Q1 2023 Interpublic Group of Companies Inc Earnings Call
It's a portion at that time, if you would like to ask a question you May press star one.
Speaker 8: Also on this slide. Our office and other direct expense was 15% of net revenue compared with 14% in Q1 twenty-two.
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, and welcome to the Interpublic Group first quarter of 2023 conference calls 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.
Speaker 9: And unineath that, we continue to leverage our expense for occupancies, which was 5% of net revenue.
Good morning, Thank you for joining us.
Speaker 8: Compared with 5% a year ago.
This morning, we are joined by our CEO colleague Kurkowski and by Ellen Johnson, our CFO.
Speaker 8: All other office and other direct expense with 10% of net revenue compared with 9% in Q1 and 22, which reflects the return of certain variable expenses, most notably higher TV and meeting compared to a year ago.
This conference is being recorded if you have any objections you may disconnect. At this time I would now like to introduce Mister Jerry lush knee senior Vice President of Investor Relations. Sir you may begin.
We have posted our earnings release, and our slide presentation on our website Interpublic Dot com.
We will begin our call with prepared remarks to be followed by Q&A.
We plan to conclude before market open at 930 eastern.
Speaker 9: Our sgna expense with 60 basis points of net revenue, a decrease of certain basis points from a year go.
Good morning, Thank you for joining us.
This morning, we are joined by our CEO Covid Krakowski and by Alan Johnson R. C F.
During this call we will refer to forward looking statements about our company.
Speaker 8: On Slide 7, we present details on adjustments to our reported firstth quarter results in order to provide better transparency and a picture of comparable performance.
These are subject to the uncertainties in the cautionary statement that is included in our earnings release and the slide presentation.
We have posted our earnings release and our slide presentation on our website, it's Republic Dot com.
We will begin our call with prepared remarks to be followed by Q&A.
These are further detailed in our 10-Q and other filings with the SEC.
Speaker 8: This begins on the left-hand side with our reported results and steps through to adjusted ebitta and our adjusted delivered EPS.
We plan to conclude before market open at 930 eastern.
We will also refer to certain non-GAAP measures.
During this call we will refer to forward looking statements about our company.
Speaker 8: Our expense for the amortization of acquired intangibles in the second column was 20.9 million.
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.
These are subject to the uncertainties in the cautionary statement that is included in our earnings release and the slide presentation.
Speaker 8: The restructuring charges were one point six million, which were small adjustments in the quarter related to previous restructuring taxes.
These are further details and our 10-Q and other filings with the SEC shake.
At this point it is my pleasure to turn things over to quick housekeeping.
Speaker 9: Below operating expenses. In coln four we had a pretaxt loss in the quarter of four point million. In other expenses.
We will also refer to certain non-GAAP measures.
Thank you Jerry and good morning.
As usual I'll begin our call with an overview of our performance in the quarter.
We believe that these measures provide useful supplemental data that while not a substitute for GAAP measures.
Speaker 8: D to the disposition a W small nonstrategic businesses.
Allan will then provide additional details and I'll conclude with update on highlights at our agencies.
Allow for greater transparency in the review of our financial and operational performance.
Speaker 8: At the foot of the slide we present the aptrtax impact for diluted share of each of these adjustments.
Followed by your Q&A.
Let's start at the top of the revenue.
At this point it is my pleasure to turn things over to you quick housekeeping.
Speaker 8: Which bridges our diluted EPS, as reported, at 33 cent.
The organic change of our revenue before billable expenses was a decrease of 20 basis points.
Thank you Gerry and good morning.
Speaker 9: To adjusted earnings of 38 cents per diluted channel.
[noise] usual I'll be get our call with an overview of our performance in the quarter.
Against last year's very strong first quarter organic growth of 11, 5%.
Speaker 9: On Slide eight we turn to cash flow in the quarter.
Ellen will then provide additional details.
That performance is consistent with our internal forecast not only for IPG as a whole, but across our operating segments and at the individual agency level.
And I'll conclude with updates on highlights at our agencies.
Speaker 9: Cash used in operations was 547.6 million, compared with 633.6 million a year ago.
Followed by your Q&A.
The start at the top of the revenue.
The organic change of our revenue before available expenses was a decrease of 20 basis points.
Back in February we'd called out for you the puts and takes specific to our diverse portfolio of services.
Speaker 9: As a reminder, our operating cash flow is highly seasonile. We typically generate significant cash from working capital in the fourth quarter and used cash in the first quarter.
[noise] against last year's very strong first quarter organic growth of 11.5%.
Within client sectors, which would be impacting our results during the first half of this year.
That performance is consistent with our internal forecast.
Speaker 11: During this year's first quarter, our working capital useth with 695 million, and that follows our fourth quarter of last year when we generated 851 million from working capital.
So it's fair to say the year is tracking as we expected.
Not only for I P G as a whole, but across our operating segments and at the individual agency level.
In keeping with our typical calendar, we recently refreshed our outlook with our operators and we remain comfortable at the midpoint of the growth range. We shared with you on our February call, which is 2% to 4% organic revenue growth for the full year.
Back in February we called out for you the puts and takes specific who are diverse portfolio of services and within client sectors, which would be impacting our results. During the first half of this year.
Speaker 8: The net of the two is 156 million of cash generated from working capital, which is squarely in the range for our recent history.
Speaker 8: It's worth noting that cash from operations for working capital changes is 148 million in the quarter.
Specifically during the first quarter the services in sectors that have led our substantial multiyear growth.
So it's fair to say the ears tracking as we expected.
In keeping with our typical calendar, we recently refresh our outlook with our operators.
Notably media and healthcare.
Speaker 8: In our investing activities need thirty four point seven.
Continued to perform strongly.
Speaker 9: In the quarter, mainly for capx.
And we remain comfortable at the mid point of the growth range. We shared with you on our February call, which is 2% to 4% organic revenue growth for the full year.
Our experiential and public relations businesses also continued their growth into the new year.
Speaker 8: Our financing activities in the quarter used 274.3 million primarily for our common stock dividend, share repurchases and taxes withheld in our performance based incentive compensation.
Also worth calling out that we've continued to win some of the largest competitive new account opportunities in markets. So far this year.
Specifically during the first quarter.
Services in sectors that have led are substantial multiyear growth.
These wins encompass a diverse set of client sectors, including financial services.
Speaker 8: Our net decrease in cash for the quarter is 866.3 million, which is comparable with the first quarter of a year now.
Notably media and health care.
Continued to perform strongly.
Pharma and autos.
Our experiential and public relations businesses also continued their growth into the new year.
And as they come on stream they will build on the large client win in the retail sector, which closed out last year.
Speaker 9: bide nine is the current portion of our balance sheet.
Also worth calling out that we've continued to win some of the largest competitive new account opportunities in market. So far this year.
Speaker 9: We ended the quarter with one point six eight zero zero zero zero zero zero zero zero zero zero zero zero zero two billion of counts equivalbent.
Taken together and given the advanced client briefs increasingly in play.
Speaker 9: suly 10 depicts the maturities of our housestanding debt. As you can see on this schedule, total debt at quarter end with two point nine billion. Our next maturity is April two 24, but only two hundred and fifty million thereafter. Our next maturity is not until 2020 eight.
New account activity further demonstrates our role in the business transformation agenda of the world's most sophisticated marketers.
These wins encompass diverse set of clients sectors, including financial services.
Farmer and autos.
As we've called out in recent conversations with you.
And as they come on stream they'll build on the large client when in the retail sector, which closed out last year.
Performance of our digital specialist agencies continued to weigh on growth in the first quarter.
Taken together and given the advanced client briefs increasingly and play.
Speaker 9: In summary, on Slide 11, our teams are focused on executing at a high level and importantly, we're on track to deliver on our expectations for the year.
Transformation underway at those businesses does continue to progress and we will begin to cycle the revenue decreases in our third quarter.
New account activity further demonstrates a roar and.
The business transformation agendas of the world's most sophisticated marketers.
Speaker 9: I would like to express our pride in in gratitude for the efforts of our people.
You'll also recall that in our most recent call.
As we've called out in recent conversations with Ya.
We underscored the evolving impact of a more challenging environment specific to the technology sector, which is one of our largest client sectors.
Speaker 9: The 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 the leap.
Performance of our digital specialist agencies continue to weigh on growth in the first quarter.
Transformation underway at those businesses does continue to progress and we will begin to cycle their revenue decreases in our third quarter.
We've all seen it in the headlines.
Speaker 12: Thanks V ly. The results we're reporting today, as you heard, are in line with what we forecast coming into the year for the first quarter.
Most prominently with respect to employment.
In technology.
That austerity in cost focus did continue to weigh on our revenue results in the first quarter.
You'll also recall that in our most recent call.
Speaker 5: And consistent with the phasing of our full year plans.
We underscore the evolving impact a more challenging environment specific to the technology sector, which is one of our largest client sectors.
Speaker 13: That's Ted.
Notwithstanding that impact.
Speaker 4: Our top line performance in the quarter is not in keeping with our long-term track record or the growth we're collectively striving to achieve.
And a macro that since the beginning of Q4 of last year has been somewhat more cautious.
We've all seen it in the headlines.
It is notable that six of our eight client sectors grew in the quarter.
Speaker 4: As mentioned earlier, during the quarter we won several of the highest profile and largest reviews in the industry, and these wins encompass a diverse set of client sectors and demonstrate our key role in the business transformation journey of marketers in a number of sectors across the economy.
In technology.
On top of very strong performance a year ago.
That austerity and cost focus did continued away on a revenue results in the first quarter.
We were led by growth in our other sector of diversified industrials and government clients.
That'd be standing that impact.
With growth in consumer goods.
And a macro that since the beginning of Q4 of last year has been somewhat more cautious.
Services autos.
Autos health.
Healthcare and food and beverage.
Speaker 4: It will also increasingly benefit our growth as we move further into the year.
As discussed our tech and telecom sector decreased in the quarter.
On top of very strong performance a year ago.
Speaker 5: We continue to invest in our emerging technology capabilities.
As did to a much lesser degree retail.
We were led by growth in our other sector of diversified industrials and government clients.
Both were comping against double digit gains a year ago.
Speaker 5: As well as expertise across the group and with external partners.
Regionally the U S decreased 90 basis points organically in the quarter.
Speaker 5: With a focus on areas including web three and artificial intelligence.
With growth in consumer good finish.
Financial services.
Those.
And this is largely the result of agency and sector specific challenges that we have.
Health care and food and beverage.
Speaker 4: We also recently launched a pilot program during the quarter with dwa, ve Quantum computing pioneer that build advertising optimization equations.
As discussed our tech and telecom sector decrease in the quarter.
Just called out.
And came against 12% growth in Q1 of 2022.
As did to a much lesser degree retail.
Speaker 4: Bed on our existing data sets.
Our international markets grew one 2% organically.
Both were comping against double digit gains a year ago.
Speaker 5: Focusing first on an engagement with one of our top 20 clients.
On top of 10% growth a year ago.
Regionally the U S decreased 90 basis points organically in the quarter.
Speaker 4: When it comes to AI and machine learning, IPG has been investing in this area for some time.
In terms of our segments.
Each was cycling double digit growth a year ago our.
And this is largely the result of agency and sector specific challenges we've.
Speaker 4: Where prze media our network is. Specializes in search, marketing and retail media marketplaces.
Our media data and engagement solutions segment decreased 70 basis points organically in the quarter.
Just called out.
And came against 12% growth in Q1 of 2022.
Speaker 4: funboarded a Chief AI Officer over two years ago.
Strong growth in our media offerings.
Or international markets grew 1.2 per cent organically.
Offset by the underperformance at the digital specialty agencies.
Speaker 4: Just as M, we've adding a global Head of AI and behavioral sciences.
On top of 10 per cent growth a year ago.
Our segment of integrated advertising and creativity led solutions decreased 90 basis points organically.
In terms of our segments.
Speaker 4: Acxiom has also been a long-time user of AI in their data analytics practice to improve how companies reach consumers.
Each with cycling double digit growth a year ago or.
And there we were again outpaced.
Our media data and engagement solutions segment.
Excuse me paced by growth at IPG health.
Speaker 4: All three of these entities fit on our AI steering committee, which recently launched a number of incubators and Labs that leverage our enterprise agreements with a range of large technology partners.
<unk> 70 basis points organically in the quarter.
While the decreases in the tech and telco sector weighed on overall segment performance.
Strong growth in our media offerings.
Offset by the underperforming at the digital specialty agencies.
In specialized communications and experiential solutions.
