Q1 2022 Interpublic Group of Companies Inc Earnings Call

Good morning, and welcome to the enter public group first quarter 2022 conference call. All parties are in a listen only mode until the question and answer portion.

At that time, if you would like to ask a question you May press Star one.

Conference is being recorded if you have any objections you may disconnect. At this time I would now like to introduce Mr. Jerry <unk> Senior Vice President of Investor Relations, Sir you may begin.

Good morning. Thank you I hope you are all well.

This morning, we are joined by our CEO Felipe quick housekeeping and by Alan Johnson CFO .

We have posted our earnings release, and our slide presentation on our website Interpublic Dot com.

We plan, we plan to begin our call with prepared remarks to be followed by Q&A.

We plan to conclude before market open at 930 eastern time.

During this call we will refer to forward looking statements about our company.

These are subject to the uncertainties and 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 allow 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.

Thanks, Gerry and good morning.

As you all know for two years now since the onset of the pandemic. We've begun these calls by sharing wishes for our collective health and safety.

Yet in the early part of this year.

The world dramatically changed again.

And the invasion of Ukraine means that people on the ground there are anything but safe.

So before getting on with the business of this call it seems appropriate and actually even necessary to express our support for the Ukrainian people.

Across our company IPG.

IPG colleagues have been focused on doing their part to help.

During this crisis.

Some of us closer to Ukraine have assisted with transportation near the border.

Others have helped with refugees resettlement and with access to housing and medical services.

And several of our agencies and eastern Europe will open their doors to displaced colleagues.

We're also making significant donations to humanitarian organizations at all levels of the company and matching employee.

Donations as well.

On a related note.

We've disengaged from our Russian operations.

So having first provided for our associates. There are many of whom are individuals with whom we've worked for many decades to receive a minimum of six months salary.

And amid ongoing tragedy all of US continue to hope for the escalation of the war and ultimately for piece so.

So as to bring to an end the immense in central human suffering that we're witnessing.

Turning now to the reason for our call.

Which is obviously to discuss our business results I'm going to start with a high level view of our performance in the quarter.

Allan will then provide additional details and I'll conclude with updates on the highlights at our agencies to be followed as Jerry said by Q&A.

We're pleased to report a strong start to the year.

First quarter organic net revenue growth was 11, 5%.

That reflects strong performance in both the U S with organic growth of 12, 2%.

And in our international markets.

With organic growth of 10, 2% as well as increases in every world region.

We're also pleased to share with your strong first quarter growth across each of our new three reportable segments.

We indicated in February the operational changes would result in revisions to our segment structure as of the start of the year.

Many of you have already seen last weeks filing.

Which we describe our new segments in the recent history of financial performance.

Going back nearly two decades, we have operated and reported with two segments.

And dextro.

Yet during that time period, there of course been significant changes in our business the needs of our clients and the workings of consumer and media ecosystems.

Those changes were significantly accelerated as a result of the pandemic.

And as you know above all IPG as a client centric company.

Our offerings in businesses collaborate by design.

In order to help clients win in an increasingly digital first fragmented media environment.

Our go to market strategy. Therefore supports the need to provide integrated multi agency services that span reportable segments.

And that means that our operations will always reflect the strategic reality.

Marketers should have access to the best capabilities and talent.

No matter, where they sit across IPG.

We bring these complementary skill sets together and what we call open architecture teams that do.

Drive clients' business success.

Concurrently the speed at which market and client needs are changing.

Requires a focused and disciplined approach to the way in which as a company we operationally manage investments in key areas of our business.

This includes the creation of infrastructure and expertise that is.

Supports and can be shared by like with like assets.

And you saw an important example of that last year, when we created IPG health.

Which continues to perform very well for us.

Reflecting our evolution and following our recent strategic review of operations.

Therefore, realigned our business operations to comprise three reportable segments.

They are media data and engagement solutions.

Integrated advertising and creativity led solutions.

And specialized communications and experiential solutions.

In the first quarter each segment grew at a double digit organic rate, which demonstrates the strength of our offerings across the portfolio.

Organic growth was 11, 5% at MD&A.

11, 2% at IAA and see.

And 12, 5% at SCE and <unk>.

Our global growth was also highlighted by consistent increases across client sectors.

We were paid by double digit percentage increases in our other sector of leisure.

Government and industrial clients.

As well as double digit growth in the retail tech and telecom financial services, healthcare and auto and transportation sectors.

Turning to operating expenses and profitability.

Our team has once again demonstrated outstanding discipline.

Even as we continue to invest to support our growth.

Net income in the quarter was $159 $4 million as reported.

And our adjusted EBIT was $273 6 million, which excludes a small charge related to the 2020 restructuring program.

Resulting in net revenue margin of 12, 3%.

In our smallest seasonal quarter.

Our margin comparisons to prior first quarters continue to reflect the ins and outs of the pandemic.

Compared to a year ago under very strong revenue growth head count has grown approximately 11%.

Some variable expenses, such as travel and related and return to office costs are well above the levels of a year ago, though not fully to historic norms.

The year ago comparable first quarter margin was 13, 1% and.

And for context in both 2019 and 2020, our first quarter margins were approximately 5%.

With our strong margin results in this year's first quarter, we're confident that we continue to see the benefits of the strategic restructuring actions taken in 2020.

Diluted earnings per share was <unk> 40, as reported and was <unk> 47, as adjusted for intangible amortization and other items.

Youll recall that in February we announced that our board had reauthorized our share repurchase program and in the first quarter, we repurchased one 8 million shares using $63 million.

We're pleased to be able to share with you the strong set of results, which builds on our long term record of industry outperformance.

As well as our new disclosure, which furthers our longstanding commitment to transparency.

In order to assist in your analytical work and assessment of our company.

The differentiator of our performance in the quarter and over a period of many years.

It's been our ability to create marketing and media solutions that bring together creativity technology and data.

This combination is responsive to the evolving needs of our clients.

And it allows us to assist them by delivering higher order client solutions.

The growth Youre seeing is driven by these highly relevant capabilities.

In the midst of an expanding set of marketer needs for more precise personalized and accountable engagements with their audiences at an individual level.

Our first quarter as I said earlier is seasonally our smallest quarter.

And most of the year remains ahead of us.

We understand that we are at a moment of elevated global uncertainty.

Across multiple dimensions, whether geopolitical macroeconomic or in terms of public health.

These are part of the current reality facing every company today.

However, despite these uncertainties.

Having recently refreshed our bottoms up outlook for the year.

With key clients and with our operating teams.

The tone of the business remains positive.

This leads us to believe it's appropriate to update our revenue target for the year.

Youll recall that in February we shared our expectation for approximately 5% organic growth in 2022.

We would see that as a strong result.

Given that it compounds ipg's multi year growth stack, which significantly leads our industry going back a number of years.

At this point, we are nonetheless, increasing that outlook for the year to approximately 6% organic growth.

Along with our expectation for adjusted EBITDA margin of 16, 6%.

We remain confident in the things we can control.

Including the quality of our talent.

The resources across our portfolio.

And our ability to bring them together and collaborative effective and impactful client solutions.

We are of course, staying close to our people and our clients and carefully managing expenses and we will keep you apprised of our progress as the year develops.

Our colleagues skill and commitment has helped us to start this year on a strong footing.

Therefore, I'd like to conclude this part of my remarks by once again, recognizing and thanking our people for their work on behalf of clients, but also in support of each other.

And at this point I'm going to hand over the call to Ellen for a more in depth view on our results.

Thank you I hope that everyone is safe and healthy I would like to join Felipe and the recognition of our people and to <unk>.

Add my thanks to all of them.

As a reminder, my remarks will track the presentation slides that accompany our webcast.

Beginning with the highlights on slide two of the presentation. Our first quarter net revenue increased nine 8% from a year ago with organic growth of 11, 5%.

Organic growth was 12, 2% in the U S and.

And growth was 10, 2% in our international markets.

We had double digit growth in each of our three segments.

First quarter adjusted EBIT da Please go ahead.

<unk> restructuring adjustment with $273 6 million.

And margin with 12, 3%.

Yeah, good earnings per share of <unk> 40, as reported and 47 as adjusted.

Adjustments exclude the after tax impacts of the amortization of acquired intangibles that small refinement to our 2020 restructuring program and non operating losses.

And a small non strategic businesses.

Beginning in late February four handshake with Brian Lee authorization by our board, we repurchased one 8 million of our common shares during the quarter for $63 1 million.

Turning to slide three you'll see our P&L for the quarter.

I'll cover revenue and operating expenses in detail in the <unk>.

Hi, Paul.

Turning to first quarter revenue in more detail on slide four.

Our net revenue in the quarter to two 3 billion an increase of $195 million.

Compared to Q1 'twenty one the impact of the change in exchange rates was negative one 4%, but the dollar stronger against currency and nearly all of our international markets.

Net divestitures were negative 30 basis points.

Organic net revenue increased 11, 5%.

At the bottom of this slide we break out revenue for the three new segments.

Our immediate data engagement solution segment.

<unk>, 5%.

As you can see on this slide this segment is comprised of IPG media brands axiom connect and our digital commerce specialist agencies, which include MRM RGA in each we had very strong growth in Q1 across the segment.

