than any other time in the last decade and just Echo would fill said having that positive outlook will look to do only accretive Acquisitions and there is a lot of silly money that sometimes we're competing against so we're not planning to get a job and try to explain it to you as strategic Ur and I'll go ahead sorry. Sorry. I just had a quick follow-up on them aside from you know, maybe not necessarily giving specific color on it, but I'm just curious if that's been a leading indicator of growth to come so maybe growing a little faster than the group and I think we've seen a couple of media business accounts come up for review this year. I'm just wondering if we're sort of back on the cycle where you think there's going to be a lot of media business for grabs this year. Thanks sure wage.

Media will grow faster this year.

Forecast we've seen to date the mix may change it won't change our mix dramatically because we're so big but digital has really taken over and we've crossed a threshold that that's never really going to change film. It went to come up one or two things off that and what was the second part of your question. I'm sorry, you know, I think I think we're we're comfortable with the with the media business and the media assets. We have them. We certainly we certainly think that we're close to being passed the very difficult year that we've been through because of and dynamic so we do expect media business.

You know continue to grow as we as we head into growth mode here starting in the second quarter and we're comfortable with the assets. We have I don't think we would describe a what we'd expect to see in 2021 is you know media palooza 3, but we have seen quite a bit of activity and interest money from you know marketers across a bunch of different Industries frankly because during the pandemic it was difficult for them to make a change in their service providers, especially their media service providers. Um, it's a disruptive process for them internally throughout their organization, but I think as as things normalize and they come out of it, you know, we do expect activity in terms of new business opportunities to pick up. Yep.

One final point on this but I want to add which is really a fundamental point is when we look at our Omni product that you hear us talking about that we started really wage earners three years ago. It started in primarily in the media area and we've been very successful and I think in some ways covered has helped us moved in moving its use and as a fundamental base operating philosophy across our practice areas, which is really allows the benefits that it brings to to work very closely with our creative assets in a way that in the past was dead, you know was of more forced outcome. It's now become more of a natural outcome across the practice birth.

Is that were functioning in and I think that would it makes us more competitive going forward.

Great. Thank you. Very thank you. I think we have time for one more question Opera. Okay that question comes from the line of Tim Nolan from Macquarie, please go ahead.

Sure for fitting me in here. I just want to ask question about your CRM Commerce business if I could could you just explain a little bit more about what that business entails? I know you mentioned. The Shopper marketing component was led to that business being down 4% but what are the other things you do there and and what might the growth be in that Division if you were to take Shopper marketing out. Thanks.

So on on in CRM Commerce and Consulting our brand Consulting businesses are in there and we've got some special production assets which are relatively small in in that group. You know, I think I think we've seen growth in the quarter in the specially production assets off the brand Consulting business. We expect once we're through q1 to get back into growth mode. And we we expect the Shopper Commerce business days to get back to growth mode, but the challenges they need to need to overcome relate more to you know, I think some of the client losses they've had recent life that they need to cycle through. So, you know, we're comfortable with the the assets that we have. We're going to continue one of the areas where focused on as far as potential acquisition.

Opportunities is Ecommerce to build on that business what we think the Commerce and Consulting discipline the components of it are are dead, you know businesses that we we have high expectations for in terms of their future growth profiles.

I think we've read time.

Thank you all for taking the time to join us on the call today.

Thanks. Everybody. Stay safe.

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