Our segment of integrated advertising and creativity led solutions decreased 90 basis points organically.
We grew three 3% organically.
Speaker 5: Turning to specific highlights from the quarter at the agency level.
Highlighted by increases across our experiential and public relations offerings.
Speaker 5: At our media data and engagement solutions segment. We continue to see strong growth in industry recognition for our media operations.
And there we were again outpaced.
Excuse me paced by growth and I P G health.
As we navigate the near term.
While the decreases in the tech Intelco sector wait on overall segment performance.
Our team.
Speaker 5: Notably IPG media brands, was named the new media, AR and marketing transformation partner for GEICO in a highly competitive industry-wide review.
Has demonstrated over a period of many years.
In specialized communications and experiential solutions.
We have the financial and management talent.
Rules and business model to successfully manage margin in a range of business environments.
We grew 3.3% organically.
Highlighted by increases across our experiential and public relations offerings.
Speaker 4: Initiative continued. Outstanding performance was recognized by both ad week, which named at global media agency of the year, and ad age, where initiative was a list media agency of the year.
Q1, adjusted EBITDA margin was nine 7%.
As we navigate the near term.
In our smallest.
Seasonal quarter.
Our team.
And that results compares favorably to our pre pandemic first quarter 2019 margin of approximately 5%.
Has demonstrated over a period of many years and we have the financial and management talent.
Speaker 12: At uum, the network welcomed the new global CEO and won multiple honors at the campaign global agency of the year awards.
Rules and business model.
Which means we're seeing both structural efficiencies and meaningful leverage on our growth over the last several years.
Successfully manage margin and a range of business environments.
Speaker 5: Our media hub agency, now a partnerof media brands, was a media ARR for home appliances brand bosch in Australia and New Zealand.
Q1, adjusted EBITDA margin was 9.7%.
As expected.
Margin decreased from a year ago, when expenses for travel and entertainment.
Our smallest.
Seasonal quarter.
And that results compares favorably to our pre pandemic first quarter 2019 margin of approximately five per cent.
Speaker 5: It extended its relationship with oyal Caribbean and celebrity cruises in the U K and Europe .
Unusually low due to the impact of the pandemic.
As well as additions to head count, which had lagged the robust growth environment.
Speaker 5: Inter media hub was also named global media agency. Record by spree.
Which means we're seeing both structural efficiencies and meaningful leverage on our growth over the last several years.
We are effectively managing our flexible operating model.
Speaker 5: Matter times outcome navigator. Our proprietary suite of connected solutions for digital media at guarantees outcomes for marketers was named a winner at the 2023 big innovation awards presented by the business intelligence group, and repriise media, which I D mentioned earlier, has been shortlisted in the running to be campaign's global performance agency of the year.
This is clear and our expense for temporary labor performance.
As expected.
Margin decreased from a year ago, when expenses for travel and entertainment.
Performance based incentive compensation in SG&A.
Each was notably lower than a year ago.
Still unusually low due to the impact of the pandemic.
Our expense for severance was also elevated in this year's first quarter.
As well as additions to head count, which had lag the robust growth environment.
And we will begin to see the benefit to margin of those actions going forward.
We are effectively managing our flexible operating model.
Further we continue to see the impact from actions that we've taken over the last few years on our real estate portfolio.
This is clear at our expense for temporary labor <unk>.
Speaker 4: axiom continues to lean into its strategic partnerships.
Performance based incentive compensation N S. G N a.
Speaker 4: Integrating its ethical data and identity products in the cloud solutions, including data clean room, is powered by Snowflake.
Where we've reduced occupied square footage by approximately 30%.
H was notably lower than a year ago.
Our expense for severance was also elevated in this year's first quarter and.
As with the top line target, we remain committed to our margin target for the year.
Speaker 4: Which allow customers to securely share datas etts- with partners and platforms to identify high-value audiences and consumers.
And we'll begin to see the benefit to margin of those actions going forward.
A 16, 7%.
Diluted earnings per share in the quarter was 30 <unk> as reported was 38.
Further we continue to see the impact from actions that we've taken over the last few years, but our real estate portfolio.
Speaker 4: Since the start of the year, acting has been among sales force sales forces fastest-growing full-stack marketing partners, and we further expanded the list of leading AdTech platforms where marketers can finded and activate axiom data.
As adjusted for intangibles and amortization and other items.
Where we've reduced occupied square footage by approximately 30 per cent.
During the quarter, we repurchased two 2 million shares.
As with the top line target, we remain committed to our margin target for the year of 16.7%.
Using $78 million.
In February our board authorized another $350 million share repurchase program and increased our common share dividend by 7%.
Speaker 12: During the quarter we saw our new sales force asset rafter one C, new assignments from Motorola in partnership with M.
Diluted earnings per share in the quarter was 33 cents has reported and was 38 cents as adjusted for intangible amortization and other items.
Our ability to create marketing and media solutions that bring together creativity technology and data scale is responsive to the evolving needs of marketers for more advanced and integrated services.
Speaker 4: qge has begun to go to market under its new positioning as a consultative, creative growth accelerator.
During the quarter, we repurchased 2.2 million shares using $78 million.
Speaker 4: The agency recently launched in Australia and was also recognized by business insider as a thought leader in the area of AI.
In February or board authorized another 350 million dollar share repurchase program and increased our common share dividend by seven per cent.
We're consistently bringing together our differentiated resources to deliver precise accountable and audience led thinking and solutions.
Speaker 5: At R? Ga we announced significant sea suite changes.
Our ability to create marketing immediate solutions that bring together creativity technology and data scale is responsive to the evolving needs of marketers are more advanced in integrated services.
Speaker 12: Globally new business wins, included metaggenics and KFC.
The current macro maybe creating a moment in which for certain clients efficiency as prevailing at the expense of increasing effectiveness.
Speaker 5: rga has also brought generative AI into its creative work processes on clients like Verizon, open door and Nike.
In order to power business growth.
We're consistently bringing together are differentiated resources to deliver precise accountable an audience sled thinking and solutions.
Speaker 4: And released an AI ethics handbook. withassists clients in assessing how they will incorporate to technology into their marketing programs.
But in the mid and longer term, we remain confident that the fundamental drivers of value for our clients employees shareholders and the communities in which we operate remain strong at interpublic.
The current macro maybe creating a moment in which for certain clients efficiency is prevailing at the.
Speaker 5: ampaignne, also named rga, that digital innovation agency of the year in the U K.
At this point it.
It seems appropriate to hand, the call over to Ellen for a more detailed review of our results.
[noise] expense of increasing effectiveness in order to power business growth.
Speaker 5: And our integrated advertising and creativity-led solutions segment.
Thank you I hope that everyone as well.
But in the mid and longer term, we remain confident that the fundamental drivers of value for our clients employees shareholders and the communities in which we operate remains strong add in Republic.
Speaker 5: Ipg health led performance.
As a reminder, my remarks will track the presentation slides.
Speaker 12: During the quarter we saw wins with a number of clients in the growing Therapeutic areas of oncology endocrine, metabolic and cardiovascular disease.
Anthony our webcast.
Beginning with the highlights on slide two of the presentation, our first quarter revenue before available expenses or net revenue decreased two 3% from a year ago.
Speaker 5: The company also made significant leadership appointments, naming a Chief medical Officer and a Chief strategy Officer, who will both facilitate even greater interconnectivity across the network in the service of our health and pharma clients.
At this point.
Appropriate to hand, the call over to Ellen for a more detailed review our results.
The organic decrease of 20 basis points.
Thank you I hope that everyone is Wow <unk>.
Our organic net revenue decrease of 90 basis points in the U S.
As a reminder, my remarks will track to the presentation side and a company or web cast.
Was partially offset by organic correctly.
Speaker 4: On prior calls and conversations with you. We've mentioned that our media and health offerings leverage IPG's data fine and our open architecture model.
Getting with the highlights and try to have the presentation.
International market of one 2%.
First quarter revenue before <unk> expenses for net revenue decreased 2.3% from a year ago.
First quarter, adjusted EBIT da Nucor, a small restructuring adjustment with $210 8 million and margin with $9 seven personal lines.
Speaker 12: This quarter, IPG health launched a healthcare first connected data intelligence platform in the U? S.
Organic decrease of 20 basis points.
Organic net revenues decrease with 90 basis points in the U S, which was partially offset organic correct with international markets of 1.2 per cent.
Diluted earnings per share was 33 as reported and 38 as adjusted.
Speaker 4: Integrating tools from axiom, IPG's marketing intelligence engine, and media brands into their offering.
The adjustments exclude the after tax impact of the amortization of acquired intangibles.
Speaker 5: An IPG health was also named healthcare network of the year by Adage.
First quarter adjusted EBIT, a small restructuring suggestions with 210.8 million and Martin was 9.7%.
<unk> adjustment to our previous restructuring actions and non operating losses on the sales of certain small non strategic businesses.
Speaker 5: Marking the first time a health care network has been named to the prestigious alist.
Cause it it earnings per share is 33, 10th as reported and 38 cents as a justice.
Speaker 5: At McCann. Wins in the first quarter included premium mattress brand beauty rest at mccan Detroit and continued growth at mccan Paris's luxury practice, which recently added the valentino brand.
We repurchased two 2 million shares during the quarter for $78 million.
Turning to slide three you'll see our P&L credit quarter.
<unk> the after tax impacts of the amortization of acquired intangibles.
I'll cover I'll cover revenue and operating expenses in detail in the slides that follow.
<unk> adjustment to our previous restructuring actions and not operating losses. This has a certain small nonstrategic businesses.
Speaker 5: At fscb, the highlight in the quarter came when the network was appointed global agency of record for scoda, including one of the biggest pitches in Europe .
Turning to the first quarter revenue in more detail on slide four.
Our net revenue in the quarter was $2 8 billion.
We repurchased 2.2 million chairs during the corner of $78.
Speaker 4: The world advertising research center, also named the fdb New York as the industry's number one most awarded creative agency for effectiveness.
Compared to Q1, 'twenty, two and the impact of the change in exchange rates was negative two 3% with the dollar stronger against currency nearly all of our international markets.
Turning to five three you'll see our piano all kinds of clutter.
<unk> I'll cover revenue and operating expenses in detail and besides that.
Speaker 5: And fdv's contract with change work of the Chicago office.
Net acquisitions added 20 basis points.
Turning to the first quarter revenue in more detail on side for us.
Speaker 4: ibelieved for mickeallobe. Ultra was the world's most awarded communications campaign for effectiveness.
Organic decrease of revenue for billable expenses.
Net revenue in the clutter is 2.18 <unk>.
$4 million or 20 basis points.
Speaker 5: mullin low in the U K was named agency of record for manpower and more recently the agency was selected by the U's golf association to help grow and brand the sport.
Compared to Q1 22.
At the bottom of this slide breakouts segment revenue.
Packed with the change in exchange rate is negative 2.3 per cent at the dollar stronger currency immediately all of our international markets.
Our media data and engagement solutions segment decreased 70 basis points organically again double digit growth a year ago.
Net acquisition added 20 basis points.
Speaker 5: Reflecting an increase in the number of global in-person events.
Strong growth in our media business.
Organic decrease of for Avenue people available expenses, with 4 million or 20 basis points.
Speaker 4: As well as the need for companies to seec strategic communications and lights.
This is offset by decreases elsewhere in the segment.
We have previously noted our digital specialist agencies are in the process of transforming their business model.
Speaker 4: During periods of economic uncertainty and societal change.
At the bottom of the slide breakout segments Avenue.
Speaker 4: Our specialized communications and experiential solutions segment sawthought good growth during the quarter.
Immediately.
And their performance weighed significantly on the overall segment growth at approximately the same level as in Q4.
An engagement policemen segment.
<unk> 70 basis point organically against double digit growth near again.
Speaker 4: Octagon unboarded. New brand of talent, clis.
Our integrated advertising and creative solutions segment decreased organically by 90 basis points.
Speaker 4: As well as negotiating a historic long-term partnership agreement for Stephan Curry with under armmor.
<unk> looked at her immediate businesses was offset by decreases elsewhere in the segment.
Against double digit growth a year ago.
Speaker 5: Additionally, along with the media brand team oxagon with tap to serve as the strategic lead for geicos. More than 100 Board's marketing partnerships with leadue and teams.
With that ICT health is offset by decreases in certain of our other create ethylene go add integrated agencies.
And our specialized communication ex parental solutions segment.
Speaker 4: However Shandwick had a solid start to the year.
Alright integrated advertising can create a bunch of lads Felicia segment decreased organically by 90 basis points.
Organic growth of three 3%.
