Q3 2023 Interpublic Group of Companies Inc Earnings Call

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Speaker 1: Good morning and welcome to the Interpublic Group third quarter 2023 conference call. All parties are in a listen-only mode until the question and answer portion. At that time, if you would like to ask a question, you may press star 1. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Lushni, Senior Vice President of Investor Relations. Sir, you may begin.

Good morning, and welcome to the Interpublic Group third quarter 2023 conference call. All parties are in a listen only mode until the question and answer portion at that time, if you would like to ask a question you May press star one.

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

Speaker 2: Good morning, thank you for joining us this morning. We are joined by our CEO for lead Krakowski and by Alan Johnson, our CFO .

Good morning, Thank you for joining us. This morning, we are joined by our CEO to lead quick housekeeping and by Alan Johnson, Our CFO we.

Speaker 2: We have posted our earnings release and our slide presentation on our website, intrapublic.com

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

Speaker 2: We will begin with prepared remarks to be followed by Q&A.

We will begin with prepared remarks to be followed by Q&A.

Speaker 2: We plan to conclude before market open at 930 Eastern Time.

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

Speaker 2: During this call we will refer to forward-looking statements about our company.

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

Speaker 2: These are subject to the uncertainties and the cautionary statement that are included in our earnings release and the slide presentation.

These are subject to the uncertainties in the cautionary statement.

That are included in our earnings release and the slide presentation.

Speaker 2: These are further detailed in our 10Q and other filings with the SEC.

These are further detailed in our 10-Q and other filings with the SEC.

Speaker 2: We will also refer to certain non-GAAP measures. We believe that these measures provide useful, supplemental data that, while not a substitute for GAAP measures, allow for greater transparency in the review of our financial and operational performance.

We will also refer to certain non-GAAP measures. We believe that these measures provide useful supplemental data that while not a substitute for GAAP measures allow for greater transparency in the review of our financial and operational performance.

Speaker 2: At this point, it is my pleasure to turn things over to Philippe Krakowski.

At this point it is my pleasure to turn things over to Felipe Krakowski.

Speaker 3: Thank you, Jerry. As usual this morning, I'll begin with a high-level view of the quarter, after which Ellen will provide...

Thank you Jerry.

As usual this morning, I'll begin with a high level view quarter.

After which Alan will provide additional details.

Speaker 3: I'll conclude with updates on our agency to be followed by Q&A.

I'll conclude with updates on our agencies to be followed by Q&A.

Speaker 3: Before getting to the business of the call, however, it seems not only appropriate but necessary to speak to our collective shock and grief in response to the terrorist attacks perpetrated in Israel and their aftermath.

Before getting into the business of the call. However, it seems not only appropriate but necessary to speak to our collective shock and grief in.

In response to the terrorist attacks perpetrated in Israel and thereafter, Matt.

Speaker 3: Thankfully, our colleagues in Israel are safely accounted for, but many are being called into service.

Thankfully our colleagues in Israel are safely accounted for.

So many are being called into service.

Speaker 3: We're also clearly in the midst of a humanitarian crisis in the region.

We're also clearly in the midst of humanitarian crisis in the region.

Speaker 3: So our thoughts go out to all innocent lives that have been impacted by violence and those who remain.

Our thoughts go out to all innocent lives that have been impacted by violence.

And those who remain in harm's way.

Speaker 3: Given the scale of our operations in Israel, we'll also spend a bit more time later in the call discussing the implications on IPG's business.

Given the scale of our operations in Israel.

So spend a bit more time later in the call discussing the implications on Ipg's business.

Speaker 3: Turning the 3Q performance, starting at the top with revenue, results did not measure up to expectation.

Turning to three key performance starting at the top with revenue results did not measure up to expectations.

Speaker 3: The organic change of our revenue before billable expenses was a decrease of 40 basis.

The organic change of our revenue before billable expenses with a decrease of 40 basis points.

Speaker 3: For the first nine months of the year, our organic decrease is therefore 80 basis points from a year ago, inconsistent with a trailing three-year growth of 15.7%.

For the first nine months of the year, our organic decrease is therefore 80 basis points from a year ago inconsistent with a trailing three year growth of 15, 7%.

Speaker 3: The same factors we've discussed is having impacted the first half of the year continue to weigh on the third quarter. These are...

The same factors, we've discussed is having impact in the first half of the year.

<unk> to weigh on the third quarter.

These are in order of magnitude.

Speaker 3: The decrease in client activity in the tech and telecom client sector, which has an evident across our industry this year, and the underperformance.

The decrease in client activity in the tech and telecom client sector.

<unk> has been evident across our industry this year.

And the underperformance of our digital specialist agencies.

Speaker 3: Decreases in both of these areas were at about the same scale as we identified in the second quarter, and together they weighed on our third quarter growth by approximately 3.2%.

Decreases in both of these areas. We're at about the same scale as we identified in the second quarter and together they weighed on our third quarter growth by approximately three 2%.

Speaker 3: As we spoke into in recent quarters, major marketers and technology sector are consumers of our core service.

As we've spoken to in recent quarters major marketers in the technology sector are consumers of our core services.

Speaker 3: And as a sector, their budgets this year have seen significant cost cutting. In line with the broader austerity efforts at those companies.

And as the sector their budgets this year has seen significant cost cutting.

In line with the broader austerity efforts at those companies.

Speaker 3: While it's challenging to call the timing of the upturn in their marketing spend, we do believe that the current pressure on this sector will abate.

While it's challenging to call the timing of the upturn in their marketing spend.

We do believe that the card pressure on this sector will abate.

Speaker 3: And these market leaders will need to return the growth mode.

These market leaders will need to return to growth mode.

Speaker 3: Another key factor negatively impacting our results is the broad concern about marketers related to macroeconomic conditions, which we've identified in our previous calls this year.

Another key factor negatively impacting our results is the broad concern about marketers related to macroeconomic conditions, which we've identified in our previous calls this year.

Speaker 3: Economic concerns have translated into what is now an unmistakable more cautious tone in the business.

Economic concerns have translated into what is now an unmistakable being more cautious tone in the business.

Speaker 3: We saw those headwinds take several forms, including pauses and certain planned activities, fewer and generally smaller project opportunities, and a slower than anticipated pace. Conversion and...

We saw those headwinds takes several forms including positive in certain planned activities.

Fewer and generally smaller project opportunities and a slower than anticipated pace.

Conversion and Onboarding of new business.

Speaker 3: Notwithstanding these challenges, it's worth noting that we did see progressively better performance from month to month during the third quarter with growth in September .

Notwithstanding these challenges it's worth noting that we did see progressively better performance from month to month during the third quarter.

With growth in September .

Speaker 3: We also saw aggregate growth among our top 20 clients in the quarter.

We also saw aggregate growth among our top 20 clients in the quarter.

We continue to anticipate that the new business that we've won across the first part of this year will be more visible in our results going forward.

Speaker 3: We continue to anticipate that the new business that we've won across the first part of this year will be more visible in our results going forward.

Speaker 3: And as was announced yesterday, we replaced C General Mills tap UM as their global media agency of record. UM will handle all strategy planning, buying analytics, performance, and commerce efforts across 36 markets for this important client.

And as was announced yesterday, we were pleased to see general Mills tapped the U M as their global media agency of record.

M will handle all strategy planning buying analytics performance and commerce efforts across 36 markets for this important client.

Speaker 3: Also worth highlighting that in the quarter, we continue to see growth in areas of the business that have been key drivers of success for us over a number of years.

It's also worth highlighting that in the quarter, we continued to see growth in areas of the business that have been key drivers of success for us over a number of years.

Speaker 3: family or media offerings, which performed very strongly, and the health care.

Namely our media offerings, which performed very strongly and the health care sector.

Speaker 3: In addition, we have solid growth in sports and entertainment marketing, public relations, and our experiential offer.

In addition, we had solid growth with sports and entertainment marketing.

Public relations and our experiential offerings.

Speaker 3: Six of our eight client sectors grew during quarter, as has been the case in the nine months year to date.

Six of our eight client sectors grew during the quarter as has been the case in the nine months year to date.

Speaker 3: We were led in the quarter by the strong growth of auto and transportation.

We were late in the quarter by the strong growth of auto and transportation.

Speaker 3: followed by our other sector of diversified industrials and public sector clients. The financial services in here.

Followed by our other sector of diversified industrials and public sector clients.

The financial services and healthcare sectors.

Speaker 3: Healthcare grew in the quarter, though not at the more robust levels we'd expected.

Health care grew in the quarter, though not at the more robust levels, we had expected.

Speaker 3: Food and beverage and consumer good sectors also increased in Q3. We have a slight decrease in the retail sector. The tech and telecom sector decreased in the high teens, the percentage basis. And this is not only due to the larger trend in the sector, but also the significant client loss in the CAM.

Food and beverage and consumer goods sectors also increased in Q3.

We had a slight decrease in the retail sector.

The tech and telecom sector decreased in the high teens percentage basis.

This is not only due to the larger trend in the sector, but also to a significant client loss at Mccann.

Speaker 3: Regionally, we saw organic growth in the quarter across the UK, Europe , Latin America, and our other markets group. The US and Asia Pacific region decreased.

Regionally, we saw organic growth in the quarter across the UK Europe , Latin America, and our other markets group.

The U S and Asia Pacific region decreased.

Speaker 3: Lower revenue in the U.S. was predominantly due to the sector and agency-specific challenges we've combed out.

Lower revenue in the U S was predominantly due to the sector and agency specific challenges we've called out.

Speaker 3: As we look at the balance of the year, the geopolitical situation in the Middle East does add a degree of uncertainty to our business.

As we look to the balance of the year the geopolitical situation in the Middle East does add a degree of uncertainty to our business.

Speaker 3: Our operations in Israel include the full range of creative marketing services and media offerings. They represent approximately 1% of total IPG global revenue.

Our operations in Israel includes the full range of creative marketing services and media offerings.

They represent approximately 1% of total IPG global revenue.

Speaker 3: As you'd expect economic activity in the country is at a standstill, which is already begun to have an impact during what is seasonally.

As you would expect economic activity in the country is at a standstill, which has already begun to have an impact during what is seasonally.

The business is largest quarter.

Speaker 3: The developing geopolitical crisis is of course foremost a human concern, and our top priority is to do what we can to support our colleagues in the region. But in the context of this call, we did feel it was necessary to point out it will also have some business implications.

The developing geopolitical crisis is of course foremost of human concern.

Top priority is to do what we can to support our colleagues in the region, but.

But in the context of this call we.

We did feel it was necessary to point out it will also have some business implications.

Speaker 3: Turning the segment performance, media data and engagement solutions grew organically by 50 basis points in the quarter.

Turning to segment performance media data and engagement solutions grew organically by 50 basis points in the quarter.

Speaker 3: We continue to see very strong growth in our media offerings, but that was again largely offset by challenge results in our digital specialty agency.

We continue to see very strong growth in our media offerings, but that was again largely offset by challenged results in our digital specialty agencies.

Speaker 3: Our segment of integrated advertising creativity led solutions decreased 4.1% organically as the tech and telecom client sector and a more cautious spending climate weighed on our traditional consumer advertising agents.

Our segment of integrated advertising creativity led solutions decreased four 1% organically.

The tech and telecom client sector, and a more cautious spending climate weighed on our more traditional consumer advertising agencies.

Speaker 3: F-C-V's strong performance in the quarter was a notable exception powered by its strategy of incorporating data informed audience-led thinking into its core creating offer.

<unk> strong performance in the quarter with a notable exception.

Powered by its strategy of incorporating data informed audience led thinking into its core creative offering.

Speaker 3: Our segment specializes communications and experiential solutions, grew by 6.5% organically.

Our segment of specialized communications and experiential solutions group.

<unk> grew by six 5% organically.

Speaker 3: The quarter was highlighted by increases in sports and entertainment, experiential, and public relations. Turning to an over.

The quarter was highlighted by increases in sports and entertainment experiential and public relations.

Turning to an overview of expenses and margin.

Speaker 3: Operating discipline continued to be a strength and was fully in evidence during the quarter.

Operating discipline continue to be a strength and was fully and evidenced during the quarter.

Third quarter adjusted EBIT margin was 17, 2%.

Speaker 3: Third quarter adjusted EBIT-A margin with 17.2% up from 15.5% a year ago.

Up from 15, 5% a year ago.

Speaker 3: Across the group, we're effectively managing our flexible operating model.

Across the group.

We're effectively managing our flexible operating model.

Speaker 3: which you can see in our expenses for temporary labor, performance-based incentive compensation, and S-GNA.

Which you can see in our expenses for temporary labor.

Performance based incentive compensation in SG&A.

Speaker 3: Total head count decreased by 1.5% from a year ago.

Total head count decreased by one 5% from a year ago.

Speaker 3: Occupy at C-expans decreased as well, as we continue to benefit from actions taken on the real estate portfolio, and other variable expenses such as travel were resources operating leverage.

Occupancy expense decreased as well as we continue to benefit from actions taken in our real estate portfolio and.

And other variable expenses, such as travel or sources of operating leverage.

Speaker 3: Our diluted earnings per share in the quarter with 63 cents as reported and with 70 cents as adjusted for incantible zamirization on their item.

Our diluted earnings per share in the quarter was 63 cents as reported.

With 70 cents as adjusted for intangibles amortization and other items.

Speaker 3: During the quarter, we repurchased 2.6 million shares, returning $91 million to shareholders.

During the quarter, we repurchased two 6 million shares returning $91 million to shareholders.

Speaker 3: That brings our share we purchased this for the nine months at 6.1 million shares using $219 million. The strength and strategic

That brings our share repurchases for the nine months to $6 1 million shares.

<unk> $219 million.

The strength and strategic relevance of our offerings.

Speaker 3: is evident in our new business Wednesday year to date and our long-term record of organic growth. That said,

As evident in our new business wins year to date.

And our long term record of organic growth that said.

Speaker 3: We had anticipated that the puts in takes in Q3 would have netted to better revenue performance than reflected in our results today. And I'll do more to unpack that for you in my closing remarks.

We had anticipated that the puts and takes in Q3 would have needed to better revenue performance than reflected in our results today.

And I will do more to unpack that for you in my closing remarks.