Our integrated advertising and creatively led solutions segment.

11, 2%.

This segment is comprised of Mccann IGT House Nano group FCB and our domestic integrated agencies.

We had strong growth at all of our global networks.

And our specialized communication, an exponential solutions segment organic growth was 12, 5%.

<unk> is comprised of Ipg's Xtra, and extra house Webinar Cohen, Jack Morton momentum and Oxycontin.

We had strong Q1 growth across all of our major disciplines, we will led by events and sports and entertainment continuing an unmistakable recovery from the impact of the pandemic.

During the year organic growth of our Jack Morton momentum in optical agencies is now positive from the pre pandemic level of Q1 2019.

Moving on to slide five our organic revenue growth by region.

In the U S, which was 66% of net revenue in the quarter, our organic increase with 12, 2%.

We exhibited strong broad based growth across segments agencies and client sectors.

International markets, where 34% of our net revenue in the quarter and increased 10, 2% organically.

Grew in every international region.

Continental Europe grew nine 4%.

Noting that that's on top of 12, 4% a year ago with the increase in nearly every national market, including our largest markets of France, Germany, Spain, and Italy, there was no noticeable drop off in the quarter and our smaller eastern European markets.

UK increased one 5% organically, we had very strong increases in the experiential media amtech disciplines and at Mccann, but those were largely offset by client specific actions I would expect in the portfolio.

Asia Pac grew nine 2% organically driven by growth across our largest markets of Australia, India, and Japan, Singapore was flat and China decreased.

Organic growth in Latam with 21, 5% with strong results across all disciplines. This was notably so in our digital specialist agencies and media in our MD&A segment, and our global networks and our.

Hi, a C segment.

Our other markets group, which is Canada, the middle Eastern Africa grew 19, 9%.

<unk> growth in each region.

Moving on to slide six and operating expenses in the quarter.

Our GAAP operating expenses exclude billable expenses.

Amortization of acquired intangibles and the restructuring adjustment increased 10, 9% from a year ago and the growth of net revenue of nine 8%. The result with margin of 12, 3% compared to 13, 1% a year ago.

Our first quarter results and a significant increase from 2019 and 2020, when our first quarter margins from approximately 5%.

Our fully adjusted EBITDA margins by segment in the quarter or 10, 9% and MD&A.

14, 2%.

Nancy and 16, 8% in SCE. These margins are have an appendix on slide 17.

In General do you expect each segment margin have quarterly seasonality so much of that of our consolidated results over time.

MD&A showing the stronger seasonality over the course of the year.

As you can see on this slide our ratio of total salaries and related expense as a percentage of net revenue was 72%.

And all of these ratios are again, it's our smallest quarterly revenue base of the year.

Underneath the Srs results, we delivered on our expense for base payroll benefits and tax due to aggressive hiring over the course of the past year that was necessary to support our 14, 3% organic growth over the trailing 12 months.

Our expense for performance based employee incentive comp with equal to last year in dollar term and therefore lower as a percent of net revenue.

<unk> this year compared to four 3% a year ago.

Severance expense was 50 basis points of net revenue compared with 30 basis points a year ago.

Temporary labor expense was four 8% of revenue compared with four 6% in Q1 'twenty one.

At quarter end total worldwide head count increased by 11% from a year ago to 56800 to support underground.

Also on this slide our office and other direct expense was 14, 5% of net revenue compared to 14, 4% a year ago.

<unk> that we continue to leverage our expense for occupancy, which was five 1% of net revenues an improvement of 50 basis points from Q1 'twenty one.

All other <unk> with nine 4% of net revenue compared with eight 8% a year ago due to the return of certain variable expenses, such as our investment in travel employment and client service costs as a result of the increased level of business activity.

Our SG&A expense was <unk>, 9% of net revenue a decrease of 50 basis points from the prior year.

On slide seven we present details on adjustments to our reported first quarter results in order to provide 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 and our adjusted to reduce EPS.

Our expense for the amortization of acquired intangibles and the second column with $21 3 million.

The restructuring charges were $6 6 million, which was small estimate adjustments related to our 2020 restructuring program.

Below operating expenses in column four we had a pre tax loss in the quarter of $6 4 million and other expenses due to the disposition of a few small non strategic businesses.

That's a part of the slide you can see the after tax impact per diluted share of each of these adjustments.

Which bridges, our diluted EPS as reported at <unk> 40.

To adjusted earnings of 47 per diluted share.

On slide eight we turn to cash flow in the quarter.

Cash used in operations was 6600, $33 6 million compared with $249 8 million a year ago.

As a reminder, our operating cash flow is highly seasonal we typically generate significant cash from working capital in the fourth quarter and use cash in the first quarter.

During this year's first quarter cash used in working capital was $865 million and filed our fourth quarter of last year, when we generated over $1 billion from working capital.

<unk> II is a $194 million of cash generated from working capital, which is squarely in the range of our recent history.

And our investing activities.

$98 8 million, mainly for Capex in the quarter.

Our financing activities in the quarter were $210 1 million, primarily for our common stock dividend share repurchases and taxes withheld on shares and our performance based incentive compensation.

Our net decrease in cash for the quarter with $867 5 million.

Slide nine is the current portion of our balance sheet. We ended the quarter with $2 4 billion of cash and equivalents compared with $2 2 billion a year ago.

Slide 10 depicts the maturity of our outstanding debt.

You can see on this schedule total debt at quarter end was $3 billion.

Our next maturity is April 2024 for only $250 million thereafter, our next maturity is not until 2028.

In summary on slide 11, our teams continue to execute at a high level and have us well positioned to deliver on our expectations for the year.

I would like to reiterate our pride in and gratitude for the efforts of our people.

Strength of our balance sheet liquidity means that we remain well positioned both financially and commercially and with that I'll turn it back to Lee.

Thank you.

As Alan just said our work and our people continue to set the standard for the industry. So I would also like to again thank.

Approximately 57000 colleagues around the world, who contribute to our clients' growth and the continued evolution of our business.

Collectively we're implementing our strategic vision, which is to integrate brand experiences across consumer touch points.

Combining award winning creativity with best in class technology and data infrastructure.

That commitment is translated into new client engagements.

Expanded relationships with our existing partners and programs that deliver significant growth outcomes for our clients as well as for our own business.

Turning now to specific highlights.

At the agency level in the quarter.

At our media data and engagement solutions segment.

We continued to see strong growth.

U M. One grubhub in year ago in the quarter.

RGA continued to perform well in new business with a notable win when it was named AOR for the XFL Pro Football League and.

And the agency also earned a composition on AD Age's 2022, a list.

New client wins were strong across axiom can as a matter of time and all three of those organizations work together with <unk> to provide a behavioral science led solution for the Grubhub when I mentioned a minute ago.

During the quarter Axiom extended California, consumer Privacy Act rights to all U S residents.

In the absence of a national U S privacy law.

We believe this is a meaningful step because it's clearly responsive individual consumers are increasingly want more access to and control of their personal data.

Sure.

It's fair to say if this move is aligned with ipg's commitment to going above and beyond what's required by law.

And this allows us to ensure we can support our clients business needs with the best data.

Tools and advice and do so by leading the way in the ethical use of data.

In addition, we launched the axiom partner marketplace Theres, a comprehensive offering of leading industry specific data under one roof.

The axiom partner marketplace complements our best in class and foundational info based data.

And it gives marketers greater access to actionable and precise people based data.

Across a range of use cases and touch points on the consumer journey.

And this is particularly important at a time when the ecosystem faces severe disruption due to proxy and deprecation.

At the end of the quarter <unk> also launched its outcome navigator.

Which is a suite of performance based services that drive specific business outcomes for brands and this puts connect those matter kind unit in line to capture more performance based marketing budgets.

During the quarter MRM expanded its commerce consulting servicing health.

Forming a strategic partnership with Salesforce sales cloud.

So allows us to deliver enterprise level solutions at scale for the insurance pharmaceutical and medical device sectors.

Looking now at our integrated advertising and creativity led solutions segment.

IPG help continues its very strong performance with clients.

And new business and within the industry.

At the recent <unk>.

Manny Awards were met avenues honors the best in pharmaceutical and healthcare advertising IPG help took home nearly 60% of the awards given the.

The agencies within the network one across many categories, including most creative agency most admired agency.

Advertising agency of the year and Additionally, IPG health was named network of the year.

Elsewhere at IAC.

Following a highly competitive review.

Mullen Lowe was named as creative agency of record by KFC.

And some of that new positioning and work will be in market shortly.

<unk> was also named U S agency of record by buyer for their lead brand, which further builds on our relationship with a valued existing client.

Media hub continued to show very well, winning new clients top golf Entertainment post consumer brands, and Picasso, which is a technology based real estate marketplace.

At FCB, we promoted a dynamic new team to lead the network.

And we've seen a very smooth transition so they've hit the ground running with a focus on building new business opportunities. They are fueled by the agencies exceptional creative reputation.

During the quarter FCB was named one of the 10, most innovative advertising agencies of 2022 by fast company and they also featured in AD age's prestigious 2022 a list.

Now during the quarter FCB, when new assignments from Hershey's and Kellogg's in North America.

And Mccann.

Q1 saw the network win velocity global distributed.