Speaker 4: With its multtistakeholder approach. theaffirm's corporate and public Affairs capabilities drove growth, as did the health and wellness sectors.
Grew across public relations and experiential offerings on top of double digit growth in the first quarter of last year.
Against double digit growth a year ago.
Could I could see health is upset by decreases certain of our other great that's willing to add integrated agencies.
Moving on to slide five our organic net revenue growth by region.
Speaker 4: The agency won new client partner case international harvester, the global agricultural company, and expanded assignments with several large clients, including Mars.
In the U S, which comprised 68% of our revenue for billable expenses in the quarter, our organic decrease of 90 basis points against 12, 2% growth a year ago.
And our specialist communication and X parental solutions segments.
Can't across the 3.3 per cent.
Speaker 5: Going saw strong growth in the quarter, driven by the? U K and North America.
Cross public relations and X parental offerings on top of double digit growth in the first quarter of last year.
Speaker 4: But they saw sector strength in consumer marketing and health care.
Growth at media brands, IPG House, and our public relations agencies was offset by decreases in our specialty digital offerings that certain of our other agencies, mainly as a result of declines in the tech sector.
Moving on to slide five are getting that revenue growth five agents.
Speaker 5: A key executive hire included a new health equity lead will help integrate the agency's public health, social purpose and sustainability teams.
In the U S, which comprised 68% of our revenue.
All expenses in the corner or organic decrease with 90 base appointment.
International markets are 32% of our net revenue in the quarter and increased one 2% organically on top of 10, 2% growth last year.
Speaker 5: Jack Morton continues to seeing new client wins with clients like Mike bright, aames and Novartis.
12.2% a.
A year ago.
Speaker 5: And notable activations in the quarter, including large-scale client events.
Okay with it Mediabrands IPG house, and our public relations agencies.
The U K increased two 9% organically.
Set by decreases of our specialty digital offerings that certain about other agencies, mainly as a result of declines in the tech sector.
Speaker 4: At March Madness and MLB's opening day.
Led by strong increases at our media and experiential offerings and that Mccann.
Speaker 4: imminarly momentum posted. Growth in the quarter has it innovative.
Continental Europe decreased 4% organically in the quarter.
International markets, where 32 per cent of our net revenue in the quarter and increase 1.2% organically.
Speaker 4: In the way brands connect with consumers, notably through the use of immersive technologies, including the integration of augmented and mixed reality with live broadcast.
Growth in Spain, and Portugal was more than offset by decreases in Germany and France.
<unk>, 10.2% growth fast sooner.
Asia Pac decreased two 6% organically.
UK increased 2.9% white dynamically.
Speaker 4: This approach helped them win new clients like purrena and general Mills.
Japan, China, and India were all lower Australia, and New Zealand.
<unk> increases at our media and X parental offerings and definitely can.
Speaker 5: At the holding company level. We've long been clear that for ippg, our commitment to ESG is a priority.
Organic growth in Latam with three 9% and was led by strong growth in media, we saw increases across all of our national market.
Continental Europe decreased four per cent like anticly in the corner.
In Spain, and Portugal is more than offset by the creases in Germany and France.
Speaker 5: With five key strategic pillars.
Speaker 5: Including D and I. climate action.
Our other markets group, which is Canada and Middle East Africa grew nine 3% on top of 19, 9% a year ago with notably strong growth continuing in the middle East.
He's a pack decreased 2.6 per cent organically.
Speaker 12: Human capital.
Speaker 5: Data ethics and privacy and responsible media and content.
Japan, China, India for all lower Australia, and New Zealand.
Speaker 5: With growing demand for climate action among consumers and the need for all companies to adapt to changing.
Alright, <unk>, 3.9% and was led by stronger can media.
Moving on to slide six and operating expenses in the quarter.
Speaker 14: Regulations.
Our net operating expenses, which exclude billable expenses, the amortization of acquired intangibles and the restructuring adjustment increased only 60 basis points from a year ago.
We saw increases across all of our national market.
Speaker 4: Particularly in the databaseace. Esg is a crucial topic, not just for us but for our clients.
Our other markets group, which is Canada admittedly Apple grass grew 9.3 per cent on top of 19.9% a year ago.
Speaker 5: On our call in February , we indicated to you that we were entering the year in a net new business negative position.
The result, with our margin of adjusted EBITDA with nine 7%.
Notably strong growth continuing in the middle East.
Speaker 4: In the intervening period we've successfully neutralized that deficit.
Moving on to fly six operating expenses in the corner.
As expected our margin decreased from 12, 3% a year ago, when head count and <unk> expenses were lower due to the pandemic.
Speaker 5: And the benefits of those wins will begin to come onstream in the second half of the year.
Alright, <unk> operating expenses, which exclude telephone expenses, the amortization of acquired intangibles and the restructuring adjustment increased only 60 basis points from a year now.
At nine 7% result represents a significant increase from the pre pandemic first quarter of 2019 when margins were approximately 5%.
Speaker 5: Despite macro uncertainty- that's largely consistent with what we saw in q4- the tone of the business remains solid.
<unk> with our marketing <unk> is 9.7%.
Speaker 4: We should meaningfully cycle issues at certain of our agencies, beginning in the third quarter.
As you can see on this slide our ratio of total salaries and related expense as a percentage of net revenue was 72, 5%.
As expected I'm marching decreased from 12.3% a year ago, when head count as many expenses.
Speaker 4: Industry and new business activity in areas where we strong, notably media.
Speaker 4: Is kicking up and should present further upside opportunities for us.
Compared with 72% a year ago.
Is it the pandemic.
At 9.7% result represents a significant increase from the pre pandemic first quarter at 2019 and margins for approximately 5%.
Again, all of these ratios are against a smaller quarterly net revenue base of the year.
Speaker 4: As indicated earlier, we remain comfortable with our growth outlook for the year, along with our expectation of for margin expansion.
Underneath that Srs results, we delivered on our expense for base payroll benefits and tax due to hiring over the course of the past year.
Speaker 4: Over time, we've consistently demonstrated that we can expand margins.
As you can see on this slide a ratio of total salaries and related expense as a percentage of map Avenue with 72.5%.
Speaker 4: Our flexible cost model is an important lever not only for improving margins and times of growth, but also to consolidate those gains in the face of downturns in the business environment.
Our average head count increased three 8% from the first quarter of last year to support our organic growth of four 3% over the trailing 12 month period.
Compared with 70.2% a year ago.
Can all of these ratios are against a smaller quarterly net revenue base of the year.
Speaker 4: Another key area for value creation remains our strong balance sheet and liquidity.
Our expense for performance based incentive compensation decrease from a year ago from 4% to two 5% of net revenue.
Underneath at Srs results deliberate on our expense for based payroll benefits and tax due to hiring over the course of the past year.
Speaker 4: And our ongoing commitment to capital returns has been clearly underscored by both our recent dividend increase as well as share repurchases.
The decrease reflects a slower start to the year.
Average headcount increase 3.8% from the first quarter of last year.
Severance expense was one 5% of net revenue.
Speaker 4: Our teams remain highly focused on delivering on our targets by continuing to provide higher order business solutions to clients.
I support our organic growth at 4.3 per cent.
Compared with 50 basis points a year ago.
Trailing 12 month period.
As we continue to evolve the portfolio and transform our businesses. We expect severance will remain elevated in our second quarter and that we will increasingly see the benefits of these actions on margins as we move forward through the year.
Speaker 4: Those to help them drive growth in additional economy.
Speaker 5: We thank our partners and our people for their continued support, as well as those of you on this call for your time and interest.
Speaker 5: And with that let's open the fourward to questions.
Deference expense with 1.5 per cent of never Avenue.
Temporary labor expense was three 4% of net revenue.
Speaker 1: Thank you to ask a question please.
Compared with 50 basis points a year ago.
Paired with four 8% in Q1, 'twenty, two which is consistent with its role as a variable in our flexible expense when revenue slows.
Speaker 1: Press Star 1, unmute your phone and record your name clearly.
As we continue to evolve to portfolio and transform our businesses. We expect severance will remain elevated in our second quarter and that we will increasingly see the benefits of these actions on Martin.
Speaker 1: If you need to withdraw your question.
Speaker 1: Press Star two.
Speaker 1: Again to ask a question.
Each of these ratios is in the appendix on slide 22.
Speaker 1: Press Star 1: one moment for the first.
Also on this slide our office and other direct expense was 15, 2% of net revenue compared with 14, 5% from Q1 'twenty two.
As we move forward with a year.
Speaker 1: Question our first question is from.
Temporary labor expense was 3.4 per cent of natural Avenue.
Speaker 1: Steve khall with Wells Fargo, you may go ahead.
Compared with 4.8% and C 122, which is consistent with it as well as a variable in a flexible expense when revenue swells.
Speaker 15: Thanks good morning. So phleip, it sounds like the? U's trend should see sequential improvement throughout the year. I think you're in your last quarter of cycling off a big loss and I think you'll now be cycling on to some wins. So first off, is that right, as we kind of think about the trend to organic growth as we move through the year. And then in the release you mentioned some of the weakness in the tech sector.
Underneath that we continue to leverage our expense for occupancy, which was four 9% of net revenue.
Each of these ratios in the appendix on 522.
Compared with five 1% a year ago.
All other office and other direct expense was 10, 3% of net revenue.
Also on the side or office and other direct expense was 15.2% of net revenue compared with 14.5% to 122.
Paired with nine 4% in Q1, 'twenty, two which reflects the return of certain variable expenses, most notably higher teeny and meetings compared to a year ago.
Speaker 15: I imagine what's gone recently in the financial sector probably hasn't helped. So in your mind, is there any new negatives in your technology exposure or are the expectations for that vertical kind of unchanged from where you were when you started the year? And then I have a follow-up for Ellen.
Underneath that we continue to leverage our sense for occupancy which.
Which was 4.9% of net revenue.
Our SG&A expense was 60 basis points of net revenue a decrease of 30 basis points from a year ago.
Compared with 5.1% a year ago.
All other office and other direct expense.
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.
10.3% of net revenue.
Speaker 16: I think what we're seeing is consistent with what we shared with you back in February right So I think within tech and telco it comes down to individual decision making by actually a fairly tight number of clients or a handful of clients that specific to know either facts and circumstances in their business or clearly the degree to which that sector is being impacted and then in terms of how we are thinking about and kind of how a year phases it's definitely the case that we think that.
[noise] paired with 9.4% a P 122, which reflects the return of certain variable expenses, most notably higher T me in meetings compared to a year ago.
This begins on the left hand side with our reported results and steps through to adjusted EBITDA and our adjusted diluted EPS.
Alright, SG&A expense was 60 basis points of net revenue decrease of 30 basis points from a year ago.
Our expense for the amortization of acquired intangibles and the second column was $20 9 million.
I'm five seven will prevent details on adjustments to Ah report it first quarter results in order to provide better transparency and a picture of comparable performance.
The restructuring charges were $1 6 million, which was small adjustments in the quarter related to previous restructuring actions.
This begins on the left hand side with a reported results and steps through to adjusted EBITDA Ta and are adjusted to with a P. P. S.
Speaker 16: The bulk of what we've indicated to use of both the sector and tech and telco, I think, is probably we have about a 2% drag on organic growth at the worldwide level in Q1.
Although operating expenses in column four we had a pre tax loss in the quarter of $4 2 million and other expenses due to the disposition of a few small non strategic businesses.
Our expense for the amortization of acquired intangibles and the second column was 20.9 million.
The restructuring charges, well 1.6 million, which was small adjustments in the quarter related to previous restructuring accents.
At the foot of this slide we present the after tax impact.
Speaker 5: So whether it's that or whether it's what's happening within those two kind of leading edge digital agencies in the portfolio, that that will cycle off starting the beginning of Q3.
<unk> per diluted share of each of these adjustments, which bridges, our diluted EPS as reported at 33.
Hello, operating expenses and calm for we had a pretax loss in the quarter of 4.2 million and other expenses to to the disposition, let's use small non strategic businesses.
To adjusted earnings of 38 per diluted share.
On slide eight we turn to cash flow in the quarter.
Speaker 15: Great and then Ellen. I think salaries were up more than two percentage points as a percentage of revenue in the quarter, often direct was up a little bit as well, maybe. How are you thinking about the ability to pass through some of the cost or wage inflation through organic growth? Is there any upside to EBITDA margin guidance and is there any more restructuring we should expect this year?
Cash used in operations was 547 6 million compared with $633 6 million a year ago.
At the foot of the side, we present the after tax impact.