Speaker 3: Turn into our outlook for the remainder of this year, given the trends we've called out for you at the beginning of the year, the fact that macro-conditions have become more challenging, as well as the incremental impact of geopolitical uncertainty. We believe organic revenue performance for the fourth quarter will come in at approximately 1% growth.

Turning to our outlook for the remainder of this year given the trends we've called out for you at the beginning of the year. The fact that macro conditions have become more challenging as well as the incremental impact of geopolitical uncertainty we.

We believe organic revenue performance for the fourth quarter it will come in at approximately 1% growth.

Speaker 3: Nonetheless, we remain committed to a margin goal for the year of 16.7%.

Nonetheless, we remain committed to a margin goal for the year of 16, 7%.

Speaker 3: A current level of performance is not up to the standards we set over many years.

Our current level of performance is not up to the standards, we set over many years.

Speaker 3: We'll therefore be looking to close this year as strongly as possible and specific to identified areas of underperformance.

We will therefore be looking to close this year as strongly as possible and specifics to identified areas of underperformance.

Speaker 3: Also assess structural internal solutions to improve our growth process.

Also assessed structural internal solutions to improve our growth profile.

Speaker 3: At this point, I hand the call over to Ellen for a more detailed review of our results.

At this point I'll hand, the call over to Ellen for a more detailed review of our results.

Speaker 1: Thank you, Philippe. As a reminder, my remarks will track to the presentation slides that accompany our web.

Thank you Felipe.

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

Speaker 1: Beginning with the highlights on slide two of the presentation, our third quarter revenue before bill about expenses or net revenue increased 60 basis points from a year ago with an organic decrease of 40 basis points.

Beginning with the highlights on slide two.

After the presentation.

Third quarter revenue for billable expenses or net revenue increase.

Increased 60 basis points from a year ago with an organic decrease of 40 basis points.

Speaker 1: Our organic decrease was 1.2% in the US. While we grew 1.1% organically in our international market.

The organic decrease was one 2% in the U S. While we grew one 1% organically international Mike.

Speaker 1: Over the first nine months of the year, our organic revenue decrease was 80 basis points.

Over the first nine months of the year, our organic revenue decrease was 80 basis points.

Speaker 1: Third quarter adjusted in the TA with 397.2 million, an increase of 11.5% from a year ago, and margin was 17.2%.

Third quarter, adjusted EBITDA was 397 2 million and.

An increase of 11, 5% from a year ago and margin was 17, 2%.

Speaker 1: are deluded earnings per share in the quarter with 63 cents as reported and 70 cents as a just.

Our diluted earnings per share in the quarter was 63 cents as reported and.

70% are suggesting.

Speaker 1: The adjustments exclude the after-tax impacts of the amortization of acquired and tangible and non-operating losses on the sales of certain small non-strategic business.

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

And on the operating losses on the sale of certain small non strategic businesses.

Speaker 1: We repurchased 2.6 million shares during the quarter and 6.1 million shares in the years first nine months.

We repurchased two 6 million shares during the quarter.

Six 1 million shares in the year's first nine months.

Speaker 1: Turning to slide three, the CRP and L for the quarter. I'll cover revenue and operating expenses in detail in the slides that follow.

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

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

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

Speaker 1: Turning to third, order revenue in more detail on slide 4.

Speaker 1: A net revenue in the quarter was 2.31 billion.

Our net revenue in the quarter was $2 three 1 billion.

Speaker 1: Compared to Q3-22, the impact of the change in exchange rate was positive 70 basis points.

Compared to Q3 'twenty two.

Impact of the change in exchange rates was positive 70 basis points.

Speaker 1: with the US dollar weaker against the euro pound in several lap time currencies, compared to last year. But stronger against most currencies in AsiaPAC and the Canadian dollar.

But the U S dollar weaker against the Euro pound and several Latam currencies compared to last year.

But stronger stronger against most currencies in Asia Pac and the Canadian dollar.

Speaker 1: Our net acquisitions added 30 basis points.

Our net acquisitions added 30 basis points.

Speaker 1: Our organic decrease of revenue before billable expenses with 40 base points.

Our organic decrease of revenue before billable expenses was 40 basis points.

Speaker 1: For the nine months, our organic decrease with 80 basis points. The performance of our segments is a-

For the nine months, our organic decrease with 80 basis points.

Performance of our segments. It was at the bottom of the slide.

Speaker 1: Our media, data and engagement and solution segments grew organically by 50 basis points.

Our media data and engagement solutions segment grew organically by 50 basis points we.

Speaker 1: We had very strong global growth in our media businesses, though that was largely offset by the continued underperformance by our digital specialist age.

We had very strong global growth in our media businesses, but that was largely offset by the continued underperformance by our digital specialist agencies.

Speaker 1: Our integrated advertising and creatively led solution segment decreased organically by 4.1%.

Our integrated advertising and creatively glad solutions segment decreased organically by four 1%.

Speaker 1: Lower revenue from clients, a mitech and telecom sector, had a more challenging macro environment, with felt broadly across a more traditional consumer facing cases.

Well, where revenue from clients in med Tech and telecom sector.

More challenging macro environment.

Felt broadly across our markets now consumer facing.

Speaker 1: At our specialized communications and experiential solution segment, organic growth was 6.5% with growth across our sports and entertainment, countless relations, and experiential disciplines.

And our specialized communications, an exponential solutions segment organic growth was six 5% with growth across our sports and entertainment public relations and ex parental discipline.

Speaker 1: Moving on to slide five, an organic net revenue growth by region.

Moving on to slide five.

Organic net revenue growth by region.

Speaker 1: In the US, which was 65% of our revenue before billable expenses in the quarter, our organic decrease was 1.2%. Again, 4.4% growth in last year's third quarter.

In the U S, which was 65% of our revenue people up there about expenses in the quarter, our organic decrease was one 2%.

Against four 4% growth in last year's third quarter.

Speaker 1: decreases among tech and telecom, sector clients, and a more cautious macroeconomic environment. Continue to weigh on our performance, notably at our digital specialist, and at most of our creatively led agents.

Decreases among tech and telecom sector clients and a more cautious macroeconomic environment.

Continued to weigh on our performance, notably at our digital specialists.

Most of our creatively led agencies.

Speaker 1: We have strong growth at our media offerings, followed by increases at our sports and entertainment, experiential and public relations discipline.

We had strong growth in our media offering followed by increases at our sports and Entertainment X brand so in public relations disciplines.

Speaker 1: International market, which was 35% of our net revenue grew organically 1.1% in the quarter, on top of 7.8% in year ago.

International markets.

35% of our net revenue grew organically one 1% in the quarter on top of seven 8% a year ago.

Speaker 1: UK, which is 8% of net revenue from the quarter, through 2.2% organically, on top of 4.9%.

The U K, which is 8% of net revenue in the quarter.

With two 2% organically.

With two 2% organically.

Top of four 9% a year ago.

Speaker 1: Grocer's lead by IBG Media Brown, McCann, and FCB.

Growth was led by IPG media brands Mccann and FCB.

Speaker 1: Constantin Europe , which was 8% of net revenue, through 3.9% organically in the quarter, compounding last year's 4.7% growth.

Continental Europe , which is 8% of net revenue grew three 9% organically in the quarter.

Compounding last year's four 7% growth.

Speaker 1: We were left by growth in Spain and Germany as well as by increases in smaller national markets.

They were led by growth in Spain, and Germany, as well as by increases in smaller national markets.

Speaker 1: Asia Pax was also 8% of net revenue in the quarter. Our organic decrease was 5%, some parented 5.6% growth a year ago due to decreases in Japan and China.

Asia Pac was also 8% of net revenue in the quarter.

The organic decrease was 5% compared to five 6% growth a year ago due to decreases in Japan and China.

Speaker 1: In Latin, which was 5% of net revenue, are organic growth with 5.7%. On top of 19.8% a year ago, with increases across all national markets led by Columbia and Argentina.

And Latam, which was 5% of net revenue organic growth was five 7% on top of 19, 8% a year ago with increases across all national markets led by Columbia and Argentina.

Speaker 1: In our other markets group, which is Canada, the Middle East, and Africa, we grew 1.2 percent on top of 10.6 percent a year ago.

In our other markets group, which is Canada, the middle East and Africa. We grew one 2% on top of 10, 6% a year ago.

Speaker 1: Moving on to slide six and operating expenses in the quarter.

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

Speaker 1: A net operating expenses, which excludes billable expenses, the amortization of acquired intangibles, and restructuring adjustments, decreased 1.5% from a year ago, compared with the growth in reported net revenue of 60 basis points.

Our net operating expenses, which excludes billable expenses.

<unk> of acquired intangibles and restructuring adjustments decreased one 5% from a year ago.

Compared with the growth in reported net revenue of 60 basis points.

Speaker 1: The result was an adjusted EVA TA margin of 17.2%, an increase of 170 basis points from a year ago.

The result was an adjusted EBIT margin of 17, 2%.

<unk> increased by 170 basis points from a year ago.

Speaker 1: As you can see on this slide, a ratio of total salaries and related expense as a percentage of net revenue decreased by 110 basis points to 66.3% from 67.4% in last year's third quarter.

As you can see on this slide our ratio of total salaries and related expense.

As a percentage of net revenue decreased by 110 basis points to 66, 3% from 67, 4% in last year's third quarter.

Speaker 1: Compared to last year, we delivered on our expense for base payroll benefits and tax, while our expense for temporary labor, employee incentive compensation, and severance decreased as a percent of net revenue.

Compared to last year and delivered on our expense for base payroll benefits and tax.

Our expense for temporary labor and employee incentive compensation and severance decreased as a percent of net revenue.

Speaker 1: Each of these ratios is shown in the appendix on slide 31.

Each of these ratios as shown in the appendix on slide 31.

Speaker 1: Headcount at quarter end with 57,700, a decrease of 1.5% per year ago.

Head count at quarter end was 57700.

A decrease of one 5% from a year ago.

Speaker 1: Also on this slide, our office and other direct expense was 13.8% of net revenue compared with 14.3% in Q322.

Also on this slide our office and other direct expense was 13, 8% of net revenue.

Paired with 14, 3% in Q3 22.

Speaker 1: Underneath that, improvement, we continue to leverage our expense for occupancy and all other office and other expense.

Underneath that improvement, we continue to leverage our expense for occupancy and all other office and other expense.

Speaker 1: Our SDNA extends with 70 basis points of net revenue and the improvement of 10 basis points.

Our SG&A expense was 70 basis points of net revenue and an improvement of 10 basis points.

Speaker 1: On slide seven, we presented detail on adjustments to report a third quarter result. In order to provide better transparency and a picture of comparable performance.

On slide seven we present the detail on adjustments to reported third quarter results.

In order to provide better transparency and a picture of comparable performance.

Speaker 1: This begins on the left hand side with reported results. And from left to right, depth through to adjusted EVTA and our adjusted deluded EPS.

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

Speaker 1: Our expense for the amortization of acquired intangibles in the second column was 21 million.

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

Speaker 1: The adjustments to previous restructuring actions was a credit of 600,000.

The adjustments to previous restructuring restructuring actions was a credit of 600000.

Speaker 1: Blow operating expenses and shown in column 4, we had a loss of 12.1 million in other expenses that would do the disposition of a few small non-stricted businesses.

Below operating expenses as shown in column four we had a loss of $12 1 million and other expenses that was due to disposition of a few small non strategic businesses.

Speaker 1: As a foot of the slide, you can see the after-tax impact for diluted share of e-to-justment, which bridges our diluted EPS as reported at 63 cents to adjusted earnings of 70 cents for diluted share.

That's a part of this slide you can see the after tax impact per diluted share of each adjustment, which bridges, our diluted EPS as reported at 63 cents to adjusted earnings of 70 cents per diluted share.

Speaker 1: Slide 8 to pick similar adjustments for the nine months. Our diluted earnings per share is $1.64 as reported and $1.81 as adjusted.

Slide eight depicts similar adjustments for the nine months, our diluted earnings per share is $1.64 as reported and $1 81 as adjusted.

Speaker 1: As a reminder, reported and adjusted EPS for the year to date, period, includes the benefit of $0.17 per share recorded to our tax provision in this year's second quarter. On slide nine.

As a reminder, reported and adjusted EPS for the year to date period includes the benefit of <unk> 17 per share recorded to our tax provision in this year's second quarter.

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

Speaker 1: Pass from operations is 242.7 million and operating cash flow before working capital with 365.4 million.

Cash from operations was $242 7 million and operating cash flow before working capital was $365 4 million.

Unknown Attendee: Good morning and welcome to the Interpublic Group 3rd quarter 2023 conference call. All parties are in a listen only mode until the question and answer portion. At that time, if you would like to ask a question, you may press star one.

Speaker 1: As a reminder, our operating cash flow is highly seasonal and can be volatile by quarter due to changes in the working capital component.

As a reminder.

Our operating cash flow is highly seasonal and <unk>.

Can be volatile by quarter due to changes in the working capital component.

Unknown Attendee: This conference is being recorded. If you have any objections, you may disconnect at this time.

Speaker 1: And our investing activities use 48.6 million, essentially fall of which was towards CapEx in the quarter.

And our investing activities used $48 6 million.

Jerry Leshne: I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin. Good morning. Thank you for joining us. This morning we are joined by our CEO, Philippe Krakowsky and by Ellen Johnson, our CFO. We have posted our earnings release and our slide presentation on our website, interpublic.com. We will begin with prepared remarks to be followed by Q&A. We plan to conclude before market open at 9.30 Eastern time.

Essentially all of which was towards the capex in the quarter.

Speaker 1: Our financing activities use 225.5 million, mainly reflecting capital returns to shareholders.

Our financing activities used $225 5 million.

Really reflecting capital return to shareholders.

Speaker 1: Our net decrease in cash for the quarter with 52.7 dollars.

Our net decrease in cash for the quarter with $52 79.

Speaker 1: July 10 is the current portion of our balance sheet. The end is a quarter with 1.57 billion of cash and equivalence, and 102 million in short-term marketable securities to be held to maturity, which is before Iran.

Well I 10, if the current portion of our balance sheet.

Ended the quarter with 1.5 dollars 7 billion of cash and equivalents and $102 million and short term marketable securities to be held to maturity, which is before year end.