Workplace platform.

Hans grow out of the UK and club Med Canada.

World Group also continued to win organic assignments across its global client roster.

At the end the awards the first major Creative award show of the season, not only with IPG named the most awarded holding company.

<unk> was named the most awarded global network.

Also worth noting that FCB and Mccann, we're ranked number one and two respectively and act responsible good report.

Which identifies the global networks doing the most powerful and effective cause related work in our industry.

And we see this as a clear reflection of the degree to which ipg's commitment to ESG directly manifest in the work that we create.

Reflecting an increase in the number of global in person events as we enter a post pandemic world.

Our specialist communications and experiential solutions segment saw strong growth during the quarter.

Extra health posted a number of wins, we're Weber shandwick, Golin and Jack Morton came together to help companies in the biotech and pharma sector defined protect and enhance their reputations.

Also during the quarter Grubhub selected Golan to handle its consumer PR work.

And Napa auto parts named Golan as its first ever PR agency.

At the 2022 PR week U S Awards.

Which celebrate the industry's best public relations work.

Current global degrees degrees global excuse me.

Ever Shandwick, the Martin Agency and Mullen group combined to win 11 awards, which was more than any other holding company.

RNC Pmk continued to spearhead global campaigns across the entertainment industry, including the launch of Apple Tvs. They call me Magic campaign.

And octagon secured a multi year agreement to manage event programming for Toyota.

To activate the company's Olympic partnership as a lead sponsor.

As a result, octagon will develop and produce the client's full range of activity related to the 2024 games in Paris.

Now as we know the pandemic disrupted pretty much every facet of human interactions.

And for brands it appended, how they seek to engage with audiences in live formats.

As real world events have become to rebound marketers are seeing that our hybrid component to events.

There's a path to reach larger new audiences and also to improve and deepen engagement.

And Thats why IPG recently announced that we are bolstering our capabilities in the hybrid and digital event space.

By acquiring a significant stake in the famous group.

Which is an award winning fan experience technology company.

Which creates connected immersive augmented and mixed reality experiences.

To enhance the reach and impact of live events.

The capabilities at famous group demonstrate what we're working to develop across all of our agencies, which is proprietary technology skills and IP that can help our agencies build deeper connections to our data resources and capabilities.

As well as the path to higher order consulting engagements with our clients.

In assessing the overall IPG portfolio, we believe that we are fully provisioned and well positioned for the future.

Without notable gaps in our offering.

That said, we will continue to look closely as strategic options to bolster our capabilities through targeted M&A, especially.

Especially opportunities that further our technology capabilities and bring proprietary tools our platform skill sets into the company.

On prior calls you'll recall that we've identified marketing technology and business transformation consulting as key areas of focus for us going forward.

As we see these as areas that can help us build on our technology layer and further accelerate our evolution.

Higher valued partnerships with our clients.

Staying at the holding company level, we've long been clear there for IPG.

Our commitment to ESG as a key strategic priority.

And this includes activity in five key pillars.

Diversity equity and inclusion.

Staying ability.

Human capital.

Data privacy.

And media responsibility.

As such we're proud that earlier this week.

Forbes released its list of the best employers for diversity 2022.

And interpublic is not only the highest ranked company in our industry.

The number five among.

Among all U S companies with more than 1000 employees.

This prestigious recognition, which was determined by Forbes and statistics.

Leading statistics portal.

They spoke to over 60000 U S employees from across a range of large businesses, serving them asking them to provide direct experience and opinions about each company in the rankings.

We're very proud of this ranking and yet we know there is still a great deal of work to do in this space.

And we're committed to doing more to become a fair and more representative workspace.

As we continue to navigate a very competitive talent market I think it was also gratifying to see a number of our agencies standout as employers of choice.

IPG health reprise revive health and AUM were recently named among AD Age's Best places to work of 2022.

Yes.

Stepping back now I think that overall, we're very pleased with the quarterly results. They represent a strong start to 2022.

Both the tone of the business as well as our net new business remain positive.

And as stated earlier on the call, we feel comfortable increasing our outlook for the year to approximately 6% organic growth along with our expectation for adjusted EBITDA margin.

Of 16, 6%.

That's not to say, we don't acknowledge the ongoing uncertainty that continues to exist.

Across multiple dimensions.

But.

In the case should it be the case in some of that were to begin to materialize. It is important to note. We have a flexible cost model, which as we've consistently demonstrated over many years can be an important lever not only for improving margins in times of growth.

But also against downturns and the macro business environment.

Another key area for value creation remains a strong balance sheet and liquidity.

Our ongoing commitment to capital returns has been clearly underscored by both our recent dividend increase as well as the resumption of share repurchases, which you saw in the quarter.

And our teams remain highly focused on delivering.

As our company continues.

To provide higher order business as solutions to clients, which can help them drive growth across a range of marketing activities and economic conditions.

So I'll just close by thanking our partners our people.

And those of you on the call for your continued support.

And at this point I think we should open the floor to questions.

Thank you at this time, if anyone would like to ask a question. Please ensure that your phone is on muted press star one and record your name clearly when prompted.

If you would need to withdraw your question Press Star two again to ask a question. Please press star one.

One moment for the first question.

Our first question is from Jason Bazinet with Citi. You May go ahead.

Thank you for the new reporting segments I guess over the last three years, it's pretty clear that <unk> grew faster than ANC, which in turn grew faster than SG&A.

But we didn't see that in.

In the first quarter.

And I was just wondering if you could provide a little commentary is that a function of sort of inflation sort of rising lifting all boats is it somewhat of a function of the comps.

When do you think the sort of that three year track record.

From 19% to 21.

With your larger segment growing more quickly sort of reassert itself.

Jason.

Look I think quarter to quarter, there is a lot of.

Sort of volatility at any given point in time. So you can have the impact in the case of MD&A in Q1.

There was a very sharp ramp in head count to keep up with growth that we saw last year.

So I think looking at anything on a quarter to quarter basis. There can obviously be a client win or not something we clearly look forward to but the opposite so I think that the macro trend is definitely the one that you want to focus on so whether thats.

On annual or clearly a multiyear trend.

I think that.

Youre right to assume that youre going to see.

Higher growth in certain.

Segments.

You're obviously going to see that the segments that have kind of embedded tech and data I think we also believe represent.

And opportunity from from a margin perspective.

But then I think what is heartening as well is you've heard us talk a lot about both how we go to market as it is as an integrated company and so what's interesting is the segments reflect.

There's been such acceleration and there is really the need to manage these businesses in a way that's consistent with kind of the underlying dynamics of each segment, but when we go to market with a client we bring all of this together and so what I think that when you've heard us talk about the fact that for example, the axiom.

Offering is increasingly helping to power through behavioral science.

The way in which some of the <unk>.

Advertising agencies go to clients with audience led solutions and insights that actually informed the creative work. So we think it will help.

<unk>.

Increased growth and it'll definitely as we incorporate more of that and more of the accountable solutions into the rest of the portfolio there's upside.

On on both it will help fuel growth elsewhere, and I think we definitely see opportunity on the margin side.

Consistent with what Youre seeing there so I can't I can't tell you that on a quarter to quarter basis, the ins and outs or to your point there are comps at play.

On what we would refer to as segment three on the <unk> segment.

Clearly that's a segment that that got meaningfully impacted by the pandemic. So 'twenty to 'twenty one was improvement 'twenty one to 'twenty two is improvement and we have underlying.

<unk> assets there, but there is also a benefit to the comp in that segment. So I think it's a fair question, but.

Okay Super helpful. Thank you.

No no worries thank you.

Thank you. The next question is from David Karnofsky with Jpmorgan you May go ahead.

David Hi, Thank you.

We've heard from a number of your peers. These past few weeks, we've said they arent seeing clients materially adjust budgets, even while some supply chain pressure or have real concern over macro or inflation. So wondering if youre hearing the same and then what do you think is driving that dynamic that marketers simply anticipate some of those to start to the year.

Are there competitive pressures that are keeping budgets and spend steady.

Well I mean, I think I think there are a lot of moving parts. So as we shared with you. We've recently come through a process thats pretty much when we go through every year, but we spend time with.

All of our operators.

And we've spent time with clients and our sense is that is that the tone of the business remains positive.

The moving parts component to it is.

I think.

We've talked about the fact that the pandemic itself.

There was that initial three to six months, which clearly had an impact but then clients began to find their footing and then they started to really lean into digital channels and we started to see much more active discussions around implementing E com going through their own business transformation journeys. So I think as we've seen subsequent waves of.

The pandemic itself, they've really been less and less disruptive to marketing activity right.

So you look at our trailing 12 month growth in the 14% to 15% range.

You look at for Us of Magna forecast for 'twenty, two and Thats directional I mean.

As you know it speaks to an adjacent industry, which at least.

Reflect client investment the way, we traded media it's not.

We're clearly a much more consultative in our approach to media, but all of those things say to you that that the environment.

For the moment with the caveat that there are some uncertainties out there.

It's still very active and then you get to what you said which is that.

I think.

Clients don't want to.

Step out of complex process. So if you've got a client who has a 360 campaign where they are.

Integrated in their approach and they are thinking about all of the ways in which along the consumer journey I'm going to need to understand who you are as an audience figure out where and how to intersect with you too.