<unk> chair of each of these adjustments, which bridges are deluded E. P. S as reported at 33 cents.
As a reminder, our operating cash flow is highly seasonal we typically generate significant cash from working capital in the fourth quarter.
<unk> earnings of 38 cents per diluted share.
On Friday, he turned to cashwell in the corner.
And use cash in the first quarter.
Speaker 9: Maybe good morning, maybe I'll start with your last question first. No, we do not plan on any more restructuring and then working backwards in inflation. So the vast majority of our client contracts do have clauses that allow us to come to the table and have discussions with our clients, but it's it's not automatic and it's a discussion. And our main objective with our clients, you know, in addition, to make sure that we get fairly paid for our services- is a really to grow our share of allowed with them.
Cash used in operations.
During this year's first quarter working capital use was $695 million and that follows our fourth quarter of last year, when we generated $851 million from working capital.
With 547.6 million compared with 633.6 million a year ago.
As a reminder are operating Castro is highly seasonal we typically generate significant cast from working capital in the fourth letter.
Out of the two is $156 million of cash generated from working capital, which is squarely in the range of our recent history.
And you use cash in the first corner during.
Its worth, noting and cash from operations before working capital changes was $148 million in the quarter.
During this year's first quarter working capital use was 695 million and that's how the fourth quarter of last year, when we generated $851 million from working capital.
And our investing activities, we used $34 7 million in the quarter mainly for Capex.
Speaker 9: So it's a conversationbut you know, as we said previously, it hasn't been a large part of our growth to date or in our forecast. Really it's more organic growth with existing clients and our net new business wins. You know, with our you we're very comfortable with our margin targets for the year. You know, if you look at it, you know when you look at based salaries, you're comparing it to a year ago when growth, you know, was so strong and our headcount was lagging that growth.
And that of the two is $156 million cash generated from working capital, which is squarely in the range of our recent history.
Our financing activities in the quarter is $274 3 million, primarily for our common stock dividend share repurchases and taxes withheld and our performance based incentive compensation.
It's worth noting cash from operations for working capital changes, there's $148 million in the corner.
Our net decrease in cash for the quarter of $866 3 million, which is comparable to the first quarter a year ago.
And are investing activities, he's $34.7 million in the quarter mainly for Capex.
Hum financing activities in the quarter is 274.3 million.
Slide nine is the current portion of our balance sheet.
We ended the quarter with $1 68 billion of cash and equivalents.
Primarily for our common stock dividends, Sherri purchases and taxes withheld and our performance space incentive compensation.
Speaker 9: You also see high a return to office expenses and our numbers this year with T V and meetings. But that said, you see us using our variable cost structure and flexing it. You see tem help down performance based comp also lower. So we remain very competident in our margin target for the year.
Slide 10 depicts the maturities of our outstanding debt.
As you can see on this casual total debt at quarter end was $2 9 billion. Our next maturity of April 2024, but only $250 million there.
A net decrease in cash for the quarter of $866.3 million, which is comparable to the first quarter of your account.
Five nine is the current question of our balance sheet.
Thereafter, our next maturity is not until 2028.
Speaker 12: Bay Thank you you.
We ended the quarter with 1.68 billion of cash and equivalents.
Speaker 1: Thank you, our next questionis.
In summary on slide 11, our teams are focused on executing at a high level and importantly, we're on track to deliver on our expectations for the year.
Speaker 1: From David carab with J P Morgan.
Speaker 17: May go ahead.
Speaker 15: Thank you, but we've wanted to say if you could dig in a bit on the digital specialist agencies. Are J huge? We've seen some articles and the trad about ongoing restructings there, So I' wondering where you think you are in terms of getting these agencies to where they need to be, and would you expect them longer terturnm to return to being growth engines for the company or have some of what were very unique capabilities a two years ago just kind of been adapted by our other networks?
As he can see I'm gonna schedule total debt, a corner and with 2.9 billion.
I would like to express our pride in and gratitude for the efforts of our people.
Next maturity April 20th 24.
The strength of our balance sheet and liquidity means that we remain well positioned both financially and commercially.
In summary, onside 11, our teams are focused on executing at a high level and importantly, we're on track to deliver on our expectations for the year I.
With that I'll turn it back to Felipe.
Thanks Alan.
The results were reporting today.
As you heard our in line with what we forecast coming into the year for the first quarter and.
I would like to express our pride in and gratitude for the efforts of our people.
And consistent with the phasing of our full year plans.
Speaker 16: That's a fair question. I think it's clearly in the nature of their offerings where you have a lot more innovation hanging know, sort of taking place, and so I think that, whether it is, you know we're- it's funny because if you really think about it, we're really seeing the macro in very specific, in few and specific places. So we've seen it impact, you know, tech.
<unk> balance sheet liquidity me that would remain well positions, let's financially and commercially and with that I'll turn it back to sleep.
That said.
Our topline performance in the quarter is not in keeping with our long term track record or the growth were collectively striving to achieve.
<unk> the.
The results were reporting today cause.
As mentioned earlier during the quarter, we won several of the highest profile and largest reviews in the industry.
Cause you hurt or in line with what we forecast coming into the year for the first quarter.
And consistent with the phasing of our full your plans.
And these wins encompass a diverse set of client sectors and demonstrate our key role in the business transformation journey of marketers and a number of sectors across the economy.
That said.
Speaker 5: And then clearly, these are agencies that are probably, you know, have greater exposure to that sector than other parts of the portfolio. But I think what you've got there is you've got two entities with premium positioning- the field has become somewhat more crowded- and then the TIM, ING in terms of when they were hitting a cycle which there're needed to be a reinvention, you know happens to be, as we're going through this, this period, where there is you, some uncertainty.
Topline performance in the quarter is not in keeping with our longterm track record for the growth, we're collectively striving to achieve.
They will also increasingly benefit our growth as we move further into the year.
As mentioned earlier during the quarter, we won several of the highest profile and largest reviews in the industry.
We continue to invest in our emerging technology capabilities as.
And these wins encompass.
As well as expertise across the group and with external partners.
The first set of clients sectors and demonstrate our key role in the business transformation journey of marketers and a number of sectors across the economy.
With a focus on areas, including web three point out.
And artificial intelligence.
We also recently launched a pilot program during the quarter with D wave.
Speaker 16: So the thinking it to get them more focused, as I mentioned you did see.
They will also increasingly benefit our growth as we move further into the year.
Speaker 16: News of a leadership change at rga, huge further along in terms of what the next value proposition is going to be for them and essentially it's going to market with more of a consultative.
Clinton computing pioneer.
To build advertising optimization equations.
We continue to invest in our emerging technology capabilities as.
Based on our existing datasets, focusing first on an engagement with one of our top 20 clients.
As well as expertise across the group and with external partners.
With a focus on areas, including web 3.0 N artificial intelligence.
When it comes to AI and machine learning.
Speaker 16: Model where it's less people and hours and more of a product and solutions approach. So that's the market now and then. I don't think that it's an issue that's sort of intrinsic to the space. So we do. We do expect them to get back to being growth drivers for us. I think to be a growth leader, you increasingly- no matter where you sit in the portfolio- you have to be linked into the data stack, into what we're doing around precision and accountability, but both of them, I think, have that preposition given the nature of what they do.
<unk> been investing in this area for some time.
We also recently launched a pilot program during the quarter with D wave <unk>.
Reprise media our network that specializes in search marketing and retail media marketplaces.
Quantum computing pioneer.
To build advertising optimization equations.
Onboard a chief AI officer over two years ago.
Based on our existing datasets, focusing first on an engagement with one of our top 20 clients.
As MRM was adding a global head of AI and behavioral Sciences.
When it comes to a I M machine learning I P. G has been investing in this area for some time.
Axiom is also been a long time user of AI in their data analytics practice to improve how companies reach consumers.
Reprise media our network that specializes in search marketing and retail media market places.
All three of these entities.
On our steering committee, which recently launched a number of incubators and labs that leverage our enterprise agreements with a range of large technology partners.
Onboarded, a chief AI officer over two years ago, just as MRM was adding a global head of <unk> and behavioral Sciences.
Speaker 5: As we've been clear as well. I think that some of those losses- again where we saw that impact us were, begin to impact us. We see that falling off as we start the second half of the year.
Axiom is also being a longtime user.
Turning to specific highlights from the quarter at the agency level.
In their data analytics practice.
At our media data and engagement solutions segments.
Prove how companies reach consumers.
We continue to see strong growth and industry recognition for our media operations.
All three of these entities fit on our steering Committee, which recently launched a number of incubators in labs.
Speaker 15: Okay and then for Ellen you had a decent sizeed reduction in that interest expense. The quarter just want to see if there's any guidance you can give on how that might progress for the year.
Notably IPG media brands was named the new media AOR and marketing transformation partner for Geico and a highly competitive industry wide review.
Leverage our enterprise agreements with a range of large technology partners.
Speaker 18: Sure.
Turning to specific highlights from the quarter at the agency level.
Speaker 9: Interest income was higher, but that's really due to the rising interest environments that we're in and the amount of return we're able to earn on our cash balances, which we actively manage. So really it's a factor of where interest rates go, but there is nothing that I would highlight other than that.
Initiatives continued outstanding performance was recognized by both Adweek, which named it Global media agency of the year in.
Had our media data and engagement solutions segments.
Continue to see strong growth in your industry recognition.
For a media operations.
And AD age where initiative with a list media agency of the year.
Notably IPG Mediabrands was named the new media AOR and marketing transformation partner for Geico and a highly.
At AUM.
<unk> welcomed a new global CEO and.
And won multiple honors.
Highly competitive industry wide review.
<unk> Global agency of the year Awards.
Speaker 19: ok.
Initiatives continued outstanding performance was recognized by both add week, which named it Global media agency of the year.
Speaker 20: Thank you.
Our media hub agency now a part of media brands.
Speaker 1: Thank you the next question is.
Speaker 17: Tim nollan.
Speaker 1: With mcquarie, you may go ahead.
Named media AOR for home appliances brand Bosch.
And add age where initiative with a list Nida agency of the year.
Speaker 21: Hi thanks, can you hear me okay? yep, Hi sleep. I don't mind if I pushed one more time on the tech.
Australia and New Zealand.
It extended its relationship with Royal Caribbean and celebrity cruises in the UK and Europe.
At U M.
<unk> welcome to new Global C E O.
Speaker 21: And the huge R G a question and I just want to see how much the two are are relatedand I went back to my notes from last quarter and I think you said that that those two agencies, huge in R G a, were a 2% drag on Q4 organic growth.and I think I heard you say just now the tech telco sectors were a 2% drag worldwide in Q1. I just want to make to see how much is tech telco and huge R G a related or they.
Immediate hub was also named global Media agency of record by spring.
And won multiple honors.
<unk> pain Global agency of the year Award.
Matter kinds outcome navigator.
Our media hub agency now apart media brands.
<unk> suite of connected solutions for.
May media AOR for home appliances brand Bosch.
For digital media guarantees outcomes for marketers.
Australia New Zealand.
Was named a winner at the 2023 Big Innovation Awards presented by the business Intelligence Group and reprise media, which I've mentioned earlier has been short listed in the running to be campaigns Global performance agency of the year.
Extended its relationship with Royal Caribbean Celebrity cruises in the UK in Europe .
Immediate help was also named global media agency of record by spree.
Speaker 21: When we say telco we're talking about the client sector So that 2% does impact other parts of the portfolio and that is the organic know. The drag anic growth is that client sector. If we were to quantify the digital specialist in their impact on Q1 to us I think either in the U's or globally, that was very marginally North the 1% and there's some overlap there.
Matter kinds outcome navigator.
Surprise, Terry sweep connected solutions for.
Axiom continues to lean into its strategic partnerships.
For digital media guarantees outcomes for marketers.
Integrating its ethical data and identity products and the cloud solutions, including data clean rooms powered by Snowflake.
Was named the winner at the 2023 Big Innovation Award presented by the business Intelligence Group <unk>.
Which allow customers to securely share data sets with partners and platforms to identify high value audiences and consumers.
Reprise media, which I'd mentioned earlier has been shortlisted in the running to be campaigns global performance agency of the year.
Speaker 5: So both of those combined probably coused us hair under the 3% of organic revenue. Hopefully that' ok.
Since the start of the year acting as being amongst Salesforce sales forces fastest growing full stack marketing partners and we further expanded the list of leading AD tech platforms.
Axiom continues to lean into it strategic partnerships.
Integrating its ethical data and identity product in the cloud solutions, including data clean rooms powered by Snowflake.