Jerry Leshne: During this call, we will refer to forward-looking statements about our company. These are subject to the uncertainties and the cautionary statement that are included in our earnings release and the slide presentation. These are further detailed in our 10Q and other filings with ESVC. We will also refer to certain non-GAP measures. We believe that these measures provide useful supplemental data that, while not a substitute for GAP measures, allow for greater transparency in the review of our financial and operational performance.

Speaker 1: Slide 11 depicts the pictures of our outstanding debt. As you can see on this schedule, total debt at quarter end with 3.2 billion. That includes our 300 million 10 year note, which he issued in June to prefund our 250 million maturity in April of next year. Thereafter, our next maturity is not until 2028.

Slide 11 pixel image depicts the maturities of our outstanding debt.

You can see on this schedule total debt at quarter end was $3 2 billion.

It includes our $300 million 10 year note, which he issued in June to pre fund our $250 million maturity in April of next year thereafter, our next maturity is not until 2028.

Speaker 1: In summary, on slide 12, our strong financial discipline continues, and the strength of our balance sheet and liquidity mean that we remain well positioned both financially as well as commercially. And with that, I'll turn it back to the lead.

In summary on slide 12, our strong financial discipline continues and the strength of our balance sheet and liquidity means that we remain well positioned both financially as well as commercially and with that I'll turn it back to Lee.

Philippe Krakowsky: At this point, it is my pleasure to turn things over to Philippe Krakowsky. Thank you, Jerry. As usual, this morning I will begin with a high-level view, the quarter after which Ellen will provide additional details.

Thanks Alan.

Speaker 3: Without question, organic revenue performance to date this year is not consistent with our expectations. Or long-term track.

Without question organic revenue performance to date this year is not consistent with our expectations.

Our long term track record.

Speaker 3: We continue to be in market with relevant and compelling offerings that are helping marketers accelerate growth and deliver business outcomes. And that was translated to new business success year-to-date.

We continue to be in market with relevant and compelling offerings are helping marketers accelerate growth and deliver business outcomes.

Philippe Krakowsky: I will conclude with updates on our agencies to be followed by Q&A.

And that has translated into new business exceeded its success year to date.

Speaker 3: Now for many of you who've been with us over a period of years, you know that we were among the first.

Now for many of you who've been with us over a period of years, you know that we were among the first.

Philippe Krakowsky: Before getting to the business of the call, however, it seems not only appropriate, but necessary to speak to our collective shock and grief in response to the terrorist attacks perpetrated in Israel and their aftermath. Thankfully, our colleagues in Israel are safely accounted for, though many are being called into service. We are also clearly in the midst of humanitarian crisis in the region, so our thoughts go out to all innocent lives that have been impacted by violence and those who remain in harm's way. Given the scale of our operations in Israel, we will also spend a bit more time later in the call discussing the implications on IPG's business.

Speaker 3: to embed digital capabilities across media, healthcare, and many of our marketing services.

To embed digital capabilities across media health care and many of our marketing services.

Speaker 3: Thwell to recognize the importance of the integrated services and increasingly complex consumer ecotasis.

To recognize the importance of integrated services in an increasingly complex consumer ecosystem.

Speaker 3: Similarly, we were early to understand the growing importance of data resources and first-party data capabilities at scale. As key tools...

Similarly, we were early to understand the growing importance of data resources and first party data capabilities at scale.

As key tools to power the success of our clients.

Philippe Krakowsky: Turning the three Q performance, starting at the top of revenue, results did not measure up to expectations. The organic change of our revenue before billable expenses was a decrease of 40 basis points. For the first nine months of the year, our organic decreases therefore 80 basis points from a year ago, inconsistent with a trailing three-year growth of 15.7%. The same factors we discussed is having impacted the first half of the year, continued to weigh on the third quarter.

Speaker 3: Given the very rapid rate of change we're all experiencing, we continue to further evolve our offerings, investing in ways that help brands compete in a dynamic world of new technology platforms and empowered consumers.

Given the very rapid rate of change we're all experiencing we continue to further evolve our offerings investing in ways that help brands compete.

In a dynamic world of new technology platforms and empowered consumers.

Speaker 3: This work is meant that increasingly large portions of our portfolio are better oriented, in particular areas of growth.

This works has meant that increasingly large portions of our portfolio are better oriented particular areas of growth.

Speaker 3: Consistent with that objective during the quarter, we launched our unified retail media solution, which is a dedicated business unit within media brands. It helps clients manage their investments across all retail media networks. One of the fastest growing apps.

Consistent with that objective during the quarter, we launched our unified retail media solution, which is a dedicated business unit within media brands.

Philippe Krakowsky: These are, in order of magnitude, the decrease in client activity in the tech and telecom client sector, which has been evident across our industry this year and the underperformance of our digital specialist agencies. Davis. Decreases in both of these areas were at about the same scale as we identified in the second quarter, and together they weighed on our third quarter growth by approximately 3.2%. As we've spoken to in recent quarters, major marketers and technology sector are consumers of our core services, and as a sector, their budgets this year have seen significant cost-cutting in line with the broader austerity efforts at those companies.

As clients manage their investments across all retail media networks.

The fastest growing advertising channels.

Speaker 3: That solution is already helping brands maximize their media investments across all of the retail channels in real time in order to drive next best business outcome.

Our solution is already helping brands maximize immediate investments across all of the retail channels in real time.

In order to drive next best business outcomes.

Speaker 3: Earlier this week, we also launched Real ID in the cloud, the tool powered by Axiom and piloted at FCP.

Earlier. This week, we also launched real IV in the cloud.

Tool powered by axiom and piloted at FCB.

Speaker 3: It modernizes identity resolution and addresses an industry need for identity tools in a post-cookie world.

It modernizes identity resolution and.

And addresses an industry need for identity tools in a post cookie world.

Speaker 3: built on ethically sourced data that prioritizes consumer privacy, real ID creates the opportunity for us to do the kind of intelligent data-driven work that we've been doing in media for some time across all marketing channels and disciplines.

Built on ethically sourced data that prioritizes consumer privacy realized creates the opportunity for us to do the kind of intelligent <unk>.

Philippe Krakowsky: While it's challenging to call the timing of the upturn in their marketing spend, we do believe that the current pressure on this sector will abate, since these market leaders will need to return to growth mode. Another key factor negatively impacting our results is the broad concern about marketers related to macroeconomic conditions, which we've identified in our previous calls this year. Economic concerns have translated into what is now and are mistakenly more cautious tone in the business.

Data driven work that we've been doing in media for some time across all marketing channels and disciplines.

Speaker 3: Our AI Steering Committee includes leaders from across our network, and it continues its work over seeing strategic partnerships and sharing news cases across the group.

Our AI steering committee.

<unk> leaders from across our network.

It continues its work overseeing strategic partnerships, ensuring use cases across the group.

Speaker 3: As you know, we've been using machine learning and other AI tools in our data and media business for a number of years.

As you know we've been using machine learning and other AI tools, and our data and media business for a number of years.

Speaker 3: with hundreds of new AI pilots underway across the company. We're tracking the subset of promising programs with a particular focus on three new areas. First, using AI to generate content, including text, images, audio and video, in our ideation and creative processes.

Hundreds of new AI pilots underway across the company, we're tracking a subset promising programs with a particular focus on three new areas.

Philippe Krakowsky: We saw those headlines take several forms, including pauses in certain planned activities, fewer and generally smaller project opportunities, and a slower than anticipated pace in conversion and onboarding of new business. Notwithstanding these challenges, it's worth noting that we did see progressively better performance from month to month during the third quarter with growth in September. We also saw aggregate growth among our top 20 clients in the quarter. We continue to anticipate that the new business that we've won across the first part of this year will be more visible in our results going forward.

Using AI to generate content, including text images audio and video in our ideation and creative processes.

Speaker 3: Second, AI is a tool to uncover strategy and insights.

Second.

The tool to uncover strat.

Strategy and insights.

Speaker 3: You'll always business trends that can help our clients and their brands. And finally,

You always business trends that can help our clients and their brands and finally.

Speaker 3: By letting the use of intelligent chatbots automate paths like program recommendations and other key steps on consumers e-commerce journeys.

Piloting the use of intelligence chatbot to automate tasks like program recommendations and other key steps on consumers E Commerce journeys.

Speaker 3: Given the impact AI will continue to have on all businesses, including ours, we're fully engaged with leading AI in a bit.

Given the impact and I will continue to have on all businesses, including ours, we're fully engaged with leading innovators.

Philippe Krakowsky: And as was announced yesterday, we were pleased to see General Mills tap UM as their global media agency of record. UM will handle all strategy planning, buying analytics, performance and commerce efforts across 36 markets for this important client. It's also worth highlighting that in the quarter, we continue to see growth in areas of the business that have been key drivers of success for us over a number of years, namely our media offerings which perform very strongly in the healthcare sector.

Speaker 3: Adobe Amazon Google Microsoft Nvidia and Sims.

Adobe Amazon, Google, Microsoft and video and Salesforce.

Speaker 3: For example, during the quarter, NVIDIA worked with us, specifically within our PR agencies, to incorporate AI-enabled processes into earned media and corporate communications workflow.

For example, during the quarter and video worked with us.

Specifically within our PR agencies to incorporate AI enabled processes in the earned media and corporate communications workflows.

Speaker 3: I just stepped back and talked a bit again about our reporting segments, some detail discussed earlier. Within the MD and E segment, we had very strong growth at our media offerings.

And just to step back and talk a bit again about our reporting segments in some detail as discussed earlier.

Philippe Krakowsky: In addition, we had solid growth in sports and entertainment marketing, public relations and our experiential offerings. Six of our eight client sectors grew during the quarter, as has been the case in the nine months year to date. We were led in the quarter by the strong growth of auto and transportation, followed by our other sector of diversified industrials and public sector clients, the financial services and healthcare sectors. Healthcare grew in the quarter, though not at the more robust levels we've expected.

Within the M D and E segment, we had very strong growth and our media offerings.

Speaker 3: But that continued to be largely offset by challenges within the BATALIS JIGINAL Specialty Agency.

But that continued to be largely offset by challenges within the dental digital specialty agencies.

Speaker 3: I think notably during the quarter, we brought three distinct media brand companies, Kineso, MatterCynon, Reprise, under the Kineso banner and brand to create the unified, sectar-in-performance unit.

Notably during the quarter, we brought three distinct media brand companies connect so matter kind and reprise.

Under the <unk> banner and brand to create a unified tech driven performance unit.

Speaker 3: that enhances the effectiveness, efficient, and simplicity of media activation that is end to end across it. That... ... um...

It enhances the effectiveness efficiency and simplicity.

Media activation.

And across that.

Philippe Krakowsky: Food and beverage and consumer good sectors also increased in Q3. We had a slight decrease in the retail sector. The tech and telecom sector decreased in the high teens and percentage basis. And this is not only due to the larger trend in the sector but also the significant client loss in the camp. Regionally we saw organic growth in the quarter across the UK, Europe, Latin America and our other markets group. The US and Asia Pacific region decreased. East. Lower revenue in the U.S, was predominantly due to the sector and agency specific challenges we've combed out.

Values chain.

Speaker 3: And as mentioned earlier, General Mills is another great piece of news at MediaBrent.

And as mentioned earlier General Mills is another great piece of news and media brands.

Speaker 3: During the quarter, ACCEM announced that its InfoBase consumer insights and audiences are now available in cloud data exchanges and received a Salesforce Partner Innovation Award for work it's doing with its Heathrow client.

During the quarter axiom announced that its info base consumer insights and audiences are now available.

Cloud data exchanges.

And received a Salesforce partner Innovation award for work its doing with its Heathrow client.

Speaker 3: The company also recently launched Accine Health to the latest vertical offering and provides advertisers with quality audiences that span both consumers and healthcare providers with more effective reach and precision.

The company also recently launched axiom health.

So that's the latest vertical offering and.

It provides advertisers with quality audiences that span, both consumers and health care providers.

The effective reach and precision.

Philippe Krakowsky: As we look at the balance of the year, the geopolitical situation in the Middle East does add a degree of uncertainty to our business. Our operations in Israel include the full range of creative marketing services and media offerings, and they represent approximately 1% of total IPG global revenue. As you'd expect, economic activity in the country is at a standstill, which is already begun to have an impact during what is seasonally the business's largest quarter.

Speaker 3: At huge, the agency had a number of wins with their new suite of consultative products, their tailors just specific client business problems, which allows them...

At huge the agency had a number of wins with our new suite of consultative products that are tailored to specific client business problems, which allows them <unk>.

Speaker 3: Deliver strategy through execution very rapidly and effectively.

Deliver strategy through execution very rapidly and effectively.

Speaker 3: The agency expanded its relationship with Darling Ingredients, which was begun earlier this year, with a significant design and build project. And on the product development side, huge launch, but it calls the AI Opportunity Mapper, which help clients anticipate big shifts that Gen AI will have in their specific industry and identify opportunities for growth across near and mid and long-term current.

Agency expanded its relationship with Darling ingredients, which was begun earlier this year.

With a significant design build project.

On the product development side huge launched.

It calls the AI opportunity Mapper, which helped clients anticipate big shifts the Jennie O will have in their specific industry and identify opportunities for growth.

Philippe Krakowsky: The developing geopolitical crisis is, of course, foremost a human concern, and our top priorities to do what we can to support our colleagues in the region. But in the context of this call, we did feel it was necessary to point out it will also have some business implications.

Across near mid and long term horizons.

Looking at RGA, The agency N as new business wins in the U S from Bloomberg and the BBC.

Speaker 3: Looking at RGA, the agency has new business wins in the US from Bloomberg and the BBC, and in Latin from Banco, Saffra, which is Brazil's premier financial institution.

And in Latam from Banco Safra, which is Brazil's premier financial institution.

Philippe Krakowsky: Turning to segment performance, media data and engagement solutions grew organically by 50 basis points in the quarter. We continue to see very strong growth in our media offerings, but that was again largely offset by challenge results in our digital specialty agencies. Our segment of integrated advertising and creativity led solutions decreased 4.1 percent organically, as the tech and telecom client sector and a more cautious spending climate weighed on our more traditional consumer advertising agencies.