Pull out of that it's not something that you can necessarily easily restart.

The larger national multinational clients.

I think that that means that there continues to be commitment.

There is concern to your point that if you pull back.

You see ground and so if that means somebody else jumps in line and get into that conversation or if that means that you're being diluted share.

At a time when obviously you want to.

In essence use of leverage that your brand and your position in the marketplace provide to you to take price to offset some of these.

These pressures that you're feeling that every business is feeling so I can't tell you and again, we've got a very very broad portfolio of clients. So so the specifics of client category and geography.

<unk> mix or different each time out but at the moment, we are definitely seeing that commitment to stay invested hold.

Okay great.

Alan maybe one for you I think generally in the past you've noted organic growth.

Driver higher margins over time, but you did leave your margin outlook, the same while raising organic and I just want to better understand the dynamic there and save costs or potentially coming in different than you had expected when you last guided or whether there's other factors we should consider.

Sure. Thank you for the question.

As Blake mentioned.

Just finished a bottoms up process of meeting with all the operators.

Our outlook reflects that both on the revised up in growth and to maintain the margin.

16, 6% margin if you look at the progress we've made over the last several years is pretty substantial.

<unk> will be a great result, as we said earlier this year, there's just a lot of ins and outs coming out of the period of time that we just yet.

Alright, thank you.

Thank you.

Thank you. The next question is from Tim Nolan with Macquarie You May go ahead.

Great Hi, thanks very much.

There is a number that I just can't help but comparing which is that your revenue growth was probably for the first time ever are much higher than facebooks.

Which reported last night.

Yes.

After the last two.

<unk>.

I know that visits are clearly different and I know the Facebook issue clearly has quite a bit to do with Apple.

Wondering if you could give a bit more color on.

Your optimism for the second half in general for the agency business.

<unk> in your upgraded.

For the full year.

With some of these larger tech companies and issues that they face is it just about the Apple changes that are coming through are there other things that are going on in there as well. Thanks.

I mean, that's a.

That's such a broad based question in that and then I'm not sure that.

An opinion about what might or might not be impacting all of them. So.

Could it be what.

We've seen with iOS absolutely.

Could it be.

Dawning that youre seeing consumers more focused on I talked a bit about what we've done at axiom with extending CPA too.

We believe that in the long term.

The idea that you invest behind having the benefits of of data the precision that it gives you the ability to be.

Kind of much more accountable to what that investment is yielding and yet to do it in a way that is much more sort of future proved and built for a world in which.

You are not necessarily assuming this extremely asymmetrical relationship between the platform and the individual consumer so I mean, it could be that it could be.

That they're dealing with.

No.

Clients for whom brand safety and the responsible deployment of media is an issue I mean, it could clearly be that theres, probably some share shift going on over there in.

And you've definitely got at least one or two I mean tictoc is is clearly.

Showing up and making a really big impact.

And then you've got some nascent categories.

No.

Be it.

Sports betting be it a crypto that I think are.

Our looking at the space with a much cleaner.

With fewer preconceived notions so they might be much more democratic and their use of digital media right. So that's the question that I think you were asking at least in part the question about us and the agency space I think.

It's the same thesis that we've had for some time right. So the thesis has been the complexity is going to continue to increase so the ways in which fragmentation is both potentially.

There's a challenge there is a market or there is also an opportunity there.

As a marketer.

Then there is the.

Get more digital in the way in which you engage so.

Put more.

<unk> thought and then ultimately invest more money behind those kinds of channels.

And then and then ultimately.

Kind of build one to one connections and relationships.

With individuals and you do that with.

Kind of the right both.

The marketing technology suite and skill sets and then.

Definitively where the right data infrastructure. So we see that all of what's going on in this space that you noted is being.

At least I don't know if theyre being disrupted they're clearly going through some changes we see that as continued opportunity because clearly marketers are saying, okay. What do we do about that what are the implications of that how do we make sure we're making the right decisions.

We're well positioned to help them.

As their advisor as a consultant who shows up and is able to to help them with those kinds of opportunities and challenges.

Yes that answers it perfectly thanks Felipe.

No.

Very few people ever say that about anything I do so thank you Pam.

Thank you. The next question is from Dan Salmon with BMO capital markets. You May go ahead.

Great.

Good morning, Dan.

Thanks for taking my questions I hope.

Interesting answering that one too so.

Felipe.

It feels like we're hearing a little bit more I guess similar theme across the industry about developing solutions that reach more small and mid size businesses, maybe that goes a little bit hand in hand, with more focus on data and technology and platforms.

Things that are naturally a little bit more scalable so.

Maybe asking the question. This way do you expect the holding company and then obviously IPG specifically do you expect the number of clients to grow significantly over time.

Eric.

Thousands of clients with the sort of top 200 top 300 accounting for the majority of revenue do you see tens to hundreds of thousands of clients any thoughts on that would be great.

And then Allen. Thank you both for the comments on the macro and.

Lots of talk about that lately and I think the reality cmo's often do sit downstream from those decisions so to the agencies. So my question is.

Do you engage with your agency CFO was a little differently at times like this so I'd like to check in more often.

Is there like a <unk>.

Con level that gets raised during periods like this.

Maybe let us know.

What goes on inside of the organization to help check on these things.

So yes.

The initial question is a great question and I think to my mind.

It's definitely a place I would like to see US go I mean, I think it's I think it is factored into the planning and the thinking around here because.

As you say the client universe that has been able to.

Work with us.

Has been significant but ultimately reached limits, if and as we build more.

Services that have a.

Technology layer or component.

Capabilities that you can in essence plug in off the shelf whether thats.

Dashboards whether thats.

Kind of IP that you can license from us. So that you can then do a certain kind of analytic work or certain kind of.

Segmentation work or put data to work in in mid sized businesses. That's definitely a place we want to go.

I don't know that I can tell you that we've sort that out to the point, where it'll go from our.

Current 5000 clients too.

Two times that or three times that I think I think it's.

Sort of too early to.

It's sort of premature to put that out there, but I think.

What you suggest about how these capabilities and the way. These capabilities are delivered do mean that we can.

Sort of think about an addressable market and think about a.

Middle market of clients with whom we can engage is absolutely consistent with with kind of our thinking.

And then ill pass things over to Alan for the interesting question on the on the CFO side of things yes.

So our financial community, yes, it's cfos, but it's broader than that tail and.

It's really a team sport if I can use that.

And navigate and its not different now absolutely always to talk and communicate and stay very close to our operators to make sure that we are very close to what's happening in the business and on the clients.

It's continuous and this year is no different than the previous years.

Just the way, we do things and we're constantly speaking.

Get together as a community regularly.

Your ideas best practices and information.

Okay.

Business as usual, but I'm sure that you are.

More interesting conversation.

Thank you Bill.

Thank you.

Okay. Thank you and our final question is from Michael Nathanson with Moffett Nathanson you May go ahead.

Thanks.

Hopefully I will try to ask you the question that.

It takes all of the previous questions together.

Yep.

Do you think.

Commentary about digital advertising, which is mostly SMB and ecommerce in terms of where the weaknesses.

In this environment.

Is favoring multinational companies larger companies, which is the backbone of your business.

It may be small wanted to place is there anything that you've thought of in terms of size operation ability to pass on.

Costs.

Sure with distributors so that's one.

Second for you Alan if the dollar keeps weakening I've always thought that your U S operations have higher margins.

Cash operations I don't know, if that's true or not that's our assumption. So if a weaker dollar keeps strengthening won't there be a natural flattering our margins just simply from translation purposes. So those are my questions. Thanks.

Alright.

That's a question that I'm trying to sort of pull it apart as.

To your point it pulls in so much of what we've been talking about earlier, so I think larger clients clearly have a number of benefits so to your point.

<unk>.

The complexity of the work they do the fact that they've got the full range of capabilities at their disposal.

And then the fact that.

If they are invested in and many of them are further along that curve than others, but to the extent that they are.

Thinking about and working to work to sort of incorporate more of the.

Digital channels that intersect with consumers the.

Digital channels are the sort of.

Ways to do <unk> to see whether thats in the E comm space or whether thats through AD Tech.

Clearly I do think that Youre right that at this point.

They do have an advantage.

It's difficult for me to say whether or not.

I don't think I don't think it disqualifies I mean, we see a lot of.

Well funded sophisticated data see companies that are young companies coming into market and they're looking to us for services once they get to a certain point in their maturation process, but it's still fairly early on for them right.

And then when I think about health care, which as you know is a big part of our mix and.

And really what we continue to see as a very robust area with some real promise.

We work with the majors, we work with the vast majority of the really large players in that space.

But we're also we're also bringing a lot of.

A biotech companies into the fold right. So when we when we're looking for for a balanced mix. So I would I would say, yes, what you say definitely holds true do we have.

Perfect lens to that no because our client roster does skew pretty heavily to the folks that you pointed out likely are advantaged.

But they are definitely they are definitely a lot of of new entrants into the space who show up.

With a pretty sophisticated view and the ability to take on board a pretty broad range of our services.

And put them to use.

Okay.

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

Okay, So I have that wrong.

And I understand that I guess, yes, we are at the hour.

Well look again, we appreciate the time, we appreciate the continued support we will.