Speaker 5: That's great. I wasn't even open, I wasn't even think I to get that of a number from you. sothats great. Great to here. So separate but related issues. Thanks for that. Could I ask another question on margins? You know you you, you beat our estimate on operating margin, I think, probably ahead of. What you were kind of pointing people towards was that you know some real estate savings from the Q4 events that are already working through, and I think you also mentioned a last call.
Marketers can find and activate at Acxiom data.
Which allow customers to securely share data sets with partners and platforms to identify high value audiences and consumers.
During the quarter, we saw our new Salesforce asset after one <unk>.
<unk> new assignments for Motorola.
Since the start of the year acting as being amongst sale for sales forces.
Partnership with MRM.
Huge has begun to go to market under its new positioning is a consultative create a growth accelerator.
This growing fullstack marketing partners can be further expanded the list of leading adtec platforms.
The agency recently launched in Australia and was also recognized by business insider.
Marketers confined and activate axiom data.
Speaker 21: You still expect to be that hiring in 2023. I wonder if that is still a case. So how do we think about the B? I will, I'll start and then I'll pass it over to ill. you know, I think what you do see as you see.
During the quarter, we saw a new salesforce asset rafter won.
Sought leader in the area of AI.
Your new assignments for Motorola.
At RGA.
Announced significant C suite changes.
Partnership with M. R M.
Q just begun to go to market under its new positioning as a consultative creative growth accelerator.
Globally, new business wins included <unk> and KFC.
Speaker 12: wherere we've been taking a very large business over time we've been evolving it we do have disparate results across the portfolio and so Yes we're definitely hiring because within the number you've got you know the businesses will segment we talked about the growth we're seeing strong growth you know with media brands with media and dated you know informed solutions at health care So you're seeing you're seeing that and then obviously you're seeingthe places in the business that we've called that for you where we've got some challenges and some which are probably anywhere in between those and in terms of margins I'll just start by talking about the fact that we've been clear with you all about.
RGA is also brought generative AI into its creative work processes on clients like Verizon <unk>.
The agency recently launched in Australia and was also recognized five business insider is a thought leader in the area of a.
Open door and Nike.
And released an AI ethics Handbook with <unk>.
At R. G E.
<unk> significant C sweet changes.
<unk> clients and assessing how they will incorporate the technology.
Globally, new business wins included <unk> and K F C.
Into their marketing programs.
And pain also named RGA is digital innovation agency of the year in the U K.
<unk> is also brought generative a into its creative work processes on clients like Verizon.
At our integrated advertising and creativity led solutions segment.
Door and Nike.
And released in AI Ethics Handbook <unk> clients in assessing how they will incorporate technology into their marketing programs.
IPG health led performance.
During the quarter, we saw wins with a number of clients and the growing therapeutic areas of oncology into crane metabolic and cardiovascular disease.
Campaign also named R. A G. A digital innovation agency of the year in the U K.
Speaker 16: Degree to which the model does Flex and the fact that we're very focused on and very disciplined about all of the levers and all the component parts that help us ensure that we're on top of that, and I think I'll ask calendar. Then just fill in the specific pieces underneath that.
The company also made significant leadership appointments.
A chief Medical Officer, and Chief strategy Officer.
That are integrated advertising and creativity led solutions segment.
We will both facilitate even greater interconnectivity across the network.
I P G health lead performance.
During the quarter, we saw wins with a number of clients and the growing therapeutic areas of oncology.
In the service of our health and pharma clients.
Speaker 9: Sure you know. I would just point out that you know we have expanded our margin 260 basis points over the last several years, So we really, you know, have a good sense on how to do this. You did see that severance was elevated in the quarter you and, as fully pointed out, we are hiring where we have growth, but we're also adjusting the business in places that we do both for either rightsizing or upscaling talallenge.
On prior calls and conversations with you we've mentioned that our media and health offerings leverage Ipg's data spine and our open architecture model.
<unk> metabolic cardiovascular disease.
The company also made significant leadership appointments Navy Chief Medical Officer, and a chief strategy Officer.
This quarter IPG health launched a healthcare first connected data intelligence platform in the U S.
Who were both facilitate even greater interconnectivity across the network.
In the service of our health inform our clients.
Integrating tools from axiom.
Speaker 9: We expect that we'll continue in Q2 but we'll see the savings from that as we move forward through year. As you mentioned, we are seeing the savings from the real estate actions as well as well, as you know, using temp help, as we should, as a lever. So I think all of those things together you keep make us feel good about our margin targets for the year and our ability to expand them going forward.
Ipg's marketing intelligence engine.
Prior called in conversations with Ya.
And media brands into their offering.
Mentioned that our media and health offerings leverage Ipg's date is fine and are open architecture model.
And IPG Health was also named healthcare network of the year by AD age.
Marking the first time, a health care networks.
This quarter by P. G health launched a health care first connected data intelligence platform in the U S.
Been named to the prestigious a list.
At Mccann wins in the first quarter included premium mattress brand beauty rest at Mccann Detroit.
Grading tools from axiom.
P G S marketing intelligence engine.
And media brands into their offerings.
And continued growth at Mccann parishes luxury practice, which recently added the Valentino brand.
Speaker 5: Great Thank you all, Thank you.
Can I P. G Health was also named Health care network of the year by at age.
Speaker 1: Thank you. Our next question is from Michael Nathan.
Speaker 1: Son with mffet Nathanson, you may.
Working the first time health care network has been named to the prestigious a list.
At FCB the highlight in the quarter came when the network was appointed global agency of record for <unk>, including one of the biggest pitches in Europe.
Speaker 22: Ahead.
Speaker 23: Thanks I have a true partter first Ellen.
Mccann wins in the first quarter included premium mattress brand beauty rest at Mccann Detroit.
Speaker 23: What is in your billable expenses and why was he such a varability between net and gross revenues? And you remind me if you take a priscial position to media buying, paying out an answer. I M one for poip.
The World Advertising Research Center also named FCB, New York as the industry's number one most awarded creative agency for effectiveness.
Continued growth and Mccain Paris's luxury practice, which recently added the Valentino brand.
Fcb's contract for change work out of the Chicago Office.
Speaker 9: So our up is truly passed through expense, and the reason we do net accounting is because there is not a margin in the bable expenses.
At F. C V. The highlighting the quarter came when the network was appointed global agency of record for <unk> <unk>.
Believe for Michelob Ultra was the world's most awarded communications campaign for effectiveness.
Including one of the biggest pitches in Europe .
Mullen Lowe in the UK was named agency of record for manpower.
The World Advertising Research Center also named F. C. B, New York is the industry's number one most awarded creative agency for effectiveness.
Speaker 9: So it is VAR based upon know how our clients that are spending and that's the variability.
And more recently the agency was selected by the U S Golf Association to help grow and brand support.
N F C B S contract with change work of the Chicago Office.
Speaker 13: ok So there's not a media bank.
Reflecting an increase in the number of global in person events as.
Believe for Michelob Ultra was the world's most awarded communications campaign for effectiveness.
Speaker 16: Position in there and believe I think in the past you guys have not been pretty clear, right. So given that others are now doing it, looks like with some success.
As well as the need for companies to seek out strategic communications advice.
Mullen low in the UK was named agency of record for manpower.
Periods of economic uncertainty and societal change.
Speaker 2: Why maintain that posture, and it seems like it's now more standard.
Our specialized communications and experiential solutions segment.
And more recently the agency was selected by the U S Golf Association to help grow and brand the sports.
Speaker 16: What's interesting because in my comments I talked about the degree to which we might be at a moment in time when efficiency is perhaps trumping effectiveness and there had really been a focus and it had clearly worked in our favor for a number of years now to.
Good growth during the quarter.
Octagon Onboarding, new brand and talent clients.
Reflecting an increase in the number of global in person events as.
As well as negotiating a historic long term partnership agreement for Stephan Curry with under armour.
As well as the need for companies to seek out strategic communications advice.
Additionally, along with our media brands team Octagon with tap to serve as the strategic lead for Geico's more than 100 sports marketing partnerships with leagues and teams.
Speaker 5: Solutions where that data layer and the ability to be really, really precise and be smarter in terms of how you put that investment to work. It's clearly a fair question and it's something that we will look at, because we want to be able to operate in as many modes as possible in order, to your point, to take advantage of whatever at a secular level, the marketplace tells us is working right.
Good growth during the quarter.
Octagon Onboarded, new brand new talent clients.
Weber Shandwick had a solid start to the year.
As well as negotiating historic Longterm partnership agreement for Steph Curry with under armor.
With its multi stakeholder approach the firm's corporate and public affairs capabilities drove growth.
The health and wellness sectors.
The agency, one new client partner case International Harvester.
<unk> marketing partnerships with leagues and teams.
Global agricultural company and expanded assignments with several large clients, including Mars.
Speaker 5: So our model is worked well for us, to your point.
Weber Shandwick had a solid start to the year.
Speaker 16: Something seems to be out there that indicates that you want to be looking at different modalities, and that's something that we're leaning into.
With a multi stakeholder approach the firm's corporate and public affairs capabilities drove growth.
<unk> saw strong growth in the quarter, driven by the U K and North America.
Are they saw sector strength in consumer marketing and healthcare.
<unk> health and wellness sectors.
A key executive hires.
Speaker 13: Okay co teice.
You didn't see one new client partner case International Harvester, the global agricultural company and expanded assignments with several large clients <unk>.
Put in a new health equity lead who will integrate the agency's public health.
Speaker 24: Thank you.
Speaker 1: The next question is from lena gayer. With BNP parabol you may go ahead.
Social purpose sustainability teams.
<unk> Mars.
Jack Morton continue to see new client wins with clients like Nike.
Speaker 25: High alerally engy.
Goin' saw strong growth in the quarter driven by the UK in North America.
Speaker 26: I hope you are well. I have requested on my side. The first one is: can you give us an update on momentum for axiom? The second 1: your your investments in head counts for this quarter and how do you think about staff course for the rest of the year? That B M the B pull front.
Right games and Novartis.
But they saw sector strength in consumer marketing in health care.
And notable activations in the quarter, including large scale client events.
The key executive higher, including a new health equity lead who will help integrate the agencies public health <unk>.
At March Madness, Mlps opening day.
Similarly momentum posted growth in the quarter.
Social purpose sustainability teams.
Innovative.
Jack Morton continued to see new client Windsor clients like Nike.
Speaker 26: And lesly and marginal. How would you qualify your client's marketing appetite at the moment? Are there delayed saving relation, coion optimism? But any color would be appreciatedthank.
And the way brands connect with consumers, notably through the use of immersive technologies.
Right names and Novartis.
Including the integration of augmented and mixed reality with live broadcast.
A notable activations in the quarter, including large scale client events.
This approach to help them win new clients like Purina and general Mills.
At March Madness M. M. L. B is opening day.
Speaker 5: Not sure in what order, So perhaps I'll start with the first and the last and then asked the question in the middle to Ellen.
Similarly momentum posted growth in the quarter.
At the holding company level.
Long been clear that for IPG, our commitment to ESG as a priority with.
Innovative.
In the ways brands connect with consumers, notably through the use of immerse of technologies.
Speaker 27: axiom.
With five key strategic pillars.
Speaker 16: Is growing axiom as, I think, different than the data asset that exists within one of our competitors because, at least my understanding is that there's a media component to that. Whereas for us, axiom is a first party data management business and it where we plug it into and it works closely with others of our agency businesses. We then see more attractive growth within those businesses.
Including DNI.
Including the integration of augmented and mixed reality with live broadcast.
Limit action.
Capital.
Data ethics and privacy.
This approach to help them win new clients like Purina in General Mills.
And responsible media and content.
With growing demand for climate action among consumers.
At the holding company level.
Long been clear the Fry P. G. A commitment E S G as a priority with.
And the need for all companies to adapt to changing.
Regulations.
With five key strategic pillars.
<unk> in the data space ESG is a crucial topic not just for us but for our clients.
Including D N I.
[noise] mid action.
Capital.
Date of ethics and privacy and.
Speaker 28: So to the extent that media is our strongest performer and one can assume that you know it's growing.
On our call in February we indicated to you.
Responsible media and content.
With growing demand for climate action among consumers.
We were entering the year in a net new business negative position.
Speaker 16: Well ahead of.
And the need for all companies to adapt to changing.
In the intervening period, we have successfully neutralized at Jefferson.
Speaker 5: The overall number for us we're seeing axiom fuel strong results it's core business where it sells these very large software engagements to handle first-party data for clients those are multiyear contracts those take a while to sell in and that is to our mind always going to be a business that has probably.