Speaker 3: Margie also launched the associate's program, a unique approach to fractional hiring that offers flexibility and emphasizes adaptability and creativity.

<unk> also launched the associate's program.

Unique approach to fractional hiring that offers flexibility and emphasizes adaptability and creativity.

Speaker 3: and the agency's work for clients like Procter and Gamble and the ad council was recently recognized as a finalized for fast companies innovation by design awards.

And the agencies work for clients like Procter and Gamble and the AD Council was recently recognized as a finalist for fast company's innovation by design Awards.

Within the IAC segment.

Speaker 3: As we mentioned, Tekken Telco weigh on our more traditional consumer advertising agencies, but FCB was a notable exception to that.

As we mentioned tech and telco.

Based on our more traditional consumer advertising agencies, but F. C. V was a notable exception to that.

Philippe Krakowsky: SVV's strong performance in the quarter was a notable exception powered by the strategy of incorporating data and formed audience-led thinking into its core creative offering. Our segment of specialized communications and experiential solutions grew by 6.5 percent organically. The quarter was highlighted by increases in sports and entertainment, experiential and public relations.

Hmm.

Speaker 3: The networks playing a key role in our integrated Pfizer team and also expanded relationships in existence.

The network's playing a key role in our integrated Pfizer team.

And also expanded relationships with existing clients.

Such as.

Speaker 3: Sorry about that, with new clients, which is Diagio, Denone, and Upfield in Global Markets. We can not continue this until

I'm, sorry about that with new clients, such as the Ico Danone and Upfield in global markets.

IPG is health.

Speaker 3: IPG helps focus on creativity, technology and data, continue to be key to their clients. And during the quarter, the network launched the industry's first medical trial, diversity offering designed to help pharma and healthcare companies ensure more inclusive treatment and innovation.

IPG helps focus on creativity technology and data continue to be key to their clients and during the quarter. The network launched the industry's first clinical trial diversity offering designed to help pharma and health care companies ensure more inclusive treatment innovations.

Philippe Krakowsky: Turning to an overview of expenses and margin, operating discipline continued to be a strength and was fully an evidence during the quarter. Third quarter adjusted EBITR margin with 17.2 percent, up from 15.5 percent a year ago. Across the group, we're effectively managing our flexible operating model, which you can see in our expenses for temporary labor, performance-based incentive compensation and S-GNA. Total head count decreased by 1.5 percent from a year ago, occupancy expense decreased as well, as we continue to benefit from actions taken on the real estate portfolio and other variable expenses such as travel or resources operating leverage.

Speaker 3: Last month following a competitive pitch process, IKEA chose McCann as its first global brand marketing partner.

Last month.

I mean competitive pitch process Ikea chose Mccann as its first global brand marketing partner domestically.

Speaker 3: Domestically, TJ Maxx hired McCann as his creative AOR and wrecked to direct brand named MRM and McCann as brand leads in Europe and the US.

Domestically T J Maxx hired Mccann as its creative AOR and records direct brand named MRM and Mccann is brand leads in Europe and the U S.

Speaker 3: In addition, the network launched McCann Contents Studios. It's new Global Hub for Social and Creative Service.

In addition, the network launched Mccann content studios, its new global hub for social and creative services.

Speaker 3: Mollin-Low retained the DHRA account, which is the arm of the U.S. Department of Defense that focused on military recruitment across all service branches. It's renewals for five years, an expanded remit that includes advertising CRM, database management, integrated media, social, digital, and PR. All right.

Mullen Lowe retained the D. H R. A account, which is the arm of the U S Department of defense.

Philippe Krakowsky: Our diluted earnings per share in the quarter was 63 cents as reported and with 70 cents as adjusted for intangibles amortization and other items. During the quarter, we repurchased 2.6 million shares, returning $91 million to shareholders. That brings our share repurchases for the nine months to 6.1 million shares using $219 million. The strength and strategic relevance for offerings is evident in our new business wins year-to-date and our long-term record of organic growth.

Focused on military recruitment across all service branches.

Renewals for five years, then expanded remit that includes advertising CRM database management integrated media, social digital and PR.

Our S E N E solutions segment.

Speaker 3: As we mentioned, it saw a high-level growth across all disciplines. Following a strong new business track record year to date in Q3, following one new business, including need air mobility.

As we mentioned, it's all highlight saw growth across all disciplines.

Boeing is strong new business track record year to date in Q3, Boeing one new business, including Ive Air mobility.

Speaker 3: Capestry, the luxury brand holding company that owes coach and case paid. As well as Nutrugina, the Kenview skincare brand.

Philippe Krakowsky: That said, We had anticipated that the puts and takes in Q3 would have netted to better revenue performance than reflected in our results today. And I'll do more to unpack that for you in my closing remarks.

Cap history, the luxury brand holding company that owns coach and Kate Spade.

Well as neutrogena Kinsey skincare brand.

Speaker 3: Momentum grew strongly with core clients, including Verizon and Nike, and brought on a number of new clients, notably John Deere. Most recently, the company secured three AI patents.

Momentum grew strongly with core clients.

<unk>, Verizon and Nike and brought on a number of new clients, notably John Deere.

Philippe Krakowsky: Turning to our outlook for the remainder of this year, given the trends we've called out for you with the beginning of the year, the fact that macro-conditions have become more challenging, as well as the incremental impact of geopolitical uncertainty. We believe organic revenue performance for the fourth quarter will come in at approximately 1 percent growth. Nonetheless, we remain committed to a margin goal for the year of 16.7 percent. The current level of performance is not up to the standards we've set over many years. We'll therefore be looking to close this year as strongly as possible and specific to identified areas of underperformance. Also assess structural internal solutions to improve our growth profile.

Most recently the company secured three AI patents for the machine learning of experiences, which makes them. The first agency to do so in their area of expertise.

Speaker 3: which makes them the first agency to do so in their area of expertise.

Speaker 3: Dr. Gonsign, the ACC of the new client at their industry leading media rights division, and the agency won new client brands, including Hilton Hotels and Power A, as well as working with current clients, Budweiser, MasterCard and Unilever to manage activations at major global sporting events.

Octagon signed the ACC, the new client at their industry, leading media rights Division and the agency, one new client brands, including Hilton hotels and power as.

As well as working with current clients Budweiser Mastercard and Unilever to manage Activations at major global sporting events.

Speaker 3: Jack Morton, Vivi, the agency's diversity driven, inclusive marketing practice, posted wins and new work with the NBA and TIA.

Jack Morton V. The agency's diversity, driven inclusive marketing practice posted wins in new work with the NBA and T I E.

Speaker 3: There were also additional new client ads with Paramount Plus and Comcast and a large-scale reinvigoration of the ESPN Sports Center.

There were also additional new client ads with Paramount plus and Comcast and a large scale reinvigoration of ESPN Sportscenter.

Ellen Johnson: At this point, I hand the call over to Ellen for a more detailed review of our results. Thank you, Philippe. As a reminder, my remarks will track to the presentation slides that accompany our webcast. Beginning with the highlights from slide two of the presentation, our third quarter revenue before billable expenses or net revenue increased 60 basis points from a year ago, with an organic decrease of 40 basis points. Our organic decrease was 1.2 percent in the U.S., while we grew 1.1 percent organically in our international markets.

Speaker 3: by her Chandler's dog growth in the health sector and in its government and public policy work.

Weber Shandwick saw growth in the health sector, and then its government and public policy work.

Speaker 3: on the new business front. The other will wins, including dollar-shaped club, and a significant new assignment with a CDC.

On the new business front.

Notable wins included dollar shave club and a significant new assignment with the CDC.

Speaker 3: The network also expanded its predictive analytics and intelligence capability with a rollout of a new proprietary solution that measures the impact of earned media.

The network also expanded its predictive analytics and intelligence capability.

With a rollout of a new proprietary solution that measures the impact of earned media.

Despite these highlights from across the portfolio.

Speaker 3: As you can see from our results, the third quarter didn't unfold along the lines we'd envisioned when we spoke with you in July .

As you can see from our results the third quarter didn't unfold along the lines. We had envisioned when we spoke with you in July .

Ellen Johnson: Over the first nine months of the year, our organic revenue decrease was 80 basis points. Third quarter adjusted in the TA was 397.2 million, an increase of 11.5 percent from a year ago and margin was 17.2 percent. Our diluted earnings per share in the quarter was 63 cents as reported and 70 cents as adjusted. The adjustments exclude the aftertax impacts of the amortization of acquired and tangible and on operating losses on the sales of certain small non-strategic businesses. We repurchased 2.6 million shares during the quarter and 6.1 million shares in the year's first nine months.

Speaker 3: At that time, we shared our view of the second half in flexion point for stronger growth through.

At that time, we shared our view in the second half inflection point for stronger growth.

By several factors.

Speaker 3: One was accelerating growth of our media business, which didn't materialize, with notably stronger performance in the third quarter than we've seen earlier in the year.

One was accelerating growth of our media business, which didn't materialize with notably stronger performance in the third quarter and we've seen earlier in the year.

Speaker 3: We also look forward to a similar trajectory in our healthcare building.

We also look forward to a similar trajectory in our health care vertical.

Speaker 3: And while health care did grow in the quarter across the category, it was not at the level we'd anticipated.

While health care did grow in the quarter across the category.

Not at the level we'd anticipated.

Speaker 3: However, when new business coming online strong rate Q4, we do see help returning to its more typical rate of revenue.

However, with new business coming online stronger in Q4.

We do see health returning to its more typical rate of revenue growth.

Speaker 3: And as I mentioned earlier during Q3, while we saw the impact of new business coming on stream, it was slower to convert than the rate we've foreseen.

And as I mentioned earlier during Q3, while we saw the impact of new business coming on stream.

Was slower to convert then the rate.

We had foreseen.

Ellen Johnson: Turning to slide three, the U of CRPNL for the quarter, our cover revenue and operating expenses in detail in the slides that follow. Turning to third quarter revenue in more detail on slide four, our net revenue in the quarter was 2.31 billion. Compared to Q322, the impact of the change in exchange rate was positive 70 basis points. With the U.S, solid weaker against the euro, pound and several lap time currencies, compared to last year, with stronger against most currencies in AsiaPAC and the Canadian dollar. Our net acquisitions added 30 basis points. Our organic decrease of revenue before billable expenses with 40 basis points. For the nine months, our organic decrease was 80 basis points.

Yeah.

Speaker 3: Therefore, when we look to the fourth quarter, as mentioned earlier, Mrs. Historic, there are large and do seasonal factors, as you all know, we believe organic revenue performance will come in at approximately 1% growth.

Therefore, when we look to the fourth quarter as I mentioned earlier.

This is historically our largest two seasonal factors as you all know.

We believe organic revenue performance will come in at approximately 1% growth.

Speaker 3: and also to reiterate, we remain committed to our margin target for the year of 16.7%. Just 10 basis points.

And also to reiterate we remain committed to a margin target for the year or 16, 7%.

10% 10 basis points ahead of last year.

Speaker 3: We're going to stay focused on closing the year strongly as possible. But as I mentioned earlier, we're also specific to areas of underperformance assessing structural solutions to improve our growth profile.

We're going to stay focused on closing the year strongly as possible.

But as I mentioned earlier.

We're also specific to areas of underperformance assessing structural solutions to improve our growth profile.

Speaker 3: and an important additional area of revalued creation in our longstanding continued commitment to capital returns.

And an important additional area for value creation.

Our long standing and continued commitment to capital returns.

Speaker 3: which has been underscored by the execution of a shared repurchased plan and consistent dividend growth over time. These remain important priorities for us going forward.

Which has been underscored by the execution of our share repurchase plan and consistent dividend growth over time.

These remain important priorities for us going forward.

Ellen Johnson: The performance of our segments is at the bottom of the slide. Our media, data and engagement, pollution segment grew organically by 50 basis points. We had very strong global growth at our media businesses, so that was largely offset by the continued underperformance by our digital specialist agencies. Our integrated advertising and creatively glad solution segment decreased organically by 4.1%. Lower revenue from clients and the tech and telecom sector had a more challenging macro environment, was felt broadly across a more traditional consumer facing agency. At our specialized communications and experiential solution segment, organic growth was 6.5% with growth across our sports and entertainment, public relations and experiential disciplines.

Speaker 3: As always, we thank you for your time and attention. And with that, let's open the floor to your question.

As always we thank you for your time and attention.

And with that let's open the floor to your questions.

Speaker 4: Thank you. At this time, if you would like to ask a question, please ensure that your phone is unmuted, press star one and record your name clearly when prompted.

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

Speaker 4: If you would need to withdraw your request, you may press star two. Again to ask a question, let us start one.

Need to withdraw your request you May press star two.

To ask a question.

One.

One moment for our first question.

Speaker 4: Our first question is from Adrian Decent Heller with Bank of America. You may go ahead.

Our first question is from Adrian decent Hilaire with Bank of America. You May go ahead.

Speaker 5: Yes, good morning everyone. Thanks for giving me your address. So hello Philippe. Couple of questions.

Yes. Good morning, everyone. Thanks for giving me the you may address so Hello, Felipe a couple of questions. Please.

Speaker 5: So first of all, can you help us quantify the impact of the tailwind that you alluded to from New Account of Winds?

So first of all can you help us quantify the impact of the <unk>.

Headwinds that you alluded to from new account wins from perhaps recovery in check and into 2024, and then maybe a second question for four of nine so clearly an amazing job. This year in terms of protecting the margin.

Speaker 5: And then maybe a second question for Elaine. So clearly an amazing job this year.

Ellen Johnson: Moving on to slide five, an organic net revenue growth by region. In the U.S., which was 65% of our revenue before billable expenses in the quarter, our organic decrease was 1.2% against 4.4% growth in last year's third quarter. Decreases among tech and telecom sector clients and a more cautious macro economic environment, continued to weigh on our performance, notably at our digital specialist and at most of our creatively led agencies. We have strong growth at our media offerings followed by increases at our sports and entertainment, experiential and public relations disciplines.

Speaker 5: margin. It's never risked that as growth resumes next year and as you're involved in new clients we see cost growth effectively exceed revenue growth in 2024. Thank you very much.

Is there a risk that as growth resumes next year and as you onboard new clients, we see cost growth effectively exceed revenue growth in 2024. Thank you very much.