Get back to it I don't know if I can do perfection.

Again, even anytime in the next week, but thanks for that.

But as I said look the focus on execution here is.

Is very clear and as always we'll keep you posted and we look forward to our next conversation.

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

[music].

[music].

Good morning, and welcome to the enter public group first quarter 2022 conference call.

All parties are in a listen only mode until the question and answer portion.

At 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 would now like to introduce Mr. Jerry <unk> Senior Vice President of Investor Relations, Sir you may begin.

Good morning. Thank you I hope you are all well. This morning, we are joined by our CEO Felipe quick housekeeping and by Ellen Johnson CFO .

We have posted our earnings release, and our slide presentation on our website Interpublic Dot com.

We plan, we plan to begin our call with prepared remarks to be followed by Q&A.

We plan to conclude before market open at 930 eastern time.

During this call we will refer to forward looking statements about our company.

These are subject to the uncertainties and 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 allow 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 Kurkowski.

Thanks, Gerry and good morning.

As you all know for two years now since the onset of the pandemic. We've begun these calls by sharing wishes for our collective health and safety.

Yet in the early part of this year the.

The world dramatically changed again.

And the invasion of Ukraine means that people on the ground there are anything but safe.

So before getting on to the business of this call it seems appropriate and actually even necessary to express our support for Ukrainian people.

Across our company IPG.

IPG colleagues have been focused on doing their part to help during this crisis.

Some of us closer to Ukraine, and assisted with transportation near the border.

Others have helped with the refugees resettlement.

And with access to housing and medical services.

And several of our agencies and eastern Europe open their doors to displaced colleagues.

Of course, we're also making significant donations to humanitarian organizations at all levels of the company and matching employee.

Nations as well.

On a related note.

Disengaged from our Russian operations.

Having first provided for our associates there many of whom are individuals with whom we've worked for many decades to receive a minimum of six months salary.

And amid ongoing tragedy all of US continue to hope for the escalation of the war and ultimately for piece so as to bring to an end the immense in central human suffering that we're witnessing.

Turning now to the reason for our call, which is obviously to discuss our business results.

To start with a high level view of our performance in the quarter.

Allan will then provide additional details and I'll conclude with updates on the highlights at our agencies to be followed as Jerry said by Q&A.

We're pleased to report a strong start to the year.

First quarter organic net revenue growth was 11, 5%.

That reflects strong performance in both the U S with organic growth of 12, 2%.

And in our international markets.

With organic growth of 10, 2% as well as increases in every world region.

We're also pleased to share with your strong first quarter growth across each of our new three reportable segments.

We indicated in February the operational changes would result in revisions to our segment structure as of the start of the year.

Many of you have already seen last weeks filing.

Which we describe our new segments and their recent history of financial performance.

Going back nearly two decades, we have operated and reported with two segments.

And dextrose.

Yet during that time period, there of course been significant changes in our business the needs of our clients and the workings of consumer and media ecosystems.

Those changes were significantly accelerated as a result of the pandemic.

And as you know above all IPG as a client centric company.

Our offerings in businesses collaborate by design.

In order to help clients win in an increasingly digital first fragmented media environment.

Our go to market strategy. Therefore supports the need to provide integrated multi agency services that span reportable segments.

And that means that our operations will always reflect the strategic reality.

Marketers should have access to the best capabilities and talent.

No matter, where they sit across IPG.

We bring these complementary skill sets together and what we call open architecture teams.

<unk> clients business success.

Concurrently the spa.

<unk>, which market and client needs are changing.

It requires a focused and disciplined approach to the way in which as a company we operationally manage investments in key areas of our business.

This includes the creation of infrastructure and expertise that is.

Supports and can be shared by like with like assets.

And you saw an important example of that last year, when we created IPG health.

<unk> performed very well for us.

Reflecting our evolution and following our recent strategic review of operations.

We therefore realigned our business operations to comprise three reportable segments.

They are media data and engagement solutions.

Integrated advertising and creativity led solutions.

And specialized communications and experiential solutions.

In the first quarter each segment grew at a double digit organic rate.

Which demonstrates the strength of our offerings across the portfolio.

Organic growth was 11, 5% MD&A.

11, 2% at IAA and see.

And 12, 5% at SCE and <unk>.

Our global growth was also highlighted by consistent increases across client sectors.

We were paced by double digit percentage increases in our other sector of leisure government and industrial clients.

As well as double digit growth in the retail tech and telecom financial services, healthcare and auto and transportation sectors.

Turning to operating expenses and profitability our team has once again demonstrated outstanding discipline.

Even as we continue to invest to support our growth.

Net income in the quarter was $159 $4 million as reported.

And our adjusted EBIT was $273 6 million, which excludes a small charge related to the 2020 restructuring program.

Resulting in net revenue margin of 12, 3% in.

In our smallest seasonal quarter.

Our margin comparisons to prior first quarters continue to reflect the ins and outs of the pandemic.

Compared to a year ago under very strong revenue growth head count has grown approximately 11%.

Some variable expenses, such as travel unrelated and return to office costs are well above the levels of a year ago, though not fully to historic norms.

A year ago comparable first quarter margin was 13, 1%.

And for context in both 2019 and 2020, our first quarter margins were approximately 5%.

With our strong margin results in this year's first quarter, we're confident that we continue to see the benefits of the strategic restructuring actions taken in 2020.

Diluted earnings per share was <unk> 40, as reported was 47 as adjusted for intangible amortization and other items.

Youll recall that in February we announced that our board reauthorized, our share repurchase program and in the first quarter, we repurchased one 8 million shares using $63 million.

We're pleased to be able to share with you the strong set of results, which builds on our long term record of industry outperformance.

As well as our new disclosure, which furthers our longstanding commitment to transparency.

In order to assist in your analytical work and assessment of our company.

The differentiator of our performance in the quarter and over a period of many years.

It has been our ability to create marketing and media solutions that bring together creativity technology and data.

This combination is responsive to the evolving needs of our clients.

And it allows us to assist them by delivering higher order client solutions.

The growth Youre seeing is driven by these highly relevant capabilities.

In the midst of an expanding set of marketer needs for more precise personalized and accountable engagements with their audiences at an individual level.

Our first quarter as I said earlier is seasonally our smallest quarter.

And most of the year remains ahead of us.

We understand that we are at a moment of elevated global uncertainty.

Across multiple dimensions, whether geopolitical macroeconomic or in terms of public health.

These are part of the current reality facing every company today.

However, despite these uncertainties.

Having recently refreshed our bottoms up outlook for the year with key clients and with our operating teams.

The tone of the business remains positive.

This leads us to believe it is appropriate to update our revenue target for the year.

Youll recall that in February we shared our expectation for approximately 5% organic growth in 2022.

We would see that as a strong result.

Given that it compounds ipg's multiyear growth stack, which significantly leads our industry going back a number of years.

At this point, we are nonetheless, increasing that outlook for the year to approximately 6% organic growth.

Along with our expectation for adjusted EBITDA margin of 16, 6%.

We remain confident in the things we can control.

Including the quality of our talent.

The resources across our portfolio and our ability to bring them together and collaborative effective and impactful client solutions.

Our colleague skill and commitment and helped US start this year on a strong footing.

I'd therefore like to conclude this part of my remarks by once again, recognizing and thanking our people for their work on behalf of clients, but also in support of each other.

At this point I'm going to hand over the call to Ellen for a more in depth view on our results.

Thank you I hope that everyone is safe and healthy I would like to join Felipe and the recognition of our people.

Add my thanks to all of them.

As a reminder, my remarks will track the presentation slides that accompany our webcast.

Beginning with the highlights on slide two of the presentation, our first quarter net revenue increased nine 8% from a year ago.

Organic growth of 11, 5%.

<unk> growth was 12, 2% in the U S and growth was 10, 2% in our international markets.

We had double digit growth in each of our three segments.

First quarter adjusted EBITDA before a small restructuring adjustment was $273 6 million.

And margin with 12, 3%.

Yeah. Good earnings per share was <unk> 40, as reported and 47% as adjusted.

The adjustments exclude the after tax impacts of the amortization of acquired intangibles.

A refinement to our 2020 restructuring program and non operating losses in certain small non <unk>.

Can you take business.

Beginning in late February .

Re authorization by our board, we repurchased one 8 million of our common shares during the quarter for $63 1 million.

Turning to slide three you'll see our P&L for the quarter.

I'll cover revenue and operating expenses in detail in the slides.

Turning to first quarter revenue in more detail on slide four.

Net revenue in the quarter to two 3 billion an increase of 199 5 million.

<unk> Q1, 'twenty one the impact of the change in exchange rates was negative one 4%, but the dollar stronger against currency and nearly all of our international markets.

Net divestitures were negative 30 basis points.

Organic net revenue increased 11, 5% and.

At the bottom of this slide we break out revenue for the three new segments.

Our immediate data engagement solution segment.

<unk>, 5%.

As you can see on this slide this segment is comprised of IPG media brands axiom connect and our digital commerce specialist that you can see which include MRM RGA in each.

Strong growth in Q1 across the segment.

Our integrated advertising and creatively led solutions segment.

11, 2%.

This segment is comprised of Mccann <unk> nano group FCB and our domestic integrated agencies.