Regulations.
And the benefits of those wins will begin to come on stream in the second half of the year.
Glee and the data space E. S. G as a crucial topics not just for us but for our clients.
Despite macro uncertainty that's largely consistent with what we saw in Q4, the tone of the business remains solid.
On our call in February we indicated to you.
Yeah, we were entering the year in a net new business negative position.
And we should meaningfully cycle issues at certain of our agencies beginning in the third quarter.
In the intervening period, we've successfully neutralised at Jefferson.
Industry, new business activity in areas, where we're strong notably media.
And the benefits of those wins will begin to come on stream in the second half of the year.
Speaker 5: M to slightly below mid-single-digit growth that's really not the purpose of it it is the engine on which we drive a lot of the others and then in terms of your question about.
Looking up and should present further upside opportunities for us.
Despite macro uncertainty that's largely consistent with what we saw in queue for Tony.
As indicated earlier, we remain comfortable.
Comfortable with our growth outlook for the year.
The phone is a business remained solid.
Along with our expectation for margin expansion.
We should meaningfully cycle issues as certain of our agencies beginning in the third quarter.
Speaker 5: Clients I think it's quite consistent with what we shared with you the last time we spoke So I think that at the time we did say that there was a sense at that point of palpable sense that there had been more of caution or the clients were looking for a level of flexibility and contingency planning But I don't think that there's really been a change since that time as we go into this point in the year and I think the thing that I would also sort of point out if you try to dimensionalize the macro is.
Over time, we've consistently demonstrated that we can expand margins.
Our flexible cost model is an important lever not only for improving margins in times of growth.
Notably media is.
Kicking up it should present further upside opportunities for us.
But also to consolidate those gains in the face of downturns in the business environment.
As indicated earlier.
We remain comfortable with our growth outlook for the year.
Another key area for value creation remains our strong balance sheet and liquidity.
Over time, we've consistently demonstrated that we can expand margins.
And our ongoing commitment to capital returns has been clearly underscored by both our recent dividend increase as well as share repurchases.
Are flexible cost model is an important leaver not only for improving margins, sometimes you grow.
Our teams remain highly focused on delivering on our targets by continuing to provide higher order business solutions to clients.
It also to consolidate those gains in the face of downturns in the business environment.
Speaker 5: You know we take you through the client sectors, you can assume that those are probably in the order of the growth at which they are coming in. And we said six of the eight sectors were growing and I guess if you wanted sort of further quantification you've got. You know three of them at the top end that are growing, you know North the 5% and three that are growing three or 5%.
Another key area for value creation remains are strong balance sheet and liquidity.
To help them drive growth.
In the digital economy.
We thank our partners and our people for their continued support.
And our ongoing commitment to capital returns.
It's been clearly underscored by both are recent dividend increase as well as share repurchases.
As well as those of you on this call for your time and interest.
And with that let's open the floor to questions.
Teams remain highly focused on delivering on our targets by continuing to provide higher order business solutions to clients.
Thank you to ask a question. Please press star one on mute your phone and record your name clearly if you need to withdraw your question Press Star two.
Speaker 5: And so you know the tech and telco is clearly the drain on us. I don't think we're seeing a macro that is is dramatically different than what we shared with you when we last spoke.
To help them drive growth.
The digital economy.
We thank our partners and our people for their continued support.
To ask a question. Please press star one one moment for the first question.
As well as those of you on this call for your time and interest.
Our first question is from Steve Kay Hall with Wells Fargo. You May go ahead.
And with that let's open to Florida questions.
Speaker 8: And going to staff cost ratios. We're starting the year in our seasonally smallest quarter, So you, the staff cost ratios in this quarter are typically high. It is something we have a track record of managing very effectively. We never get ahead of revenue growth in our hiring and, as you've seen, we use temporary labor as as a good leabver in that as well.
Thank you to ask a question. Please press star one on mute your phone and record your name clearly if you need to withdraw your question Press Star too.
Thanks, Good morning, Felipe it sounds like the U S trend should see sequential improvement throughout the year. I think you are in your last quarter of cycling off a big loss and I think it will now be cycling onto some wins. So first off is that right as we kind of think about the trend to organic growth as we move through the year.
To ask a question. Please press star one one moment for the first question.
Our first question is from Steve K Hall with Wells Fargo. You May go ahead.
Speaker 9: And then you know I've also pointed out that severance is high and will be in the first half of the year and we do effect as expecttocy savings from that in the back half of the year as well.
Year and then in the release you mentioned some of the weakness in the tech sector I imagine what's gone on recently in the financial sector, probably Hasnt helped so in your mind is there any new negatives in your technology exposure or are the expectations for that vertical kind of unchanged from where you were when you started the year and then I have a follow up for <unk>.
Thanks, Good morning to sleep it sounds like the U S trend should see sequential improvement throughout the year I think your and your last quarter of cycling off a big loss and I think you'll now be cycling onto some wins. So first off is that right as we kind of think about the trend to organic growth as we move through the year.
Speaker 29: Thank you.
Speaker 1: Thank you our next question is from.
Speaker 1: julianne rok.e with Barclays, you may go ahead.
Sure.
Speaker 30: As yes Hi, Philip L n I two questions. The first one is: is the Q1 was lied to produce, say it's absolutely fine, it's really nine with with our phasing? Because one will going to cycle out ugen R G and you were kind enough to to tell you that the drug was 1% in Q1 and two you said that you one quite a few things that will contribute more and more throughout the year.
What we're seeing is consistent with what we shared with you back in February right. So I think within tech and telco. It comes down to individual decision, making by actually a fairly tight number of clients sort of a handful of clients that specific to.
Here and then in the release you mentioned some of the weakness in the tech sector I imagine what's gone on recently in the financial sector, probably hasn't helped so in your mind is there any new negatives in your technology exposure or are the expectations for that vertical kind of unchanged from where you were when you started the year and then I have a follow up for for <unk>.
Either facts and circumstances in their business or clearly the degree to which that sector is being impacted and then in terms of how we are thinking about.
Sure I I think what we're seeing is consistent with what we shared with you back in February right. So I think within tech and telco. It comes down to individual decision, making by actually a fairly tight number of clients with a handful of clients that specific to you know either.
Speaker 30: So is it possible to have a number like like for ugen R G on the you know new business contribution for for the full year So we can work out the phasing? That's my first question and then the second 1, lots and lots of comments on a? I in many industry, jity T V i. that is, if you had to kind of say what will be the potential biggest positive for for into public, coming from gener T V I, and also what could be the biggest potential negative.
Kind of how the year phases, it's definitely the case that we think that.
The bulk of what we've indicated to use of both.
The sector and tech and telco I.
Facts and circumstances in their business or clearly the the degree to which that sector is being impacted and then in terms of how we are thinking about and you know it kind of how the ear phases.
I think it's probably about a 2% drag on organic growth at the worldwide level in Q1.
So whether it's that or whether it's what's happening within those two kind of leading edge digital agencies in the portfolio.
Definitely the case that we think that.
The bulk of what we've indicated to use of both the sector and tech and telco you know I think it's probably about a two per cent dragging on organic growth at the worldwide level in Q1.
Speaker 12: Thank you. I don't think we're unique on the latter questionions. So obviously, when you think about a lot of the modeling work and the analytics work that is taking place in our data business, in our media business- as we mentioned on the prepared remarks- increasingly, where our health business is also incorporating that, we've been using machine learning for some time there and so I think there continue to be opportunities there.
That will cycle off starting the.
At the beginning of Q3.
Great.
And then Elena I think salaries were up more than two percentage points as a percentage of revenue in the quarter, often direct was up a little bit as well maybe how are you thinking about the ability to pass through some of the costs are wage inflation through organic growth.
So whether it's that or whether it's what's happening within those two kind of leading edge digital agencies in the portfolio that that will cycle off starting the beginning of the Q3.
Is there any upside to EBITDA margin guidance and and is there any more restructuring we should expect this year. Thanks.
Great and then Ellen I Big salaries were up more than two percentage points as a percentage of revenue in the quarter. After indirect was up a little bit as well. So that'd be how are you thinking about the ability to pass through some of the costs are wage inflation through organic growth is there any upside to EBIT margin Guy.
Speaker 5: I think that the commerce space for us is still opportunities there. There's a great deal that we can do there, and you saw us towards the end of the year last year make an acquisition in that space. You saw, you saw us at a, a leader for that space at the holding company level. So I think that in a number of areas it's going to enhance the nature of the services that we provide to clients.
Maybe.
Maybe I'll start with your last question first no we do not plan on any more restructuring.
And then working backwards and inflation.
The vast majority of our client contracts do have clauses that allow us to come to the table and have discussions with our clients, but it's not automatic and it's a discussion and our main objective with our clients.
<unk> and is there any more restructuring we should expect this year. Thanks.
Speaker 5: And then I think that I think the question or the challenges: how do you incorporate into your processes? And then how do you?
In addition to make sure that we get fairly paid for our services is it really to grow our share of wallet with them. So it's a conversation, but as we've said previously it hasnt been a large part of our growth to date or in our forecast really its more organic growth with existing clients in our net new business wins.
And then working backwards and in place and so the vast majority of our clients and contracts do have clauses that allow us to come to the table and have discussions with our clients, but it's it's not automatic and it's a discussion and our main objective with our clients. You know in addition to make sure that.
Speaker 5: Enhance what you're doing on the creative side of things by perhaps reinvesting some of the dollars it freze up, because it will doubtless make it possible to do some of the things that we're doing inside the creative agencies differently faster, perhaps more efficiently.
With our <unk>.
We're very comfortable with our margin targets for the year.
Against fairly paid for our services is it really to grow our share of a violent with them. So it's a conversation, but you know as we said previously it hasn't been a large part of our growth to date or in our forecast really it's more organic growth with existing clients and <unk>.
If you look at it when you look at base salary, if you're comparing it to a year ago.
Speaker 5: And then on the new business question that would be a tough one because as I said the real opportunities in the places where we're seeing.
When growth.
So strong and our head count was lagging that growth.
You'll also see higher return to office expenses in our numbers this year.
Speaker 5: New business come up is either in.
You know with our yeah.
Speaker 5: Media in large integrated opportunities where data and media are important components of our offering. But I don't think that we're going to start breaking down the new business at the agency level, because at D rather people's spend time actually with clients and focused on growth than sort of that level of performance kind of granularity back to you guys.
With TD and meetings, but that said you see us using our variable cost structure and flexing. It you see temp help down performance based comp is also lower.
Yeah, we're very comfortable with our margin targets for the ear, even if you look at it you know when you look at base salary, if you're comparing it to a year ago. When growth you know was so strong and our headcount was lagging back roads Uhm, you'll also see higher returned to office expenses and our numbers.
So we remain very confident in our margin target for the year.
Great. Thank you.
Thank you. Our next question is from David <unk> with Jpmorgan you May go ahead.
Yeah with T V and meetings, but that said you see as using our variable cost structure and flexing. It gives you 10 palp down performance space competent hustle Glower. So we remain very confident in a marching target for the year.
Speaker 16: But it's not the falloff there, the fact that it ends and we begin to cycle off of that in the third quarter. What is cycling on? We've had.
Alright, thank you.
We wanted to see if you could dig in a bit on the digital specialist agencies RGA and huge.
We've seen some articles in the trade it's about ongoing restructuring there. So I'm wondering where you think you are in terms of getting these agencies to where they need to be and would you expect longer term to return to being a growth engine for the company or have some of what were very unique capabilities. A few years ago, just kind of been.
Great. Thank you.
Speaker 16: Wins in.
Speaker 16: Integrated consumer advertising work in financial services, in auto, and then we've had wins in media, also in financial services and in pharma. But with's coming in and what's going out, it n' necessarily the same.
Thank you. Our next question is from David.
With J P. Morgan you May go ahead.
Alright, thank you.
We wanted to see if you could dig in a bid on the digital specialist agencies are Jane huge.
<unk> by your other networks.
You know we've seen some articles in the tree, it's about ongoing restructuring, they're so wondering where you're thinking are in terms of.
That's a fair question I think it's clearly in the nature of their offerings.
Speaker 30: So maybe I wasn't clear. I was asking for an indication at the overall company level. Maybe I wasn't clear about.
You have a lot more innovation hanging.
These agencies to where they need to be and you know would you expect them in a longer term to return to being growth engines for the company or have you know some of what we're very unique capabilities. A few years ago, just kind of been adopted by your other networks. Thanks.
Taking place and so I think that whether it is it's funny because if you really think about it we're really seeing the macro and very specific and few in specific places so we've seen that impact.