Speaker 3: I will take the one you gave me and then...

Sure I will take the one you gave me and then.

Speaker 3: a little bit of the one that you sent to Allen if I may. I don't know that we can quantify the tailwinds for 24 because we're not through to the end of the year. So we're clearly from a net new business perspective as we sit here this year positive.

A little bit of the one that you sent to Alan if I may.

I don't know that we can quantify the tailwind for 'twenty four but because we're not through to the end of the year. So we're clearly from a net new business perspective, as we sit here this year a positive.

Speaker 3: And there are still a few fairly sizeable opportunities out there for us to go get. But we do think that we'll be heading in 24 with the benefits of the winds from this year. And then...

And there are still a few fairly sizable opportunities out there for us to go get but we do think that we'll be heading into 'twenty four with the benefits of the wins from this year and then.

Speaker 3: Unfortunately, some of the benefits of the fact that there's been a little bit of a slowdown in terms of onboarding them, but I don't think we can give you a quantified number for that quite yet.

Unfortunately, some of the benefits of the fact that there's been a little bit of a slow down in terms of onboarding them, but I don't think we can give you a quantified number for that quite yet.

Ellen Johnson: International markets, which were 35% of our net revenue grew organically 1.1% in the quarter, on top of 7.8% a year ago. UK, which was 8% of net revenue in the quarter, grew 2.2% organically, on top of 4.9% a year ago. Growth was led by IBG media brands, McCam and FCB. Constantin Europe, which was 8% of net revenue, grew 3.9% organically in the quarter, compounding last year's 4.7% growth. We were led by growth in Spain and Germany as well as by increases in smaller national markets.

Yeah.

Speaker 3: And then I think that, you know, as I mentioned in passing, when you think about the quarter, there was...

And then I think that you know as I mentioned in passing when do you think about third quarter there was.

Speaker 3: an expectation on our part that on just the kind of work that

An expectation on our part that on just the.

The kind of work that you pick up.

Speaker 3: Course of business, not the sizable opportunities out there, that isn't converting at the rate at which we're used to seeing. So that's something we're just going to have to monitor through the end of the year, so that we can then give you line of sight into how we are going into 24. And then I'll hand over to Ellen, but I'll obviously point out that when there's growth, we do grow margins. So as we return to growth, I'm not sure that the cost, that the cost question should be,

Course of business not the sizable opportunities out there that isn't converting.

At the rate at which we're used to seeing so that's something we're just going to have to monitor through the end of the year. So that we can then give you line of sight into how we are going into 'twenty, four and then I'll hand over to Alan but I'll, obviously point out that when Theres growth, we do grow margins. So as we returned to growth I'm not sure that the cost.

Ellen Johnson: AsiaPac was also 8% of net revenue in the quarter. Our organic decrease was 5% some pair to 5.6% growth a year ago due to decreases in Japan and China. In last time, which was 5% of net revenue, our organic growth was 5.7%, on top of 19.8% a year ago, with increases across all national markets, led by Colombia and Argentina. In our other markets group, which is Canada, the Middle East and Africa, we grew 1.2%, on top of 10.6% a year ago.

That the cost questions should be of concern.

No.

Speaker 1: just to add to sleep comments. I mean, we've been very disciplined about not hiring ahead of revenue, as well as being able to really, as you've seen, this year included, really manage a flexible cost structure. So we do see the ability to continue to increase our margins.

Just to add to <unk> comments, I mean, we've been very disciplined about not hiring ahead of revenue.

As well as being able to really as you've seen this year included really manage a flexible cost structure. So we do see the ability to continue to increase our margins.

Yes.

Thank you both.

Thank you.

Speaker 6: The next question is from David Karnovsky with JP Morgan. You may go ahead. Thank you. I believe you noted that IPG would assess internal structural solutions to improve growth. I wanted to see if you could expand on what that means exactly. And then just regarding the commentary you gave on healthcare before, and that not performing as expected in Q3, you would that largely related to new business or with other factors. And just like new account wins aside, how do you kind of assess the health of that?

Thank you. The next question is from David Karnofsky with J P. Morgan you May go ahead.

Alright, thank you.

Ellen Johnson: Bob. Moving on to slide six and operating expenses in the quarter. Our net operating expenses which exclude billable expenses, the amortization of acquired intangibles, and restructuring adjustments decreased 1.5 percent from a year ago, compared with the growth in reported net revenue of 60 basis points. The result was adjusted even TA margin of 17.2 percent, an increase of 170 basis points from a year ago. As you can see on this slide, a ratio of total salaries and related expense as a percentage of net revenue decreased by 110 basis points to 66.3 percent from 67.4 percent in last year's third quarter.

Felipe you noted that IPG would assess internal structural solutions to improve growth wanted to see if you could expand on what that means exactly and then just regarding the commentary you gave on health care before and that is not performing as expected in Q3 was that largely related to new business or were there other factors and just like new account wins aside how does.

You kind of assess the health of that vertical.

Speaker 3: Take them in reverse order if I may. So, health, as you know, a very, very strong performer for us over a long period of time. So I think it was a period in which it was probably 14 or 15% of our overall revenue and it's now likely twice that. And long-term, we see it as a sector that still sets up wealth for growth. So that's a strength in terms of our asset and business mix.

I'll take them in reverse order if I may so health as you know a very very strong performer for us over a long period of time. So I think it was a period.

It was probably 14 or 15% of our overall revenue and its now likely twice that.

Long term, we see it as a sector that's still sets up well for growth. So that's our strength in terms of our asset and business mix.

Speaker 3: What it didn't do this quarter is what I was actually just referring to in other hands question, which is some of the TBG conversion in the non-high profile opportunities was not at the rate at which we expect from them. And yet, as we look at fourth quarter and what has been brought in, we think it will get back to the level that we see from a strong performer in the group.

Ellen Johnson: Compared to last year, we delivered on our expense for base payroll benefits and tax while our expense for temporary labor, employee incentive compensation, and severance decreased as a percent of net revenue. Each of these ratios is shown in the appendix on slide 31. Headcount at quarter end with 57,700, a decrease of 1.5 percent from a year ago. Also on this slide, our office and other direct expense was 13.8 percent of net revenue, compared with 14.3 percent in Q3-22. Underneath that, improvement, we continue to leverage our expense for occupancy and all other office and other expense. Our SQNA expense was 70 basis points of net revenue and improvement of 10 basis points.

What it didn't do this quarter is what I was actually just referring to another question which is.

Some of the TPG conversion at.

In the non high profile opportunities was not at the at the rate at which we expect from them and yet as we look at fourth quarter in what has been brought in we think it will get.

Get back to the levels that we see from a strong performer in the group.

Speaker 3: and in terms of healthcare, anything else. I guess they were one or two, but of course, a business where you have a drug that

And in terms of health care or anything else I guess, there were one or two but you know as a course of business, where you have a drug that.

Speaker 3: you know, has a lot of expectancy attached to it where there is going to be a meaningful budget where it fails late in an approval process. But that's something we do factor in. We did happen to see one or two of those in the quarter. Now, relative to your first question, I do think it bears going into a bit more detail. So how I would frame it up for you is this.

It has a lot of expectancy attached to it where there is gonna be a meaningful budget, where it fails late in an approval process, but that's something we do factor in we did happen to see one or two of those in the quarter now relative to your first question.

Do you think it bears going into a bit more detail. So how I would frame it up for you is this.

Ellen Johnson: On slide seven, we presented detail on adjustments to reported third quarter results in order to provide better transparency and a picture of comparable performance. This begins on the left hand side with reported results, and from left to right, steps through to adjusted EBTA and our adjusted deluded EPS. Our expense for the amortization of acquired intangibles in the second column was 21 million. The adjustments to previous restructuring actions was a credit of 600,000.

Speaker 3: The comment is specific to parts of the portfolio that have been underperforming.

The comment is specific to parts of the portfolio that had been underperforming.

Speaker 3: and have been taxing overall performance this

And they haven't been taxing overall performance this year.

Speaker 3: And if you think about the long-term history of those conditional specialty assets, it's one where they've successfully gone through cycles of transformation every four or five years.

And if you think.

About the long term history of the digital specialty assets.

It's one where they have successfully gone through cycles of transformation every four or five years.

Speaker 3: As we heading into the year to ask that man, there was a reason to be supportive as they looked to make the necessary adaptation.

So as we headed into the year to us that meant there was a reason to be supportive as they look to make the necessary adaptation.

Speaker 3: But sitting where we are now, if you look at the weight thing to technology clients that they have, and then the speed of change in the operating environment, this has made it an especially difficult time, both for what they do and for them to essentially reboot or reinvest. And then when it comes to tech specifically, I don't know that any of us have seen

But sitting where we are now if you look at the weighting to technology clients that they have and then the speed of change in the operating environment.

Ellen Johnson: Below operating expenses and shown in column four, we had a loss of 12.1 million in other expenses that was due to disposition of a few small non-strategic businesses. At the foot of the slide, you can see the after-tax impact per deluded share of each adjustment, which bridges our deluded EPS as reported at 63 cents to adjusted earnings of 70 cents per deluded share.

This has made it an especially difficult time, both for what they do and for them to essentially reboot or reinvest.

And then when it comes to Tech specifically I don't know that any of us have seen.

Speaker 3: It retrench to the degree we've experienced or

It retrench to the degree we've experienced or.

Speaker 3: for this long, this prolonged period of time. So we clearly have to ramp up the urgency on this.

That's it for this long, but this prolonged period of time, so we clearly have to ramp up the urgency on this.

Ellen Johnson: Slide eight depicts similar adjustments for the nine months. Our deluded earnings per share was $1.64 as reported and $1.81 as adjusted. As a reminder, reported and adjusted EPS for the year to date, period, includes the benefit of $0.17 per share recorded to our tax provision in this year's second quarter.

Speaker 3: front and be open to a broader range of solutions. And of course, those are conversations that involve the leaders of those operations as you'd expect and that are ongoing.

Brought and be open to a broader range of solutions and of course those are conversations that involved the leaders of those operations as you would expect in that are ongoing.

Speaker 3: It's not something that we're in a position where I can say to you right now, here's what we're going to do or not, but if you wanted sort of a broad guideline, if you look at our strongest performers across the portfolio, so the framework for what success should look like, and I think that could be helpful, whether it's a healthcare or media brands, you have a coordinated approach to how you go to market. You've been a...

It's not something that we're in a position where I can say to you right now here's what we're going to do or not but if you wanted sort of a broad guideline.

Ellen Johnson: On slide 9, we turn to cash flow in the quarter. Cash from operations is $242.7 million and operating cash flow before working capital with $365.4 million. As a reminder, our operating cash flow is highly seasonal and can be volatile by quarter due to changes in the working capital component. In our investing activities, we use $48.6 million, essentially all of which was towards CapEx in the quarter. Our financing activities use $225.5 million, mainly reflecting capital returns to shareholders. Our net decrease in cash for the quarter was $52.7 million.

If you look at our strongest performers across the portfolio. So the the framework for what success should look like and I think that could be helpful.

Whether it's a health care of media brands you have a coordinated approach to how you go to market.

You benefit from scale.

Speaker 3: you're looking for ways to share complementary skill sets and identify very clearly where the centers of excellence sit across multiple units. And I think it's all in the service of making it simpler for clients to engage with us.

Youre looking for ways to share complementary skill sets and identify very clearly where the centers of excellence sit across multiple units and I think it's all in the service of making it simpler for clients to engage with us.

Speaker 3: So I think those are the guidelines for us. So I think we're going to look to define a way forward in terms of putting something into effect with a number of those assets as we head into 24. So I hope that frames it up for you, David, but I can't give you a definitive answer.

So I think that those are those are the guidelines for us. So I think we're going to look to define our way forward in terms of putting something into effect.

With a number of those assets as we head into 'twenty four so I hope that frames. It up for you, David but I mean, I can't give you a definitive answer.

Ellen Johnson: Slide 10 is the current portion of our balance sheet. The end of the quarter with $1.57 billion of cash and equivalence and $102 million in short-term marketable securities to be held to maturity, which is before year end.

That's helpful. Thank you.

Please.

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

Speaker 4: Thank you. The next question is from Ben Swinburne with Morgan Stanley . You may go ahead.

Ellen Johnson: Slide 11 depicts the mature of our outstanding debt. As you can see on this schedule, total debt at quarter end with $3.2 billion. That includes our $300 million 10-year note which we issued in June to pre-fund our $250 million maturity in April of next year, thereafter our next maturity is not until 2028.

Speaker 7: Thanks. Good morning. If we, thanks for all the, hey, thanks for all the color earlier on the different segments, headwinds and talons. I was wondering if you could just spend a minute, every agency holding company kind of reports differently, as you know, so it's hard to compare, but we try anyway.

Thanks, Good morning.

Thanks for all the thanks for all the color earlier on on the different segments headwind.

Headwinds in tailwind that I was wondering if you could just spend a minute.

Every agency holding company kind of reports differently as you know so it's hard to compare.

But what we try anyway.

Speaker 7: Your IAC segment, which does not include our GN huge, you know, if it's down four and a half percent year to date, you talked about the healthcare business, that's still growing. You mentioned an account loss in the can and you're prepared to mark, but do you think, because there are sort of underlying share erosion happening here, or is this...

Your IC segment, which does not include RGA and huge it's down four 5% year to date, you talked about the health care business, that's still growing.

Ellen Johnson: In summary, on slide 12, our strong financial discipline continues and the strength of our balance sheet and liquidity means that we remain well-positioned both financially as well as commercially.

You mentioned an account loss at Mccann in your prepared remarks, but do you think is there.

Was there a sort of underlying share erosion happening here or is this just kind of creative is is just a tougher business woman. We know, it's a tough business tougher than it used to be.

Ellen Johnson: And with that, I'll turn it back to the lead. Thanks, Ellen.

Speaker 7: just kind of creative is just a tougher business for me, we know it's a tough business tougher than it used to be. But just anymore, sort of high level comments on how you're feeling about the assets within that group because that's obviously not including the digital specialty agencies. And then I guess

Philippe Krakowsky: Without question, organic revenue performance to date this year is not consistent with our expectations or a long-term track record. We continue to be in market with relevant and compelling offerings that are helping marketers accelerate growth and deliver business outcomes. And that was translated to new business success year-to-date.