Strong growth at all of our global networks.

And our specialized communications and exponential foolishness segment organic growth was 12, 5%.

This segment is comprised of Ipg's extra extra house.

Becker Cowen Jack Morton momentum and octagon.

We had strong Q1 growth across all of our major disciplines.

We were led by events and sports and entertainment continuing an unmistakable recovery from the impact of the pandemic.

So for the year organic growth of our Jack Morton momentum in optical agencies is now positive from the pre pandemic level of Q1 2019.

Moving on to slide five our organic revenue growth by region.

In the U S, which was 66% of net revenue in the quarter, our organic increase was 12, 2%.

We exhibited strong broad.

Broad based growth across segments agencies and client sectors.

International markets, where 34% of our net revenue in the quarter and increased 10, 2% organically. We grew in every international region.

Continental Europe grew nine 4% and is worth noting that thats on top of 12, 4% a year ago.

The increase in nearly every national market, including our largest markets.

Germany, Spain, and Italy, there was no noticeable drop off in the quarter and our smaller eastern European markets.

The U K increased one 5% organically with very strong increases in the exponential media amtech disciplines and at Mccann, but those were largely offset by client specific actions elsewhere in the portfolio.

Asia Pac grew nine 2% organically.

By growth across our largest markets of Australia, India, and Japan, Singapore was flat and China decreased.

Organic growth in Latam with 21, 5% with strong results across all disciplines. This was notably so in our digital specialist agencies and media in our MD&A segment and our global networks.

C segment.

Our other markets group, which is Canada, the middle Eastern Africa grew 19, 9% with strong growth.

Jim.

Moving on to slide six and operating expenses in the quarter.

Our net operating expenses, which exclude <unk>.

The amortization of acquired intangibles and the restructuring adjustment increased 10, 9% from a year ago and the growth of net revenue of nine 8%. The result with margin of 12, 3% compared to 13, 1% a year ago.

First quarter result is a significant increase from 2019 and 2020, when our first quarter margins from approximately 5%.

Our fully adjusted EBITDA margins by segment in the quarter or 10, 9% in MD&A 14, 2%.

And 16, 8% in FCB. These margins are an appendix on slide 17.

In General do you expect each segment margin have quarterly seasonality similar to that of our consolidated results over time.

<unk> showing the stronger seasonality over the course of the year.

As you can see on this slide our ratio of total salaries and related expense as a percentage of net revenue was 72%.

Thank you and all of these ratios are again, it's our smallest quarterly revenue base of the year.

Underneath the Srs results due to leverage on our expense for base payroll benefits and tax due to aggressive hiring over the course of the past year that was necessary to support our 14, 3% organic growth over the trailing 12 months.

Our expense for performance based employee incentive comp with equal to last year. It's in dollar term and therefore lower as a percent of net revenue, 4% this year compared to four 3% a year ago.

Severance expense was 50 basis points of net revenue compared with 30 basis points a year ago.

Temporary labor expense was four 8% of revenue compared with four 6% in Q1 'twenty one.

At quarter end total worldwide head count increased by 11% from a year ago to 56800 to support our growth.

Also on this slide our office and other direct expense was 14, 5% of net revenue compared to 14, 4% a year ago.

Underneath that we continue to leverage our expense for occupancy, which was five 1% of net revenues an improvement of 50 basis points from Q1 'twenty one.

All other <unk> versus nine 4% of net revenue compared with eight 8% a year ago due to the return of certain variable expenses, such as our investment in travel employment.

And service costs as a result of the increased level of business activity.

Our SG&A expense was <unk>, 9% net revenue a decrease of 50 basis points from the prior year.

On slide seven we present detail on adjustments to our reported first quarter results in order to provide better transparency and a picture of contract performance.

This begins on the left hand side with our reported results and steps through to adjusted EBITDA and our adjusted diluted EPS.

Our expense for the amortization of acquired intangibles and the second column with $21 3 million.

The restructuring charges were $6 6 million, which is small estimate adjustments related to our 2020 restructuring program.

Operating expenses in column four we had a pre tax loss in the quarter of $6 4 million and other expenses due to the disposition of a few small non strategic businesses.

That's a part of the slide you can see the after tax impact per diluted share of each of these adjustments.

Which bridges, our diluted EPS as reported at 40.

Adjusted earnings of 47 per diluted share.

On slide eight we turn to cash flow in the quarter.

Cash used in operations was 6600, $33 6 million compared with $249 8 million a year ago.

As a reminder, our operating cash flow is highly seasonal we typically generate significant cash from working capital in the fourth quarter and use cash in the first quarter.

During this year's first quarter cash used in working capital was $865 million and filed our fourth quarter of last year, when we generated over $1 billion from working capital.

<unk> II is a $194 million of cash generated from working capital, which is squarely in the range of our recent history.

And our investing activities.

$98 8 million, mainly for Capex in the quarter.

Our financing activities in the quarter were $210 1 million, primarily for our common stock dividend share repurchases and taxes withheld on shares and our performance based incentive compensation.

Our net decrease in cash for the quarter with $867 5 million.

Slide nine is the current portion of our balance sheet. We ended the quarter with $2 4 billion of cash and equivalents compared with $2 2 billion a year ago.

Slide 10 depicts the maturity of our outstanding debt.

As you can see on this schedule total debt at quarter end was $3 billion.

Our next maturity is April 2024 for only $250 million thereafter, our next maturity is not until 2028.

In summary on slide 11, our teams continue to execute at a high level and have us well positioned to deliver on our expectations for the year.

I'd like to reiterate our pride in and gratitude for the efforts of our people.

Strength of our balance sheet liquidity means that we remain well positioned both financially and commercially and with that I'll turn it back to Felicia.

Thank you.

As Alan just said our work and our people continue to set the standard for the industry. So I would also like to again thank.

Approximately 57000 colleagues around the world.

Contribute to our clients' growth and the continued evolution of our business.

Collectively we're implementing our strategic vision, which is to integrate brand experiences across consumer touch points.

By combining award winning creativity with best in class technology and data infrastructure.

That commitment is translated into new client engagements expanded relationships with our existing partners and programs that deliver significant growth outcomes for our clients as well as for our own business.

Turning now to specific highlights.

At the agency level in the quarter.

At our media data and engagement solutions segment.

We continued to see strong growth.

U M. One grubhub and you go in the quarter.

RGA continued to perform well in new business with a notable win when it was named AOR for the XFL Pro Football League and.

And the agency also earned a top position on AD Age's 2022, a list.

New client wins were strong across axiom connects a matter of time and all three of those organizations work together with <unk> to provide a behavioral science led solution for the Grubhub when I mentioned a minute ago.

During the quarter axiom extended California, consumer privacy act rates to all U S residents.

In the absence of a national U S privacy law.

We believe this is a meaningful step because it's clearly responsive individual consumers increasingly want more access to and control of their personal data.

Sure.

It's fair to say this move is aligned with itg's commitment to going above and beyond what's required by law.

And this allows us to ensure we can support our clients business needs with the best data.

Tools and advice and do so by leading the way in the ethical use of data.

In addition, we launched the axiom partner marketplace is a comprehensive offering of leading industry specific data under one roof.

The axiom partner marketplace complements our best in class and foundational info based data.

And it gives marketers greater access to actionable and precise people based data.

Across a range of use cases and touch points on the consumer journey.

And this is particularly important at a time when the ecosystem faces severe disruption due to proxy deprecation.

At the end of the quarter <unk> also launched its outcome navigator.

Which is a suite of performance based services that drive specific business outcomes for brands and this puts connect those matter kind unit in line to capture more performance based marketing budgets.

During the quarter MRM expanded its commerce consulting service and health.

Forming a strategic partnership with Salesforce sales cloud.

So allows us to deliver enterprise level solutions at scale for the insurance pharmaceutical and medical device sectors.

Looking now at our integrated advertising and creativity led solutions segment.

IPG help continues its very strong performance with clients.

In new business and within the industry.

At the recent <unk>.

Manny Awards were met avenues honors the best in pharmaceutical and healthcare advertising IPG helped took home nearly 60% of the awards given.

The agencies within the network one across many categories, including most creative agency most admired agency.

Advertising agency of the year and Additionally, IPG health was named network of the year.

Elsewhere at IAC.

Following a highly competitive review Mullen Lowe was named as creative agency of record by KFC.

And some of that new positioning and work will be in market shortly.

<unk> was also named U S agency of record by buyer for their lead brand, which further builds on our relationship with a valued existing client.

Media hub continued to show very well, winning new clients top golf Entertainment post consumer brands, and Picasso, which is a technology based real estate marketplace.

At FCB, we promoted a dynamic new team to lead the network.

And we've seen a very smooth transition so they've hit the ground running with a focus on building new business opportunities. They are fueled by the agencies exceptional creative reputation.

During the quarter FCB was named one of the 10, most innovative advertising agencies of 2022 by fast company and they also featured an adage is prestigious 2022 a list.

Now during the quarter FCB, when new assignments from Hershey's and Kellogg's in North America.

And Mccann.

Q1 saw the network win velocity global distributed.

Workplace platform hands grow out of the UK and club Med Canada.

World Group also continued to win organic assignments across its global client roster.