Speaker 5: I mean, as I said, then we went into the year net new business with a headwind and at this point we have managed to retire that and all of, and the Winds will start coming on stream.
Tech and then clearly these are agencies that are probably.
Favorite question I think it's clearly in the nature of their offerings, where you have a lot more innovation hanging.
Speaker 5: Shortly, but definitively and stronger in the back half.
Have greater exposure to that sector than other parts of the portfolio, but I think what you've got there is you've got two entities with premium positioning the field has become somewhat more crowded.
Taking place and so I think that whether it is you know it's funny because if you really think about it we're really seeing the macro and in very specific and few in specific places. So we've seen it impact you know tech and then clearly these're agencies that or probably you know have greater exposure to that sex.
Speaker 4: ok hel, Thank you very much.
Speaker 31: Thank you.
Speaker 1: And our last question.
And then the timing in terms of when they were hitting a cycle, which there needed to be a reinvention happens to be.
Speaker 1: Comes from Ben Swinburne. With morganlate you may go ahead.
Speaker 32: hithis is kamering mcv for Ben the morning on had a cple a couple just on your recent appointment of your Chief commerce strategy Officer I was wondering if you could talk a bit about the retail media opportunity and how do your clients are approaching that and then secondly on the a environment curious of your appetite has changed for a at all that there's any specific type of strategic acquisition you guys are focused on in the near term thanks.
As we're going through this this period, where there is some uncertainty so.
[noise] than other parts of the portfolio, but I think what you've got there is you've got two entities with premium positioning the field has become somewhat more crowded and then the timing in terms of when they were eating a cycle, which there needed to be a reinvention you know happens to be as we're going.
The thinking is to get them more focused as I mentioned you did see.
News of a leadership change at RGA.
Huge is further along in terms of what the next value proposition is going to be for them and essentially it's going to market with more of a consultative.
Through this this period, where there is some uncertainty so the thinking is to get them more focused as I mentioned you did see.
Model, where it's less people in hours and more of our product and solutions approach. So that's in market now.
Speaker 5: Sure retail media definitely a high growth medium, I think it.
News of a leadership change at RGA Hugest further along in terms of what the next value proposition is gonna be for them and essentially it's going to market with more of a consultative.
And then I don't think that it's an issue that's sort of intrinsic to the space. So we do we do expect them to get back to being growth drivers for us.
Speaker 16: Has any number of benefits whether it's that it's closer to where purchases are being made or that it gives our clients a different tool So that they're not as reliant on either the advertising technology ecosystem or so that they're getting.
I think to be a growth leader you increasingly no matter, where you sit in the portfolio you have to be linked into the data stack into what we're doing around precision.
A model, where it's less people in hours and more of a product and solutions approach. So that's in market now and then I don't think that it's an issue that sort of intrinsic to the space. So we do we do expect them to get back to being growth drivers for us.
Speaker 5: A a different.
And accountability, but both of them I think have that previous position given the nature of what they do.
Speaker 16: First-party data set with which to enhance their own first-party data. So we continue to see that as an area that has a lot of growth to it and, as I mentioned, we've got up.
As we've been clear as well I think that some of those losses again.
You know I think to be a growth leader you increasingly no matter, where you sit in the portfolio you have to be linked into you know the data stack into what we're doing around <unk>.
Speaker 5: Retail me to marketplace business inside of media brands. It Reprise, D. But we are also doing quite a bit of the work that surrounds retail media at a number of our agencies, like at an M, obviously after 1, which was the acquisition, and I think it is a place where we continue to look. So, whether it's performance media, whether it's commerce, retail media, those are clearly places where we will continue to look at.
Where we saw that impact us or begin to impact us we see that.
Falling off as we as we start the second half of the year.
Precision and accountability, but both of them I think you know have that predisposition, given the nature of what they do.
Okay, and then for Alan.
You had a decent size reduction in net interest expense for the quarter. Just wanted to see if there is any guidance you can give on how that might progress through the year.
As we've been clear as well I think that.
Some of those losses again.
Sure.
Where where are we saw that impact us or begin to impact us we see that falling off as we as we start the second half of the year.
Interest income was higher but thats really due to the rising interest environment that we're in and the amount of return we're able to.
Speaker 12: And four Ma, and then the individual we brought across from Accenture.
Earn on our cash balances, which we actively manage.
Speaker 16: Has been spending a lot of time on the ground with operators and thinking about how to aalign or connect the various component parts. We've got across the holding company. We've got shopper marketing businesses. choppable commerce happens in the PR space- clearly media as a part of it, So it's definitely a place where we believe there's a lot of opportunity.
Okay, and then for Ellen you had a decent size reduction in that interest expense for the quarter. Just wanted to see if there's any guidance you can give on how that might progressive ear.
So really you know, it's a factor of where interest rates go.
But there is nothing that I would highlight other than that.
Sure.
Interest income was higher but that's really due to the rising you know interest environment step or in any amount of return we're able to earn on our cash balances, which we actively manage so really you know it's a a factor of where interest rates go but there was nothing that I would highly.
Okay.
Thank you.
Thank you. The next question is from Tim Nolan with Macquarie You May go ahead.
Hi, Thanks.
You hear me, Okay, Yes, yes, hi.
Slip I don't mind, if I push one more time on the tech and the huge RGA question I just wanted to see how much the two are related.
Speaker 17: Thank you, and that was our last question. I'll now turn it back to phip for any final thought.
Other than that.
Okay.
Back to my notes from last quarter, and I think you said that those two agencies huge and RGA were a one 6% drag on Q4 organic growth and I think I heard you say just now have to check and telco sectors, where a 2% drag worldwide in Q1, I just want to make sure I understand how much is tech <unk> telco and huge RGA related or are these.
Thank you.
Speaker 16: Well again, Thank you. We appreciate the time. I think I'd say that allow results in Q1 are consistent with, as we said to, our internal forecasts and we believe ourselves to be on track. I'll just repeat something I said a bit earlier: they're not consistent with our long-term track record of growth or what we're expecting ourselves. So that's clearly the focus here, Thank you.
Thank you. The next question is from Tim Nolan with Maguire.
You May go ahead.
Hi, Thanks can you hear me, Okay, Yep, Yep, Hi, sleep I don't mind, if I push it one more time on the tech in the huge RGA question I just wanted to see how much. The two are related I went back to my notes from last quarter and I think you said that those two agencies huge and RGA, where a 1.6 per sir.
When we say tech and telecom, we're talking about the client sector. So that 2% does impact other parts of the portfolio and that is the organic the drag to organic growth is that client sector.
Drag on queue for organic growth and I think I heard you say just have to check in telco sectors, where a two per cent drag worldwide in Q1, I just Wanna make sure I understand how much is tech and telco and huge orgy a related or the second when when we say tech and telecom, we're talking about the client sector. So that 2% does impact other.
Speaker 24: Thank you, and this concludes today's conference.
Speaker 24: You may disconnect it this.
If we were to quantify the digital specialists and their impact on Q1 to us.
Speaker 33: Time.
I think either in the U S or globally that was very marginally north of 1% and there is some overlap there. So both of those combined probably cost us a hair under 3% of.
Parts of the portfolio and that is the organic you know the dragged organic growth is that clients. The sector. If we were to quantify the digital specialist and their impact on Q1 to us I think either in the U S or globally that was very <unk>.
Organic revenue.
That helps.
That's great I was I wasn't even hoping I wasn't even if I had to get that kind of a number from you. So that's great great to hear so separate but related issues. Thanks for that.
Can I ask another question on margins.
Marginally north of 1% and there's some overlap there so both of those combined probably cost us a hair under three per cent of organic revenue hopefully that helped Jake.
You beat our estimate on operating margin.
Probably ahead of what you were kind of pointing people towards.
Was that.
Real estate savings from the Q4 events that are already working through.
That's great I was I wasn't even hoping I wasn't even thinking to get that kind of a number from you. So that's great great to hear so separate but related issues. Thanks for that could I ask another question on margins you know U U U B R estimate on operating margin I think probably ahead of what you were kinda 0.2 people towards was that.
And I think you also mentioned on our last call that you still expect to be net hiring in 2023 I Wonder if that is still the case. So how do we think about that.
I'll start and then I'll pass it over to Ellen I think what you do see as you see.
Where we've been taking a very large business over time, we've been evolving it we do have disparate results across the portfolio.
Some real estate savings from the queue for events that are already working through and I think you also mentioned the last call you still expect to be net hiring in 2023 I Wonder if that is still the case. So how do we think about this I will I'll start and then I'll pass it over to Ellen.
And so yes, we're definitely hiring because within the number you've got.
The businesses will segment, we talked about the growth we're seeing strong growth.
I think what you do see as you see.
Where.
With media brands with median David.
We've been taking a very large business over time, we've been evolving it we do have disparate results across the portfolio and so yes, we're definitely hiring because within the number you've got you know the businesses will segment, we talked about the growth we're seeing strong growth.
Informed solutions at health care.
So youre seeing youre seeing that and then obviously youre seeing.
<unk> and the business that we've called out for you, where we've got some challenges and some which would probably anywhere in between those.
And in terms of margins I'll just start by talking about the fact that we've been clear with you all about.
With media brands with median data you know inform solutions at health care, So you're saying, you're saying that and then obviously you're seeing the places in the business that we'd call that for Ya, where we've got some challenges and some which would probably anywhere in in between those and in terms of <unk>.
The degree to which the model does flex and the fact that we're very focused on and very disciplined about all of the levers and all of the component parts that help us ensure that we're on top of that and I think I'll ask calendar than just fill in the specific pieces underneath that sure I would just point out that we have.
<unk> I'll just start by talking about the fact that we've been clear with you all about.
<unk> expanded our margin 260 basis points over the last several years.
Degree to which the model does flex and the fact that we're very focused on and very disciplined about all of the leavers and all the component parts that help us to ensure that we're on top of that and I think I'll ask calendar then just fill in the specific pieces underneath that sure you know I would just point out that you know we.
Really you now have.
Good sense on how to do this.
Did see that severance is elevated in the quarter.
And escalate pointed out we are hiring where we have growth, but we're also adjusting the business in places that we do both for you the right sizing our upscaling talent.
Have expanded our margin of 260 basis points over the last several years. So we really you know have a good sense of how to do this you did see that severances elevated in the corner N O N escalate pointed out we are hiring with where we have growth, but we're also adjusting the business in places that we do.
We expect that will continue in Q2, but we will see the savings from that as we move forward through the year.
As you mentioned, we are seeing the savings from the real estate actions as well as well as using temp help as they should as a lever. So I think all of those things together.
Keep it make us feel good about our margin targets for the year and our ability to expand them going forward.
But for you the right sizing or upscaling talent.
We expect that will continue in queue too, but let's see the savings from that as we move forward through the year as you mentioned and we are seeing the savings from the real estate actions as well as well as you know using 10 palp as we should as a lever. So I think all of those things together you know keep it make us feel good about.
Great. Thank you both.
Thank you.
Thank you. Our next question is from Michael Nathanson with Moffett Nathanson you May go ahead.
Thanks, I have a two parter first Ellen.
Hey, guys.
Is in your billable expenses and why was there such a variability between net and gross revenues and can you remind me if you take principal positions in media buying.
Our margin targets for the gear and our ability to expand them going forward.
Great. Thank you both.
Q.
The answer I have one for Felipe.
Thank you. Our next question is from Michael Nathan.
So our.
Nathan you May go ahead.
Our book is truly pass through expense.
Thanks, I have a two parter first Ellen.
And the reason we do net accounting is because there is not a margin in those expenses.
Yes, what is in your billable expenses and why was just such a variability between net and gross revenues and can you remind me if you take a principled position immediate by depending on the answer I wanted for Felipe.
So it just varies based upon.
How our clients are spending and thats the variability.
Okay, So theres not a media buying.
So our our <unk> is is truly pass through expense Uhm and the reason we do not accounting is because there is not a margin and that's done about expenses.
Our position in there and believe I think in the past you guys have not yet you've been pretty clear right. So given that others are now doing it looks like with some success why maintain that posture when it seems like it's now more standard.
So it is various based upon you know how our clients are spending and that's the variability.
Well, it's interesting because in my comments I talked about.
Okay. So there's not a media buying.
The degree to which we might be at a moment in time when.
Position in there and and leave I think in the past you guys have not you've been pretty clear <unk> given that others are now doing it looks like with some success <unk>.
Efficiency is perhaps trumping.
Effectiveness and there hasn't really been a focus and it clearly worked in our in our favor for a number of years now too.