Just any more sort of high level comments on.

And how you're feeling about the assets within that group because that's that's obviously not including the digital specialty agencies and then I guess.

Speaker 7: I guess just a question around kind of AI, which was maybe everyone's question back in January , February . How much of an investment priority is that for you guys internally? Because protecting margins and margin expansion is something people have to want and expect from IPG. But I'm sure you're also keeping your eye on the long game here and not wanting to miss anything as it relates to investing in tech and talent on the, particularly on the AI front.

I guess just a question around kind of AI, which was maybe everyone's question back in January February .

Philippe Krakowsky: Now for many of you who've been with us over a period of years, you know that we were among the first to embed digital capabilities across media, healthcare, and many of our marketing services, as well to recognize the importance of the integrated services and increasingly complex consumer ecosystem. Kimmelarly, we were early to understand the growing importance of data resources and first-party data capabilities at scale as key tools to power the success of our clients. Given the very rapid range of change we're all experiencing, we continue to further evolve our offerings, investing in ways that help brands compete in a dynamic world of new technology platforms and empowered consumers.

How much of an investment priority is that for you guys internally because protecting margins and margin expansion is something people, obviously want and expect from IPG, but I'm sure. You're also keeping your eye on the long game here and not wanting to Miss anything as it relates to investing in tech and talent on the particularly on the AI front. Thanks.

Philippe Krakowsky: This work is meant that increasingly large portions of our portfolio are better oriented, secular areas of growth.

Got it.

Speaker 3: On your first question, I think that across the industry over the last year or more, in fact, you've seen folks call out that the garlands and grenades made during the Qualcomm War of 2020

On your first question I think that across the industry over the last year or more in fact, you've seen folks call out that the.

The more you know.

Speaker 3: quote unquote the traditional consumer advertising portion of all of our businesses.

Quote unquote, the traditional consumer advertising portion of all of our businesses.

Speaker 3: is under some stress as you put it. So within IAC, you've got our healthcare business, which we spoke about. You've got FCP, which.

It is under some stress as you put it so within I see you've got our health care business, which we spoke about you've got FCB, which.

Philippe Krakowsky: Consistent with that objective during the quarter, we launched our unified retail media solution, which is a dedicated business unit within media brands. It helps clients manage their investments across all retail media networks. Fox, one of the fastest growing advertising channels. That solution is already helping brands maximize their media investments across all of the retail channels in real time in order to drive next best business outcomes.

Speaker 3: again, I think we did speak to how they leaned into incorporating data and precision thinking sort of an audience-led approach and married it up to a very, very creative offering. And so for us, the rest of what is in that grouping is a McCann, which

Again, I think we did speak to.

How they've leaned into incorporating data and precision thinking sort of an audience led approach and married it up to a very very creative offering and so for us the rest of what is in that grouping is.

Ah Mccann, which.

Speaker 3: is on that same path. And then a group of...

Is on that same path and then and then a group of.

Philippe Krakowsky: Earlier this week, we also launched real ID in the cloud, the tool powered by Axiom that is piloted at FCB. It modernizes identity resolution and addresses an industry need for identity tools in a post-cookie world. Built on ethically sourced data that prioritizes consumer privacy, real ID creates the opportunity for us to do the kind of intelligent, data-driven work that we've been doing in media for some time across all marketing channels and disciplines.

Speaker 3: kind of a portfolio of US independent agencies where we do, again, I think need to look a bit as it's a part of the answer that I shared with David around what does scale look like? How are we clear about centers of excellence? How do we get complimentary skill sets working together and what's a simpler way for clients to engage there and for us just to be

Kind of a portfolio of of U S independent agencies.

Where we do again I think need to look a bit as you know it's sort of part of the answer that I that I shared with David around what.

What is what does this what does scale look like how are we clear about centers of excellence, how do we get complimentary skill sets working together.

And what's the what's a simpler way for clients to engage there and for US just to be.

Philippe Krakowsky: Our AI Steering Committee includes leaders from across our network, and it continues its work over seeing strategic partnerships, ensuring use cases across the group. As you know, we've been using machine learning and other AI tools in our data and media business for a number of years. With hundreds of new AI pilots underway across the company, we're tracking the subset of promising programs with a particular focus on three new areas. First, using AI to generate content, including text, images, audio and video, in our ideation and creative processes.

Speaker 3: You kind of have a flying formation for that grouping. So I think IEC definitely needs...

You kind of have a flying formation for that grouping, so I think I see definitely needs.

Not unique to us right as you can.

Speaker 3: not unique to us, right? As you called it out, that's a part of the business where I think everybody is thinking about with the right way to integrate that. When you take creativity and its part of an integrated offering, it's definitely much more powerful.

Called it out that's a part of the business, where I think everybody is thinking about what the right way to integrate that when you take creativity and as part of an integrated offering it's definitely much more powerful.

Speaker 3: And then on the AI question, it is an investment priority. It has been for some time, as I said to you, because whether it's inside of media brands or at Axiom, there's quite a bit we've been doing there. And ways in which AI is going to make it possible for us to...

And then on the AI question. It is an investment priority.

It has been for some time as I said to you because whether it's inside of media brands are at axiom, there's quite a bit we've been doing there and ways in which AI is going to make it possible for us to.

Philippe Krakowsky: Second, AI is a tool to uncover kind of strategy and insights through all those business trends that can help our clients and their brands. And finally, by letting the use of intelligent chatbots automate tasks like program recommendations and other key steps on consumers e-commerce journeys. Given the impact AI will continue to have on all businesses, including ours, we're fully engaged with leading AI innovators, just Adobe, Amazon, Google, Microsoft, Nvidia and Salesforce. For example, during the quarter, Nvidia worked with us, specifically within our PR agencies, to incorporate AI-enabled processes into earned media and corporate communications workflows.

Speaker 3: get more done for clients or work smarter and take a lot of processes we have. So from an efficiency point of view, it's clearly gonna be a boon. But we also think it's gonna open up opportunities to, there's so much demand for content at this point, given how...

Get more done for clients or work smarter and take a lot of processes we have.

So from a from an efficiency point of view, it's clearly going to be a boom, but we also think it's going to open up opportunities too.

There's so much demand for content at this point given how.

Speaker 3: Many channels there are in how complex the consumer journey is across.

Many channels there are and how complex the the consumer journey is across just this.

Speaker 3: incredibly fragmented tech ecosystem, that we still see opportunities to also have it be a revenue generator. So as I said, we've got an AI task force that has a handful of the top leaders from across the group. And that's probably going to then become something that gets leadership at the center here and we prioritize investment that way.

Incredibly fragmented tech ecosystem that we we still see opportunities too.

Also have it be a revenue generator. So as I said, we've got a task force that has a handful of the top leaders from across the group and that's probably going to then becomes something that gets leadership at the center here and we prioritize investment that way.

Philippe Krakowsky: I just stepped back and talked a bit again about our reporting segments in some detail. We discussed earlier, within the MD and E segment, we had very strong growth at our media offerings. But that continued to be largely offset by challenges within the digital specialty agencies. Notably, during the quarter, we brought three distinct media brand companies, Kineso, MatterCine and Reprise, under the Kineso banner and brand, to create a unified, vector of and performance unit that enhances the effectiveness, efficiency and simplicity of media activation that is end-to-end across that values chain.

Thanks, a lot.

Thank you.

Yeah.

Speaker 4: Thank you. And the next question is from Michael Nathanson. With Moffat Nathanson, you may go ahead. Thanks. And good morning, Fulie. Parry.

Thank you and the next question is from Michael Nathanson with Moffett Nathan You May go ahead.

Hey, good morning, Felipe how are you.

Speaker 8: All right. Okay, so this is a long running Q&A we've been having. I guess we can get under. I might know what the question is. Okay, exactly. When you look at media data engagement and backing away RGA and you're just taking it out, where are you guys growing top of the leader?

Alright, okay.

Okay. So this is a long running a Q&A we've been having.

Guess wouldn't get what the question was.

Okay.

When you look at media data and engagement and backing away RGA and you're just taking it out where you see you guys growing top of the leaderboard.

Speaker 8: And this year's been a struggle, we know that. But I wonder when you look at some of your competitors, those who bought data assets and those that have not. Look at what's happening under your hood.

And this year has been a struggle, we know that but I wonder when you look at some of your competitors those who've bought data assets and those that have not looked at whats.

Philippe Krakowsky: And as mentioned earlier, General Mills is another great piece of news at MediaBrents. During the quarter, Axiom announced that its Infobase consumer insights and audiences are now available in cloud data exchanges and received a Salesforce Partner Innovation Award for work it's doing with its heat-work clients. The company also recently launched Accine Health, which is its latest vertical offering, and provides advertisers with quality audiences that span both consumers and healthcare providers, the more effective reach and precision.

Under your Hood.

Speaker 8: You know, what do you think about the huge, huge epilogue that you made? What is slowing down maybe the growth? Exos digital, you know, special access.

No.

What do you think about the strategic pivot that you made.

What is slowing down maybe the growth ex those digital special.

Specialist assets.

Speaker 8: And there's just something that you think strategically is on the wrong footer is just execution. Because, you know, we see other companies just going faster and I know your cops are hard, but I wonder like what do you think about the decisions you've made to get here? And it's just basically a tough year that bounces back.

And is this something that you think strategically is on the wrong foot or is just execution because.

We see other companies just growing faster and I know your comps are hard, but I wonder what do you think about the decisions you've made to get here.

Basically a tough year that bounces back next year.

Philippe Krakowsky: As huge, the agency had a number of wins with their new suite of consultative products, their tailors' specific client business problems, which allows them deliver strategy through execution very rapidly and effectively. The agency expanded its relationship with Darling Ingredients, which was begun earlier this year, with a significant design and build project, and on the product development side, huge launch, but it calls the AI Opportunity Mapper, which help clients anticipate big shifts the Gen AI will have in their specific industry and identify opportunities for growth across near and mid and long-term horizons.

Speaker 3: Look, I mean, we've got a terrific media offering to your point. And I think that's been clear both in what we keep saying about the performance there and in the new business performance of your day.

Look I mean, we've got a terrific media offering to your point and I think that's been clear.

Close and what we keep saying about the performance there and in the new business performance year to date, if you sort of consider major pitches from a geico at the early part of the year all the way through general Mills, which was yesterday.

Speaker 3: consider major pitches from a Geico at the early part of the year all the way through General Mills, which was yesterday. That said, I will, I think, you know, you're clear, you have one of you, and it could very well be that we are missing out on an additional source of growth there, right? Right. So I think the questions come up before it's a very valid question, and we clearly have to be open to exploring.

That said I will I think you're you know you're clear you avoid a view and it could very well be that we are missing out on additional source of growth there right right. So I think the questions come up before it's a very valid question and we clearly have to be open to exploring.

Philippe Krakowsky: Looking at RGA, the agency has new business wins in the U.S, from Bloomberg and the BBC, and in Latin from Banco Sasa, which is Brazil's premier financial institution. RGA also launched the associate's program, a unique approach to fractional hiring that offers flexibility and emphasizes adaptability and creativity. And the agency's work for clients like Procter and Gamble and the Ad Council was recently recognized as a finalized for fast companies' innovation by design awards.

Speaker 3: Every avenue for delivering value to our clients and that includes our trading.

Every avenue for delivering value to our clients and that includes our trading model.

Speaker 3: by which I mean how we buy media on their behalf. All right, so clients, land's bad.

By which I mean, how we buy media on their behalf.

Alright, so clients value product and.

Speaker 3: and results. We're very strong in that regard. They also value efficiency. And we have to deliver on both sides of that equation on both fronts.

<unk> results were very strong in that regard they also value efficiency and.

And we have to deliver on both sides.

That equation are on both fronts.

Speaker 3: So I think that, like you said, it's been a conversation we've had on a call like this one, and then just when we've met independent of this, and we're looking very hard at our...

I think that you know.

Like you said, it's been a conversation we've had.

On a call like this one and then and then just when we've met independent of this and we're looking very hard at our.

Philippe Krakowsky: Within the IAC segment, as we mentioned, Tech and Telco weigh on our more traditional consumer advertising agencies, but FCB was a notable exception to that. The network's playing a key role in our integrated Pfizer team and also expanded relationships with existing clients, which is, sorry about that, with new clients, which is Diagio, Denon, and Upfield and Global Markets. IPG helps focus on creativity, technology, and data, continue to be key to their clients. And during the quarter, the network launched the industry's first medical trial diversity offering designed to help pharma and healthcare companies ensure more inclusive treatment innovations.

Speaker 3: model within the media component of this for that reason.

Model within the media component of this for that reason.

Speaker 3: says you're right. I mean, there's no, there's no off-site in leaving growth on the table.

Because you're right I mean, there's no there's no there's no upside in leaving.

Growth on the table.

Speaker 8: Got it. And I can ask one to Ellen, Bill of expenses, I know there's no media there given what we know. The growth is pretty strong in this quarter. Can you tell us what was that tie to?

Got it and then can I ask one.

On behalf.

Billable expenses I know, there's more media there given what we know the growth was pretty strong. This quarter can you tell us what what was that tied to.

Speaker 1: Sure, I think it's consistent with the growth you saw in our SE&E segment.

Sure I think it's consistent with the growth you saw and I can see any segment.

Okay.

It out some don't.

Clearly.

Speaker 1: Those those billable expenses are predominantly associated with that segment and that segment grew nicely. So.

It is those theres belbow expenses are predominantly associated with that segment.

And that segment grew nicely so.

Thank you guys.

Philippe Krakowsky: Last month, following a competitive pitch process, Ikea chose McCann as its first global brand marketing partner. Domestically, TJ Maxx hired McCann as his creative AOR and records a direct brand named MRM and McCann as brand leads in Europe and the US. In addition, the network launched McCann content studios. It's new Global Hub for social and creative services. Mullen Low retained the DHRA account, which is the arm of the US Department of Defense that focused on military recruitment across all service branches, this renewal is for five years.

Thank you.

Speaker 4: Thank you. The next question is from Stephen Keahal with Wells Fargo. You may go ahead.