At the end the awards the first major Creative award show of the season, not only with IPG named the most awarded holding company that Mccann was named the most awarded global network.

Also worth noting that FCB and Mccann, we're ranked number one and two respectively and act responsible good report.

<unk> identifies the global networks doing the most powerful and effective cause related work in our industry.

And we see this as a clear reflection of the degree to which ipg's commitment to ESG directly manifest in the work that we create.

Reflecting an increase in the number of global in person events as we enter a post pandemic world.

Our specialist communications and experiential solutions segment saw strong growth during the quarter.

The extra health posted a number of wins, we're Weber shandwick Golin and Jack Morton came together to help companies in the biotech and pharma sector defined protect and enhance their reputations.

Also during the quarter Grubhub selected Golan to handle its consumer PR work.

And Napa auto parts named Goldman as its first ever PR agency.

At the 2022, PR week U S Awards, which celebrate the industry's best public relations work.

Current global degrees degrees global excuse me.

Weber Shandwick, the Martin Agency and Mullen group combined to win 11 awards, which was more than any other holding company.

RNC Pmk continued to spearhead global campaigns across the entertainment industry, including the launch of Apple Tvs. They call me Magic campaign.

And octagon secured a multiyear agreement can manage event programming for Toyota.

To activate the company's Olympic partnership as a lead sponsor.

As a result, octagon will develop and produce.

<unk> full range of activity related to the 2024 games in Paris.

Now as we know the pandemic disrupted pretty much every facet of human interactions.

And for brands it appended, how they seek to engage with audiences in live performance.

As real world events have become to rebound marketers are seeing that our hybrid component to events.

There is a path to reach larger new audiences and also to improve and deepen engagement.

And Thats why IPG recently announced that we are bolstering our capabilities in the hybrid and digital event space by acquiring a significant stake in the famous group.

As an award winning fan experience technology company.

Which creates connected immersive augmented and mixed reality experiences to enhance the reach and impact of live events.

The capabilities at famous group demonstrate what we're working to develop across all of our agencies, which is proprietary technology skills and IP.

That can help our agencies build deeper connections to our data resources and capabilities.

As well as the path to higher order consulting engagements with our clients.

In assessing the overall IPG portfolio, we believe that we are fully provisioned and well positioned for the future.

Without notable gaps in our offering.

That said, we will continue to look closely at strategic options to bolster our capabilities through targeted M&A.

Especially opportunities that further our technology capabilities and bring proprietary tools our platform skill sets into the company.

On prior calls you'll recall that we've identified marketing technology and business transformation consulting as key areas of focus for us going forward.

As we see these as areas that can help us build on our technology layer and further accelerate our evolution.

Higher valued partnerships with our clients.

Staying at the holding company level.

We've long been clear there for IPG.

<unk> commitment to ESG as a key strategic priority.

This includes activity in five key pillars.

Diversity equity and inclusion.

Staying ability.

Human capital.

Data privacy.

And media responsibility.

As such we are.

Proud that earlier this week.

Forbes released its list of the best employers for diversity 2022.

And interpublic is not only the highest ranked company in our industry. We are the number five among.

Among all U S companies with more than 1000 employees.

This prestigious recognition, which was determined by Forbes in cities.

Leading statistics portal.

They spoke to over 60000 U S employees from across a range of large businesses, serving them asking them to provide direct experience and opinions about each company in the rankings.

We're very proud of this ranking and yet we know there is still a great deal of work to do in this space.

And we're committed to doing more to become a fair and more representative workspace.

As we continue to navigate a very competitive talent market I think it was also gratifying to see a number of our agencies standout as employers of choice.

IPG health reprise revive health and AUM were recently named among AD age as best places to work of 2022.

Yes.

Stepping back now I think that overall, we're very pleased with the quarterly results. They represent a strong start to 2022.

Both the tone of the business as well as our net new business remain positive.

And as stated earlier on the call, we feel comfortable increasing our outlook for the year to approximately 6% organic growth along with our expectation for adjusted EBITDA margin.

Of 16, 6%.

That's not to say, we don't acknowledge the ongoing uncertainty that continues to exist.

Across multiple dimensions.

But.

In the case should it be the case that some of that were to begin to materialize. It is important to note. We have a flexible cost model, which as we've consistently demonstrated over many years can be an important lever not only for improving margins in times of growth.

But also against downturns and the macro business environment.

Another key area for value creation remains our strong balance sheet and liquidity.

Our ongoing commitment to capital returns has been clearly underscored by both our recent dividend increase as well as the resumption of share repurchases, which you saw in quarter.

And our teams remain highly focused on delivering.

As our company continues.

To provide higher order businesses solutions to clients, which can help them drive growth across a range of marketing activities and economic conditions.

So I'll just close by thanking our partners our people.

And those of you on the call for your continued support.

And at this point I think we should open the floor to questions.

Thank you at this time, if anyone would like to ask a question. Please ensure that your phone is on muted press star one and record your name clearly when prompted.

If you would need to withdraw your question Press Star two again to ask a question. Please press star one.

One moment for the first question.

Our first question is from Jason Bazinet with Citi. You May go ahead.

Thank you for the new reporting segments I guess over the last three years, it's pretty clear that the MD&A grew faster than ANC, which in turn grew faster than SG&A.

But we didn't see that in.

In the first quarter.

And I was just wondering if you could provide a little commentary is that a function of sort of inflation sort of rising lifting all boats is it somewhat a function of the comps.

When do you think the sort of that three year track record.

From 19% to 21.

With your larger segment growing more quickly sort of reassert itself.

Jason.

Look I think quarter to quarter, there is a lot of.

Sort of volatility at any given point in time, so you're going to have the impact in the case of MD&A in Q1.

There was a very sharp ramp in head count to keep up with growth that we saw last year.

I think looking at anything on a quarter to quarter basis. There can obviously be a client win or not something we clearly look forward to but the opposite.

So I think that the macro trend is definitely the one that you want to focus on so whether thats.

On annual or clearly a multiyear trend.

Thank you.

You are right to assume that youre going to see.

Higher growth in certain.

Segments.

Youre, obviously going to see that the segments that have kind of embedded tech and data I think we also believe represent.

And opportunity from from a margin perspective.

But then I think what is heartening as well is you've heard us talk a lot about both how we go to market as it is an.

Great Company and so what's interesting is the segments reflect.

There's been such acceleration and there is really the need to manage these businesses in a way that's consistent with kind of the underlying dynamics of each segment, but when we go to market with a client we bring all of this together and so what I think that when you've heard us talk about the fact that for example, the axiom.

Offering is increasingly helping to power through behavioral science.

The way in which some of the.

Advertising agencies go to clients with audience led solutions and insights that actually informed the creative work. So we think it will help.

Increased growth and it'll definitely as we incorporate more of that and more of the accountable solutions into the rest of the portfolio there is upside.

On on both it will help fuel growth elsewhere, and I think we definitely see opportunity on the margin side.

Consistent with what Youre seeing there so I can't I can't tell you that on a quarter to quarter basis, the ins and outs or to your point there are comps at play.

What we would refer to as segment three on the on the <unk> segment.

Clearly that's a segment that that got me.

Meaningfully impacted by the pandemic, so 'twenty to 'twenty, one was improvement 'twenty one to 'twenty two is improvement and we have underlying <unk>.

<unk> assets there, but there is also a benefit to the comp in that segment. So I think it's a fair question, but.

Okay Super helpful. Thank you.

Yeah no worries. Thank you.

Thank you. The next question is from David Karnofsky with Jpmorgan you May go ahead.

David Hi, Thank you.

We've heard from a number of your peers. These past few weeks, who have said they arent seeing clients materially adjust budgets, even while some supply chain pressure or have real concern over macro or inflation. So im wondering if youre hearing the same and then what do you think is driving that dynamic did marketers simply anticipate some of this to start to the year.

Are there competitive pressures that are keeping budgets and spend steady.

Well I mean, I think I think there are a lot of moving parts. So as we shared with you. We've recently come through a process thats pretty much when we go through every year, but we spend time with.

All of our operators.

And we've spent time with clients and our sense is that is that the tone of the business remains positive.

The moving parts component to it is.

I think.

We've talked about the fact that the pandemic itself.

There was that initial three to six months, which clearly had an impact but then clients began to find their footing and then they started to really lean into digital channels and we started to see much more active discussions around implementing E com going through their own business transformation journeys. So I think as we've seen subsequent waves of.

The pandemic itself, they've really been less and less disruptive to marketing activity right.

So you look at our trailing 12 month growth in the 14% to 15% range.

You look at for US the Magna forecast for 'twenty, two and that's directional.

As you know it speaks to an adjacent industry, which at least.

Reflect client investment the way, we traded media it's not.

Clearly a much more consultative in our approach to media, but all of those things say to you that that the environment.

For the moment with the caveat that there are some uncertainties out there.

It's still very active and then you get to what you said which is that.

I think.

Clients don't want to.

Step out of complex process. So if you've got a client who has a 360 campaign where they are.

Integrated in their approach and they are thinking about all of the ways in which along the consumer journey I'm going to need to understand who you are as an audience figure out where and how to intersect with you too.

Pull out of that it's not something that you can necessarily easily restart.

The larger national multinational clients.