Why maintained that posture when it seems like it is now more standard.
Solutions, where that data layer and the ability to be really really precise and be smarter in terms of how you put that investment to work.
What's interesting because you know in in my comments I've talked about the.
The degree to which we might be at a moment in time when you know efficiency is perhaps trumping.
It's clearly a fair question and it's something that we will look at because we want to be able to operate in as many modes as possible in order to your point to take advantage of.
Effectiveness and there had really been a focus and it clearly worked in our in our favor for a number of years now too.
Solutions, where that data layer and the ability to be really really precise and be smarter in terms of how you put that investment to work it's.
Whatever it is secular level the marketplace tells us.
Is working right. So our model has worked well for us to your point.
Something seems to be out there that indicates that you want to be looking at different modalities and that's something that.
It's clearly a fair question and it's something that you know we will look at because we want to be able to operate in as many modes as possible in order to your point to take advantage of you know whatever it is secular level. The marketplace tells US is working right. So our model has worked well for us to your <unk>.
We're leaning into.
Okay cool thanks.
Thank you. The next question is from Liana <unk> with BNP Paribas you May go ahead.
Point.
Something seems to be out there that indicates that you wanna be looking at different modality, and that's something that now we're leaning into.
Hi, <unk>.
Kevin.
Two questions on my side.
The first one is can you give us an update on the momentum.
Jim.
Okay cool thanks.
Just a quick one.
Your investments in <unk> this quarter and how do you think about staff cost for the rest of the year.
Thank you. The next question is from Lena.
With B N P.
In the Boonies pool shrunk.
Go ahead.
Hi, <unk>.
And lastly in margin, yes, how would you quantify your clients marketing EBITDA is at the moment.
On my side. This was 20th can you give us an update on the magenta Max <unk>.
An audio from delayed <unk>.
Installation cushion or can you just switch any color would be appreciated. Thank you sure.
The shipping one <unk> your investments and edge counts South Dakota, and how do you think about that question for the rest of the year. It's at the end of <unk>, and lastly, and not in Manhattan.
I'm not sure in what order some perhaps I'll start with the first and the last and then.
Past the.
Question in the middle to Ellen.
Axiom is growing.
How would you qualify you try and some marketing appetite at the moment audition.
Axiom is I think different than the <unk>.
Savings installation <unk> with any cause that would be appreciated. Thank you sure.
Data asset that exists within one of our competitors because of at least my understanding is that there is a media component to that whereas for us axiom is.
I'm not sure in what order some perhaps I'll I'll start with the first and the last and then.
Past the the question in the middle to Ellen.
First party data management business, and where we plug it into and it works closely with others of our agency businesses. We then see more attractive growth within those businesses. So to the extent that media is our strongest performer and one can assume that it's growing.
Axiom is growing axiom is I think different than the data asset that exists within one of our competitors because of at least my understanding is that there's a media component to that whereas for US axiom is a first party data management.
<unk>.
Well ahead of.
The overall number for us we're seeing axiom fuel strong results, it's core business, where it sells is very large.
<unk> and <unk>, where we plug it into and it works closely with others of our agency businesses. We then see more attractive growth within those businesses. So to the extent that media is our strongest performer and one can assume that you know it's growing.
Software engagements to handle first party data for clients those are multiyear contracts those take a while to sell in and that is to our mind always going to be a.
Well ahead of.
The overall number for US you know, we're seeing axiom fuel strong results, it's core business, where it sells he's very large software engagements to handle first party data for clients. Those are multi year contracts those take awhile to sell in and that is you know to our.
A business that has probably.
Mid to slightly below mid single digit growth, that's really not the purpose of it is the engine on which we drive a lot of the others and then in terms of your question about.
Clients I think it's quite consistent with what we shared with you.
Mind always gonna be a a business that has probably.
The last time, we spoke so I think that at the time, we did say that there was a sense at that point, a palpable sense that.
Mid two slightly below mid single digit growth, that's really not the the purpose of it is the engine on which we drive a lot of of the others and then in terms of your question about.
There had been.
More of caution or that clients were looking for a level of flexibility and contingency planning, but I don't think that theres really been a change.
Clients I think it's quite consistent with what we shared with you. The last time, we spoke so I think that at the time, we did say that there was a sense at that point, a palpable sense that there had been.
Since that time as we go into this point in the year and I think.
The thing that I would also sort of point out if you try to dimensionalize the macro is.
More of a caution or the clients were looking for a level of flexibility and contingency planning, but I don't think that there's really been a change of since that time as we go into this point in the year and I think you know the thing that I would also sort of point out if you try to dimension.
We take you through the clients sectors, you can assume that those are probably in the order of the growth that which.
They are coming in and we said six of the eight sectors were growing and I guess, if you wanted to sort of further quantification you've got.
Three of them at the top end that are growing.
[noise] lies the macro is.
North of 5% and three that are growing 3% to 5% and so the tech and telco is clearly the drain on us, but I don't think were seeing a macro that is it is dramatically different than what we shared with you when we last spoke.
You know we take you through the client sectors you can assume that those are probably in the order of the growth that which they were coming in and we said six or of the eight sectors were growing and I I guess, if you wanted to sort of further quantification you've got you know.
Okay.
Three of them at the top and that are growing.
And going to staff cost ratios.
North of 5% in three that are growing 3% to 5% and so you know the the tech and telco is clearly the the drain on us but.
Starting the year in our seasonally smallest quarter. So SaaS class ratios in this quarter are typically high it is something we have a track record of managing very effectively.
Don't think we're seeing a macro that is that is dramatically different than what we shared with you when we last spoke.
<unk> never get ahead of revenue growth in our hiring and as you've seen at least temporary labor.
Okay.
As a good lever in that as well.
And going to staff cost ratios uhm restarting the here and our seasonally smallest clutter. So SaaS quite spacious in this corner are typically hi, uhm. It is something we have a track record of managing very effectively we never get ahead for revenue growth in our hiring has he seen Lee is temporary later.
And then I've also pointed out that severance is high and we will be in this first half of the year and we do in fact see expect to see savings from that.
In the back half of the year as well.
Okay.
Thank you.
Yes.
Sure.
Thank you. Our next question is from Julien Roch with Barclays. You May go ahead.
As a as a good leather in that as well and then you know I've also pointed out that seven says hi, and we'll be in the first half of the year and we do affect the state expect to see savings from that I'm in the back half of the year as well.
Yes.
And then.
Two questions.
First one is Q1 was light would you say, it's absolutely fine it's really in line with our phasing.
One we will going to cycle out.
Thank you.
Thank you. Our next question is from Julianne broke with Barclays.
And you were kind enough to tell you that the drug was 1% in Q1.
Ahead.
<unk> you said that you won quite a few things that will contribute more and more throughout the year. So is it possible to have a number like like for huge and RGA on.
Yes.
Hi, there.
Two questions. The first one is is Q and was like would you say, it's absolutely fine it's what.
New business contribution for the full year. So we can.
We felt freezing because one will gonna cycled out you <unk> and you have a cut enough to to tell you that the drug was one per cent in <unk>. In two you said that you won't quite a few things that will contribute more than most throughout the year. So is it possible to have a number of like like for <unk>.
Work out the same.
That's my first question and then the second one lots and lots of comments on AI in many industry Gino TV why that is.
If you had to kind of say what would be the potential biggest positive for interpublic coming from <unk> and also what could be the biggest potential negative.
On the new business contribution food for the food you. So we can work out the amazing. That's my first question and then the second one lots and lots of comments on <unk> and in many industry G. N O T V I that is.
Thank you.
I don't think we're unique on the latter question. So obviously when you think about a lot of the modeling work and the analytics work that is taking place.
If you had to kind of say what will be the potential biggest positive for for a public coming from <unk> and also what could be the biggest potential negative.
In our data business in our media business as we mentioned on the prepared remarks increasingly where our health business is also incorporating that.
Thank you.
I don't think we're unique on the ladder questions. So obviously when you think about a lot of the modeling work in the analytics work that is taking place.
We've been using machine learning for some time, there and so I think there continue to be opportunities there I think that.
The commerce space for US is still opportunities there is a great deal that we can do there and you saw us towards the end of the year last year make an acquisition in that space. You saw you saw us add a leader for that space at the holding company level. So I think that in a number of areas it's going to enhance.
Prepared remarks increasingly where our our health business is also incorporating that we've been using machine learning for some time, there and so I think there continue to be opportunities there I think that.
The nature of the services that we provide to clients.
Commerce space for Us is still opportunities there there's a great deal that we can do there and your sauce towards the end of the year last year make an acquisition in that space. You saw it asks you saw at a a leader for that space at the holding company level. So I think that in a number of areas it's going to enhance.
And then I think that.
I think the question or the challenge is how do you incorporate it into your processes and then how do you.
Enhance what youre doing on the creative side of things by perhaps reinvesting some of the the dollars. It frees up because it will doubtless make it possible to do some of the things that we're doing inside of the creative agencies differently faster, perhaps more efficiently.
The nature of the services that we provide to clients and then I think that.
Yeah, I think the the question or the challenge is how do you incorporate it into your processes and then how do you.
And then on the new business question that would be a tough one because.
Enhance what you're doing on the creative side of things by perhaps reinvesting some of the the dollars would freeze up because it will doubtless make it possible to do some of the things that we're doing inside of the creative agencies differently faster, perhaps more efficiently.
As I said, the real opportunities in the places where we're seeing.
<unk>.
New business come up is either in.
Media in large integrated opportunities, where data and media are important components of our offering but I don't think that we are going to start breaking down the new business at the at the agency level, because I'd rather have people spend time actually with clients and focused on growth then.
And then on the new business question that would be a tough one because.
As I said, the the real opportunities in the places where we're seeing.
New business come up is either in.
Sort of that level of performance kind of granularity back to you guys, but it's not the falloff there. The fact that it ends and we begin to cycle off of that in the third quarter, while cycling on.
Media in large integrated opportunities where data and media are are important components of are offering, but I don't think that we're gonna start breaking down the new business at the at the agency level, because I'd, rather people spend time actually with clients and focused on growth and then.
We've had.
Wins in.
Integrated consumer advertising work in financial services and auto and then we've had wins in.
Media also in financial services and in pharma, but what's coming in and what's going out isn't necessarily the same.
So I mean, maybe I wasn't clear I was asking for an indication of the overall company level.
Maybe I wasn't clear.
I mean.
As I said, we went into the year net new business with.
A headwind and at this point, we've managed to retire that and all of the wins will start coming on stream.
Shortly but definitively and stronger in the back half.
Okay, Alright, thank you very much.
Thank you.
And our last question comes from Ben Swinburne with Morgan Stanley You May go ahead.
Hi, This is Cameron on for Ben Good morning, Hey, how are you I had a couple.
Shortly but definitively and and stronger in the back half.
A couple just on your recent appointment of your Chief Commerce strategy Officer I was wondering if you could talk a bit about the retail media opportunity and how your clients are approaching that.
And then secondly on the M&A environment curious if your appetite has changed for M&A at all and if Theres any specific type of strategic acquisition you guys are focused on the near term. Thanks.
Sure.
Retail media definitely a high growth medium.
I think it.
Has any number of benefits, whether it's that it's closer to where purchases are being made or that it gives our clients.
A different tool so that theyre not as reliant on either the advertising technology ecosystem.
Or so that theyre getting.
Different.
First party data set with which to enhance their own first party data. So we continue to see that as an.
As an area that has a lot of growth to it and as I mentioned, we've got a.
Retail media marketplace.
<unk> inside of media brands that reprise but were also doing quite a bit of the work that surrounds retail media at a number of our agencies like add in MRM, obviously, rafter, one which was the acquisition and I think it is a place where we continue to look.
So whether it's performance media, whether it's commerce.
Retail media those are clearly places, where we will continue to look at and for M&A and then the individuals we brought across from Accenture.
It has been spending a lot of time on the ground with operators and thinking about.
How to align or connect the various component parts, we've got across the holding company, we've got shopper marketing businesses.
<unk> commerce happens in the PR space clearly media as a part of it. So it's definitely a place where we believe there is a lot of opportunity.
Thank you.
Our last question I will now turn it back to you.
Any final thoughts.
Well again. Thank you. We appreciate the time I think I'd say that while our results in Q1 are.
Our consistent with as we said to you our internal forecast and we believe ourselves to be on track I'll, just repeat something I said a bit earlier, they are not consistent with our long term track record of growth or or what we're expecting we're ourselves. So that's clearly the focus here.
Thank you and this concludes today's conference you may disconnect at this time.
Yeah.