Thank you. The next question is from Steven <unk> with Wells Fargo. You May go ahead.

Speaker 8: Yeah, thank you, good morning. So, Philippe, you talked about the 3.2 percentage points growth drag from Tekken, Talco, and Digital, and I don't think that was too new from Q2 to Q3 because we've talked about that a lot this year. And same with the macro concerns, I just know we've been talking about those this year. So, I guess my question is, what has changed most from your perspective over the last three months? It seems like the business did deteriorate in some ways versus your prior expectations. I think we're trying to understand what of that is idiosyncratic related to a lot of the agencies you've talked about. And then what might be just more broad base that can really flow and extend into a great deal of next year? So, I just love to have some incremental color on what's changed the most more recently.

Yes. Thank you good morning, So Felipe you talked about the 3.2 percentage points growth drag from tech and telco and digital and and I don't think that was too new from Q2 to Q3, because we've talked about that a lot this year and.

And same with the macro concerns I just know we've been talking about those this year. So I guess my question is what has changed most from your perspective over the last three months. It seems like the business did deteriorate in some ways versus your prior expectations. I think we're trying to understand what of that is idiosyncratic related to a lot of the agencies you've talked about.

And same with the macro concerns I just know we've been talking about those this year. So I guess my question is what has changed most from your perspective over the last three months. It seems like the business did deteriorate in some ways versus your prior expectations. I think we're trying to understand what of that is idiosyncratic related to a lot of the agencies you've talked about.

Philippe Krakowsky: An expanded remit that includes advertising, CRM, database management, integrated media, social digital, and PR. Our S-C-N-E solution segment, as we mentioned, saw growth across all disciplines. Following a strong new business track record year-to-date, in Q3, Bullen won a new business including need air mobility. Capestry, the luxury brand holding company that owes coach and Kate Spade, as well as Neutrogena, the Ken Doe's skin care brand, momentum grew strongly with core clients, including Verizon and Nike, and brought on a number of new clients, notably John Deere.

And then what might be just more broad base that can really flow and extend into a great deal of next year. So just love to have some incremental color on what's changed the most more recently and then Alan you said, you're not hiring ahead of revenue a lot of the labor market stats indicate things are pretty tight, but I've seen a lot of industry trade reports that theres also a lot of head.

Speaker 8: And then Ellen, you said you're not hiring ahead of revenue. A lot of the labor market staff indicate things are pretty tight.

Speaker 8: but I've seen a lot of industry trade reports that there's also a lot of head count reduction. So when you look at the labor market today, do you think it's a buyer's market for the skills you need or is it a seller's market? Thank you.

Count reduction so when you look at the labor market today do you think it's a buyer's market for the skills you need or is it a seller's market. Thank you.

Speaker 3: All right, let me unpack that because I think most of the pieces are out there to your point. So the tech telco and the

Alright.

Unpack that because I think most of the pieces are out there to your point.

The tech telco and the.

Speaker 3: entities within our world that, you know, as I said, are taxing our performance is not new news. Over the normal course of business, there's always revenue to be generated. And I think your budget, your existing book, and then that TVG, and the operators are accountable for both creating those opportunities and converting those opportunities with existing clients, as well as winning ones with new clients. And I think that the...

Specific entities within our world that you know as I said are taxing our performance is not new news.

Philippe Krakowsky: Most recently, the company secured three AI patents for the machine learning of experiences, which makes them the first agency to do so in their area of expertise. Octagon signed the ACC of a new client at their industry leading media rights division, and the agency won new client brands, including Hilton Hotels and Power-Aid, as well as working with current clients Budweiser, Mastercard and Unilever, to manage activations at major global sporting events. Jack Morton, Vivi, the agency's diversity-driven, inclusive marketing practice, posted wins and new work with the MBA and TIA.

Over the normal course of business, there's always revenue to be generated and I think your budget. Your existing book and then that T V. G and the operators are accountable for both creating those opportunities and converting those opportunities with existing clients.

As well as winning ones with new clients and I think that the incremental.

Speaker 3: Drag in Q3 was really there to a much lesser extent that some of the larger new business did not ramp at the pace that we anticipated.

Drag in Q3 was really there to a much lesser extent that some of the larger new business did.

Philippe Krakowsky: There were also additional new client ads with Paramount Plus and Comcast, and a large-scale reinvigoration of the ESPN Sports Center. However, Chandler's thought growth in the health sector and in its government and public policy work. On the new business front, notable wins included Dollar Shave Club and a significant new assignment with a CDC. The network also expanded its predictive analytics and intelligence capability with a roll-out of a new proprietary solution that measures the impact of earned media.

Did not ramp at the pace that we anticipated.

I'd sort of say that.

Speaker 3: We don't like to see the Delta, because we obviously have been on the other side of that for some time, but I don't see that the Delta to our key competitors has changed over the course of this year. And so there is some of what's been on this call, which is the things we talked about, what I just mentioned to you, and then potentially the question Michael asked around media.

We don't like to see the Delta because we've obviously been on the other side of that for some time, but I don't see that the delta to our key competitors has changed over the course of this year and so there is.

Some of what's been on this call, which is the things we talked about.

What I just mentioned to you and then potentially the question Michael asked around media.

Speaker 3: client mix question or perhaps the some degree asset mix.

Our client mix question or perhaps.

Philippe Krakowsky: Despite these highlights from across the portfolio, as you can see from our results, the third quarter didn't unfold along the lines we'd envisioned when we spoke with you in July. At that time, we shared our view of a second half in flexion point for stronger growth driven by several factors. One was accelerating growth of our media business, which didn't materialize, with notably stronger performance in the third quarter than we've seen earlier in the year.

To some degree asset mix.

Speaker 3: positive to us over time. Now clearly there's one competitor who credits them is benefiting from asset mix. But I don't know that there's anything outside of those that gets me to dramatically de-

Positive to us overtime now clearly there's no one competitor who credit to them is benefiting from from asset mix, but I don't I don't know that there's anything see that outside of those that.

Me too.

A dramatically different perspective.

Speaker 1: And then looking at our workforce, if you're looking for broad-based trends based upon your question, if I go back post-the pandemic, labor was tight, nutrition was high, those trends have attenuated. But we're not one business as you know. We are many businesses, and we recruit many different types of talent. So we're the skillset of the more...

And then looking at our workforce if.

Philippe Krakowsky: We also looked forward to a similar trajectory in our health care vertical. In July, health care did grow in the quarter across the category. It was not at the level we'd anticipated. However, with new business coming online, strong-ranked Q4, we do see health returning to its more typical rate of revenue growth. And as I mentioned earlier during Q3, while we saw the impact of new business coming on stream, it was slower to convert than the rate we'd foreseen.

If youre looking for broad based trends based upon your question. If I go back post the pandemic you know labor was tight attrition was high and those trends have attenuated.

But we're not one business as you know we are many businesses many different types of talent, so where the skill set of some more scarce. There is you know that supply and demand mix, but you know we have a truly great labor force in our talent.

Speaker 1: There is, you know, that supply and demand mix, but, you know, we have truly great labor force in our talent. And, you know, so we, you know, are very competitive in that regard. But the broad-based trends that were called out, you know, post-the-pandemic, those have attenuated a bit.

And you know so we are very competitive in that regard, but the broad based trends that were called out post the pandemic those have attenuated.

Philippe Krakowsky: Therefore, when we look to the fourth quarter, as mentioned earlier, and this is historically our largest due seasonal factors, as you all know, we believe organic revenue performance will come in at approximately 1% growth. And also to reiterate, we remain committed to our margin target for the year of 16.7%. Just 10 basis points ahead of last year. We're going to stay focused on closing the year as strongly as possible. But as I mentioned earlier, we're also specific to areas of underperformance, assessing structural solutions to improve our growth profile.

Thank you.

Thank you. Thank you.

Speaker 4: And our next question is from Tim Nalan with McQuarrie. You may go ahead.

And our next question is from Tim Nolan with Macquarie You May go ahead.

Speaker 2: Hi, Philippe Ellen. Thanks very much. Just I wonder if you could give a little bit more explanation around the new business trends. You've said it two or three times on this call that you've seen some, I guess, delays in the conversion and onboarding of some of the wins that you've been talking about for a little while. It's supposed to come through in the second half.

Hi, Felipe Ellen Thanks, very much just I wonder if you could give a little bit more explanation around the new business trends.

You've said it two or three times on this call that you've seen some I guess delays in the conversion and onboarding of some of the wins that you've been talking about for a little while is supposed to come through in the second half.

Philippe Krakowsky: And an important additional area for value creation is our longstanding continued commitment to capital returns. Jones, which has been underscored by the execution of a shared repurchase plan and consistent dividend growth over time. These remain important priorities for us going forward.

Speaker 9: I mean, maybe this happens sometimes. That just don't really recall that.

I mean, maybe this happens sometimes I, just don't really recall that hum.

Speaker 9: occurrence before. I just want to be going to explain is it is it part of these these new clients, you know, seeing these slowdowns and worrying about spending in the fourth quarter and just sort of deciding to go slower or is it a change in the scope of work that's coming on and just hadn't really heard that commentary before and and and relatedly the general mills when sounds pretty big. I didn't check the numbers I wonder if you could just help us maybe scope out kind of of of the long list of wins that you've had in the last several months like which are the biggest one?

Occurrence before I just wonder if you can explain is it is it part of these these new clients you know seeing the slowdowns and worrying about spending in the fourth quarter and just sort of deciding to go slower or is it a change in the scope of work that's coming on and just haven't really heard that commentary before.

Unknown Attendee: As always, we thank you for your time and attention, and with that, let's open the floor to your questions. Thank you. At this time, if you would like to ask a question, please ensure that your phone is unmuted. Press star one and record your name clearly when prompted. If you would need to withdraw your request, you may press star two. Again, to ask a question, that is star one. One moment for our first question.

And Relatedly the general mills, when it sounds pretty big I Didnt check the numbers I Wonder if you could just help us maybe scope out kind of the long list of wins that you've had in the last several months.

The biggest ones.

Speaker 3: I think on the large headlight winds, that's the onboarding of those that are modestly lower in a smaller, slower pace, is not the key driver. It's what...

I think on the on the large headline wins.

The onboarding of those that are at a modestly lower in the smaller slower pace is not the key driver. It's it's what it's what Steven was just asking about around.

Adrien Hilaire: Our first question is from Adrien Decent Hilaire with Bank of America. You may go ahead. Yes. Good morning, everyone. Thanks for giving me Adrien. Hello, Philippe. A couple of questions, please.

Speaker 3: Steven was just asking about around, I think that it's the TVG conversion that I would really point to in Q3. And then in terms of scale, I think that we've got quite a few. I mean, so from Geico, I think, I think,

I think that the T V G conversion that I would really point to in Q3.

And then in terms of scale.

Philippe Krakowsky: So, first of all, can you help us quantify the impact of the tailwinds that you alluded to from new account winds, from past recovery in tech into 2024? And then maybe a second question for Elaine. So clearly an amazing job this year in terms of protecting the margin. If there are risks that as growth resumes next year, and as you're involved in new clients, we see cost growth effectively exceed revenue growth in 2024. Thank you very much. Sure. I will take the one you gave me and then a little bit of the one that you sent to Alan, if I may.

We've got quite a few I mean, so from Guy Guy go at it.

<unk>.

Speaker 3: General Mills is at the scale of a Geico. Bristol Myersquib is maybe modestly smaller than that. Constellation brands is sizable. They do cluster into the media sector. And then Pfizer is very large. And it's probably different in that clearly it was integrated across creative, you know.

General Mills is it the scale of a geico.

Of Bristol Myers Squibb, as maybe modestly smaller than that constellation brands.

Sizable they do cluster into the media sector and then Pfizer is very large.

And it's probably different in that in that clearly it was integrated across creative.

The.

Speaker 3: health and medical communications and expertise in public relations and and some are global

Health and medical communications and expertise in public relations and some are global.

Ellen Johnson: I don't know that we can quantify the tailwinds for 24 because we're not through to the end of the year. So we're clearly from a net new business perspective as we sit here this year or positive. And there are still a few fairly sizable opportunities out there for us to go get, but we do think that we'll be heading in 24 with the benefits of the winds from this year. And then, unfortunately, some of the benefits of the fact that there's been a little bit of a slowdown in terms of onboarding them.

Speaker 3: one like that or general mills, whereas a Geico or a BMA, I mean a constellation brands are domestic.

One like that or general mills, whereas.

You know, a geico or a b M. A I mean a.

Constellation brands are domestic.

Speaker 3: But I do think that as I said, it's not the scale.

But I do think that as I said, it's not it's not the scale.

Speaker 3: We have one of the larger wins that is onboarding a bit more slowly than anticipated, but broadly speaking, it's the...

We have one of the larger.

Wins that is onboarding, a bit more slowly than anticipated, but broadly speaking, it's the TPG conversion.

Speaker 3: Thanks. I mean, Ellen, you know, at some point, we can break down for you kind of.

Okay. Thanks.

Ellen Johnson: But I don't think we can give you a quantified number for that quite yet. And then I think that as I mentioned in passing, when you think about third quarter, there was an expectation on our part that on just the kind of work that you pick up. Of course, a business, not the sizable opportunities out there, that isn't converting at the rate at which we're used to seeing. So that's something we're just going to have to monitor through the end of the year so that we can then give you a line of sight into how we are going into 24.

Alan can you know at some point, we can break down for you kind of.

Speaker 3: Given, as she said, it's a lot of businesses in front of business and a lot of them are project businesses, so where we drive new business is still.

Given she said its a lot of businesses inside of business and a lot of them are project businesses, where we where we drive new business still.

Speaker 3: significantly in the day-to-day converting of work at a much more local level.

Significantly into the day to day converting of work.

At a at a much more local level.

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

Speaker 4: The next question is from Jason Bazzone with City. You may go ahead.

Speaker 5: Add a quick question on the tech telco weakness that you called out. When do we begin to laugh that? Would you say that's a second quarter event? I think that's the first quarter member or is it more Q1?

Just had a quick question on the tech telco weakness that you called out when when do we begin to lap that would you say that's a second quarter event I think that's the first call I remember or is it more Q1 of next year.