I think that that means that there continues to be commitment.

There is concern to your point that if you pull back.

You see ground and so if that means somebody else jumps to line and gets into that conversation or if that means that you're going to lose share.

At a time when obviously you want to.

In essence use the leverage that your brand and your position in the marketplace provide to you to take price to offset some of these.

These pressures that you're feeling that every business is feeling so I can't tell you and again, we've got a very very broad portfolio of clients. So so the specifics of client category and geography.

Marketing mix or different each time out but at the moment, we are definitely seeing that commitment to stay invested hold.

Alright, Great and then Alan.

Maybe one for you I think generally in the past you've noted organic growth as a driver of higher margins over time and you did leave your margin outlook. The same while raising organic and I just want to better understand the dynamic there and save costs or potentially coming in different than you had expected when you last guided or whether there's other factors we should consider thanks.

Sure. Thank you for the question.

As Blake mentioned, we just finished a bottoms up process of meeting with all the operators.

So our outlook reflects that both on the revised up in growth and to maintain the margin and a 16, 6% margin. If you look at the progress we've made over the last several years is pretty substantial.

We think will be a great result, as we said earlier this year, there's just a lot of ins and outs coming out of the period of time that we just yet.

Alright, thank you.

Thank you.

Thank you. The next question is from Tim Nolan with Macquarie You May go ahead.

Great Hi, thanks very much.

There is a number that I just can't help but comparing which is that your revenue growth was probably for the first time ever are much higher than facebooks.

Which reported last night.

Yes.

After the last two.

I know that visits are clearly different and I know the Facebook issue clearly has quite a bit to do with Apple.

Just wondering if you could give a bit more color on.

Your optimism for the second half in general for the agency business reflected in your upgraded.

Target for the full year.

With some of these larger tech companies and issues that they face is it just about the Apple changes that are coming through are there other things that are going on in there as well.

I mean, that's a.

Such a broad based question in that and then I'm not sure that.

An opinion about what might or might not be impacting all of them. So.

Could it be what we've seen with iOS absolutely.

Could it be.

Dawning that youre seeing consumers more focused on I talked a bit about what we've done at axiom with extending CPA too.

We believe that in the long term.

The idea that you invest behind having the benefit of of data the precision that it gives you the ability to be.

Kind of much more accountable to what that investment is yielding and yet to do it in a way that is much more sort of future proof and built for a world in which.

You are not necessarily assuming this extremely asymmetrical relationship between the platform and the individual consumer so I mean, it could be that it could be.

That they're dealing with.

No.

Clients for whom brand safety and the responsible deployment of media is an issue I mean, it could clearly be that theres, probably some share shift going on over there in.

And you've definitely got at least one or two I mean tictoc is is clearly.

Showing up and making a really big impact.

And then you've got some nascent categories.

No.

Be it.

Sports betting be it a crypto that I think R.

Our looking at the space with a much cleaner.

With fewer preconceived notions so they might be much more democratic and their use of digital media right. So that's the question that I think you were asking at least in part the question about us and the agency space I think.

It's the same thesis that we've had for some time right. So the thesis has been the complexity is going to continue to increase so the ways in which fragmentation is both potentially.

There's a challenge there is a market or there is also an opportunity there.

As a marketer.

Then there is the.

Get more digital in the way in which you engage so.

Put more.

<unk> thought and then ultimately invest more money behind those kinds of channels.

And then and then ultimately.

Kind of build one to one connections and relationships.

With individuals and you do that with.

Kind of the right both.

Marketing technology suite and skill sets and then.

Definitively where the right data infrastructure, so we see that all of what's going on.

In the space that you noted is being.

At least I don't know if theyre being disrupted they're clearly going through some changes we see that as continued opportunity because clearly marketers are saying, okay. What do we do about that what are the implications of that how do we make sure we're making the right decisions.

We're well positioned to help them.

As their advisor as a consultant who shows up and is able to to help them with those kinds of opportunities and challenges.

Yes that answers it perfectly thanks Felipe.

No.

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

Thank you. The next question is from Dan Salmon with BMO capital markets. You May go ahead.

Great.

Good morning, Dan.

Thanks for taking my questions I hope.

Interesting answering that one too so.

Felipe.

It feels like we are hearing a little bit more I guess similar theme across the industry about developing solutions that reach more small and mid size businesses, maybe that goes a little bit hand in hand, with more focus on data and technology and platforms and things that are naturally a little bit more scalable so.

Maybe asking the question. This way do you expect the holding companies and obviously IPG specifically do you expect the number of clients to grow significantly over time.

Brickley.

Thousands of clients with the sort of top 200 top 300 accounting for the majority of revenue do you see tens to hundreds of thousands of clients any thoughts on that would be great.

And then Allen Thank you inventory both for the comments on the macro.

Lots of talk about that.

I think the reality Cmo's often do sits downstream from those decisions since due to the agencies. So my question is.

Do you engage with your agency CFO was a little differently at times like this so I'd like to check in more often.

Is there like a def con level that gets raised during periods like this so maybe let us know what goes on inside of the organization to help check on these things.

So.

The initial question is a great question and I think to my mind.

It's definitely a place I would like to see US go I mean, I think it's I think it is factored into the planning and the thinking around here because.

As you say the client universe that has been able to.

Work with us.

<unk> has been significant but ultimately reached limits.

And as we build more.

Services that have it.

Technology layer or component.

Capabilities that you can in essence plug in off the shelf whether thats.

Dashboards whether thats.

Kind of IP that you can license from us. So that you can then do a certain kind of analytic work or certain kind of.

Segmentation work or put data to work in and mid sized businesses. That's definitely a place we want to go I.

I don't know that I can tell you that we've sort that out to the point, where it'll go from our current 5000 clients too.

Two times that or three times that I think I think it's.

Sort of too early to.

It's sort of premature to put that out there, but I think that.

What you suggest about how these capabilities and the way. These capabilities are delivered do mean that we can.

Sort of think about an addressable market and think about our.

Middle market of clients with whom we can engage is absolutely consistent with with kind of our thinking.

And then I'll pass things over to Alan for the interesting question on the on the CFO side of things yes.

So our financial community, yes, cfos, but it's broader than that tail and.

It's really a team sport if I can use that.

And nowadays and its not different now absolutely earliest to talk and communicate to stay very close to our operators to make sure that we are very close to what's happening in the business and on the clients.

It's continuous and this year is no different than the previous years.

Just the way we do things.

We're constantly speaking.

Get together as a community regularly.

Share ideas best practices and information.

Okay.

Business as usual, but I'm sure that you are bit more interesting conversation. So thank you Bob.

Thank you.

Thank you and our final question is from Michael Nathanson with Moffett Nathanson you May go ahead.

Thanks.

So I would try to ask you the question that.

It takes all of the previous questions together.

Yep.

Do you think.

Commentary about digital advertising, which is mostly SMB and ecommerce and here's where the weaknesses do you think this environment.

Is favoring multinational companies larger companies, which is the backbone of your business.

Maybe small enterprises or anything that you've thought of in terms of size operation ability to pass on.

Costs.

Power with distributors. So that's one second.

Second for you Alan if the dollar keeps weakening I've always thought that your U S operations have higher margins.

Cash operations I don't know, if that's true or not that's our assumption.

Weaker.

I'll keep strengthening won't there be a natural flattering our margins just simply from translation purposes. So those are my questions. Thanks.

Alright.

That's a question that I'm trying to sort of pull it apart as it because to your point it pulls in so much of what we've been talking about earlier, so I think larger clients clearly have a number of benefits so to your point.

The complexity of the work they do the fact that they've got the full range of capabilities at their disposal.

And then the fact that.

If they've invested in and many of them are further along that curve than others.

To the extent that they are.

Thinking about and working to work to sort of incorporate more of the.

Digital channels that intersect with consumers.

The digital channels are the sort of.

Way to do data to see whether thats in the E comm space or whether thats through AD Tech. So clearly I do think that youre right that at this point.

They do have an advantage.

<unk>.

It's difficult for me to say whether or not.

I don't think I don't think it disqualifies I mean, we see a lot of.

Well funded sophisticated data see companies that are young companies coming into market and they're looking to us for services once they get to a certain point in their maturation process, but it's still fairly early on for them.

Right.

And then when I think about health care, which as you know is a big part of our mix and.

And a really what we continue to see as a very robust area with some real promise.

We work with the majors, we work with the vast majority of the really large players in that space.

But we're also we're also bringing a lot of.

A biotech companies into the fold right.

When we when we're looking for for a balanced mix. So I would I would say, yes. What you say definitely holds true do we have a perfect lens to that no because our client roster does skew pretty heavily to the folks that you pointed out likely are advantaged.

But they are definitely they are definitely a lot of new entrants into the space who show up.

With a pretty sophisticated view and the ability to take onboard a pretty broad range of our services.

And put them to use.

Okay.

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

Okay, So I have that wrong.

And I understand that I guess, yes, we are at the hour.

Well look again, we appreciate the time, we appreciate the continued support we will.

Get back to it I don't know if I can do perfection.

Again, even anytime in the next week, but thanks for that.

As I said look the focus on execution here is.

It is very clear and as always we'll keep you posted and we look forward to our next conversation.

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