Ellen Johnson: And then I'll hand over to Alan, but I'll obviously point out that when there's growth, we do grow margins. So as we return to growth, I'm not sure that the cost that the cost question should be a concern. No, just to add to the comments, I mean, we've been very disciplined about not hiring ahead of revenue, as well as being able to really, as you've seen, you know, this year included, really manage a flexible cost structure. So we do see the ability to continue to increase our margins. Thank you both.

Unknown Attendee: Thank you.

Speaker 3: I mean, I think I think tech specifically we would have been largely through it, but as I did call out, you know,

Well I mean, I think I think our tech specifically, we would've been largely through it but as I did call out we had a.

Speaker 3: significant loss at McCann in the telco space, which is then going to extend that into next year. And then, I don't think health falls into the same category. I think health is really just a, we expected more from that sector this quarter than we've seen. But that's not a long-term hedge in the next year drag.

Significant loss at Mccann in the telco space, which is then going to extend that into next year and then.

I don't think health falls into the same category I.

I think health is really just a.

We expected more from that sector this quarter than we've seen.

David Karnovsky: The next question is from David Karnovsky with JP Morgan. You may go ahead. Thank you. I believe you noted that IPG would assess internal structural solutions to improve growth. One of the see if you could expand on what that means exactly. And then just regarding the commentary you gave on health care before and that, not performing as expected in Q3, you with that largely related to new business or with other factors. And just like new account lens aside, how do you kind of assess the health of that? Vertical.

That's not a long term hedge into next year drag.

Okay. Thank you.

Thank you.

Speaker 4: You are next question is from Julian Roke with Barclays. You may go ahead.

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

Yes, good morning, Felipe good morning, and thank you for taking the question two if I may I was hoping you could give us the number of employees, so huge and RGA Tuesday.

Speaker 10: Good morning Philip Gugong and thank you for taking the question. Two, if I may, I was hoping you could give us the number of employees like the huge and RGA today.

Speaker 10: And the second question is margin versus gross next year. So this is doing 5 cent of line growth and how many come 4% for the full year? Is they make their number in Q4 on flat margin? Is that cost including employees are up 4 to 5 while yours are flat? So as talent and these days investment intake is key to growth in agency land? Could that be an issue for next year?

And the second question is margins versus growth next year. So could this is doing swaps and top line growth and nobody called 4% for the full year.

Philippe Krakowsky: We'll take them in reverse order if I may. So, health, as you know, a very, very strong performer for us over a long period of time. So, I think it was a period in which it was probably 14 or 15% of our overall revenue, and it's now likely twice that. And long-term, we see it as a sector that still sets up well for growth. So, that's a strength in terms of our asset and business mix.

To make their numbers in Q4, once that margin or is that cost including employees up 45, what yours are flat.

Talent and he's the investment intake is key to growth in agency then could that be an issue for next year.

Speaker 3: I don't know that we would break out the by unit employee numbers. I think the second question is a good question.

I don't know that we would break out of that.

By unit employee numbers.

Philippe Krakowsky: What it didn't do this quarter is what I was actually just referring to in other hands question, which is some of the TBG conversion in the non-high profile opportunities was not at the rate at which we expect from them. And yet, as we look at fourth quarter, and what has been brought in, we think it will get back to the level that we see from a strong performer in the group. And in terms of healthcare, anything else, I guess they were one or two, but you know, it's of course a business where you have a drug that, you know, has a lot of expectancy attached to it, where there is going to be a meaningful budget where it fails late in approval process. But that's something we do factor in. We did happen to see one or two of those in the quarter.

I think the second question.

Is a good question.

Speaker 3: and to Alan's point earlier, I mean, we are running a portfolio of businesses. And as you could see, a number of them, quite a few of them, whether it's media, health.

And to Alan's point earlier, I mean, we are running a portfolio of businesses and as you can see a number of them quite a few of them, whether it's media health a lot of experiential PR businesses are performing well for us and others are going through some challenges. So I don't know that you approach.

Speaker 3: A lot of these experiential p-arbitances are performing well for us.

Speaker 3: and others are going through some challenges. So I don't know that you approach

Speaker 3: the comp component of it similarly across the board and we haven't for quite a few years. So we've been finding talent in the growth businesses.

The comp component of it similarly across the board and we haven't for quite a few years. So we've been finding talent in the growth businesses.

Speaker 3: which means that we're able to compensate them appropriately. And when you look at the model as it is now, you see a number for us which is an all-in number and it averages out.

Means that we're able to compensate them appropriately.

And when you look at the model as it is now you see a number for US which is an all in number and it averages out.

Philippe Krakowsky: Now, relative to your first question, I do think it bears going into a bit more detail, so how I would frame it up for you is this. The comment is specific to parts of the portfolio that have been underperforming and have been taxing overall performance this year. And if you think about the long-term history of those additional specialty assets, it's one where they've successfully gone through cycles of transformation every four or five years.

But what youre seeing in there are.

Speaker 3: a range of outcomes or a range of reality.

And a range of outcomes or a range of realities.

Speaker 3: and making sure that we are rewarding and investing the folks who are driving the performance and who are the strong performers, you know, shouldn't be an issue. And there's very, you know, there's clarity across our group and all of our operators in terms of how their incentives are very, very directly aligned to our results and what we're accountable to.

And making sure that we are rewarding and investing.

The folks who are driving the performance and who are the strong performers.

Shouldn't be an issue and there's very there's clarity across our group and all of our operators in terms of how their incentives are very very directly aligned to.

Our results and what we're accountable to you all for.

Speaker 3: People understand where and how they're earning the compensation. So I don't see that as a meaningful concern.

People people understand where and how they're earning.

Philippe Krakowsky: So as we heading into the year to ask that meant there was a reason to be supportive as they look to make the necessary adaptation. But sitting where we are now, if you look at the weighting to technology clients that they have, and then the speed of change in the operating environment, this has made it an especially difficult time, both for what they do and for them to essentially reboot or reinvest.

The compensation, so I don't I don't see that as a meaningful concern.

Okay. Thank you.

Thank you.

Speaker 4: you. And that was our last question. I'll now turn it back to sleep for any final thoughts.

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

Speaker 3: Thank you, Sue. Again, thank you all for the time. And we look forward to sharing better news with you in February .

Thank you Sue.

Again, thank you all for the time and.

We look forward to sharing better news with you in February .

Philippe Krakowsky: And then when it comes to tech specifically, I don't know that any of us have seen it retrench to the degree we've experienced, or for this long, this prolonged period of time. So we clearly have to ramp up the urgency on this front and be open to a broad range of solutions. And of course, those are conversations that involve the leaders of those operations as you'd expect and that are ongoing. It's not something that we're in a position where I can say to you right now, here's what we're going to do or not.

Speaker 4: Thank you. This concludes today's conference. You may disconnect at this time.

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

Philippe Krakowsky: But if you wanted sort of a broad guideline, if you look at our strongest performers across the portfolio, so the framework for what success should look like, and I think that could be helpful, whether it's healthcare, media brands, you have a coordinated approach to how you go to market, you benefit from scale. You're looking for ways to share complementary skill sets and identify very clearly where the centers of excellence sit across multiple units.

Philippe Krakowsky: And I think it's all in the service that making it simpler for clients to engage with us. So I think those are the guidelines for us. I think we're going to look to define a way forward in terms of putting something into effect with a number of those assets as we head into 24. So I hope that frames it up for you, David. But I mean, I can't give you a definitive answer.

Unknown Attendee: Let's help. Well, thank you. Please. Thank you.

Ben Swinburne: The next question is from Ben Swinburne with Morgan Stanley. You may go ahead. Thanks.

Philippe Krakowsky: Good morning. Thanks for all the color earlier on the different segments, headwinds and tailwinds. I was wondering if you could just spend a minute. You know, every agency holding company kind of reports differently, as you know, so it's hard to compare. But we try anyway. Your IAC segment, which does not include RGN huge, you know, it's down four and a half percent year to date. You talked about the healthcare business. That's still growing.

Philippe Krakowsky: You mentioned an account loss in the can and you're prepared in March. But do you think, like, is there a sort of underlying share erosion happening here? Or is this just kind of creative? It's just a tougher business for me. We know it's a tough business. It's tougher than it used to be. But just any more sort of high level comments on how you're feeling about the assets within that group. Because that's obviously not including the digital specialty agencies.

Philippe Krakowsky: And then, I guess, I guess just a question around kind of AI, which was maybe everyone's question back in January, February. How much of an investment priority is that for you guys internally? Because protecting margins and margin expansion is something people want and expect from IPG. But I'm sure you're also keeping your eye on the long game here and not wanting to miss anything as it relates to investing in tech and talent on the, particularly on the AI front.

Philippe Krakowsky: Thanks. On your first question, I think that across the industry, over the last year or more, in fact, you've seen folks call out that the more, quote unquote, the traditional consumer advertising portion of all of our businesses is under some stress as you put it. So within ISC, you've got our healthcare business, which we spoke about. You've got FCB, which, again, I think we did speak to, you know, how they've leaned into incorporating data and precision thinking sort of an audience led approach and married it up to a very, very creative offering.

Philippe Krakowsky: And so for us, the rest of what is in that grouping is, you know, a McCann, which is on that same path. And then a group of, you know, kind of a portfolio of US independent agencies where we do, again, I think need to look a bit as, you know, that's a part of the answer that I shared with David around, you know, what is, what does this, what does scale look like?

Philippe Krakowsky: How are we clear about centers of excellence? How do we get complimentary skillsets working together? And what's a, what's a simpler way for clients to engage there and for us just to be. You kind of have a flying formation for that grouping. So I think IAC definitely needs not unique to us, right? As you called it out, that's a part of the business where I think everybody is thinking about what the right way to integrate that. You know, when you take creativity and it's part of an integrated offering, it's definitely much more powerful.

Philippe Krakowsky: And then on the AI question, it is an investment priority. It has been for some time, as I said to you, because whether it's inside of media brands or at Axiom, there's quite a bit we've been doing there. And ways in which AI is going to make it possible for us to get more done for clients or work smarter and take a lot of processes we have. So from an efficiency point of view, it's clearly going to be a boon.

Philippe Krakowsky: But we also think it's going to open up opportunities to, you know, there's so much demand for content at this point given how many channels there are and how complex the consumer journey is across this incredibly fragmented tech ecosystem, that we still see opportunities to also have it be a revenue generator. So as I said, we've got an AI task force that has a handful of the top leaders from across the group. And that's probably going to then become something that gets leadership at the center here. And, you know, we prioritize investment that way. Thank you.

Michael Nathanson: And the next question is from Michael Nathanson with Moffat Nathanson, you may go ahead. Thanks. And good morning, Pauli. All right. Okay. So this is a long running Q&A we've been having. I guess when you get under, I might know what the question is. Okay. Exactly. When you look at media data and engagement and backing away RGA and you're just taking it out, you know, we're used to you guys growing top of the leaderboard.

Michael Nathanson: And this year is going to struggle. We know that. But I wonder when you look at some of your competitors, those who've bought data assets and those that have not, look at what's happening under your hood. You know, what do you think about the strategic pivot that you made? What is slowing down maybe with the growth? Ex those digital, you know, special assets.

Philippe Krakowsky: And is this something that you think, you know, strategically is on the wrong footer's just execution? Because, you know, we see other companies just growing faster. I know you're cops are hard, but I wonder like, what do you think about the decisions you've made to get here?

Ellen Johnson: It's just basically a tough year that bounces back next year. Look, I mean, we've got a terrific media offering to your point. And I think that's been clear both in what we keep saying about the performance there. And in the new business performance a year today, if you sort of consider major pitches from a Geico at the early part of the year all the way through General Mills, which was yesterday, that said, I will, I think, you know, you're clear you have one of you.

Ellen Johnson: And it could very well be that we are missing out an additional source of growth there, right? Right. So I think the questions come up before it's a very valid question. And we clearly have to be open to exploring, and David Karnovsky. Every avenue for delivering value to our clients, and that includes our trading model, by which I mean how we buy media on their behalf, right? So, client's value product and results, we're very strong in that regard, they also value efficiency, and we have to deliver on both sides of that equation, on both fronts.

Ellen Johnson: So I think that, like you said, it's been a conversation we've had on a call like this one, and then, you know, just when we've met independent of this, and we're looking very hard at our model within the media component of this for that reason. Because you're right. I mean there's no, there's no, there's no upside in leaving growth on the table. Got it.

Ellen Johnson: And then I can ask one to Ellen, Bill of expenses, I know there's no media there given what we know. The growth is pretty strong in this quarter. If you tell us what, what was that tie to? Sure. I think it's consistent with the growth you saw in our SE&E segment. Okay. So I'm going to let it out, some don't, clearly. Those, those, those bill of expenses are predominantly associated with that segment, and that segment grew nicely. So.

Unknown Attendee: Thank you, yes.

Unknown Attendee: Thank you.

Stephen K. Hall: The next question is from Stephen K. Hall with Wells Fargo. You may go ahead. Yeah. Thank you. Good morning. So Philippe, you talked about the 3.2 percentage points growth drag from tech and telco and digital, and, and I don't think that was too new from Q2 to Q3 because we've talked about that a lot this year. And same with the macro concerns, I just know we've been talking about those this year.

Philippe Krakowsky: So, I guess my question is what has changed most from your perspective over the last three months? It seems like the business did deteriorate in some ways versus your, your prior expectations. I think we're trying to understand what of that is idiosyncratic related to a lot of the agencies you've talked about. And then what might be just more broad base that can really flow and extend into a great deal of next year. So I just love to have some incremental color on on what's changed the most more recently.

Ellen Johnson: And then Ellen, you said you're not hiring ahead of revenue. A lot of the labor market stats indicate things are pretty tight, but I've seen a lot of industry trade reports that there's also a lot of head count reduction. So when you look at the labor market today, do you think it's a buyer's market for the skills you need or is it a seller's market? Thank you. All right. Let me unpack that because I think most of the pieces are out there to your point.

Ellen Johnson: So the tech telco and the specific entities within our world that, you know, as I said, are taxing our performance is not new news. Over the normal course of business, there's always revenue to be generated. And I think your budget, your existing book, and then that TVG and the operators are accountable for both creating those opportunities and converting those opportunities with existing clients, as well as winning ones with new clients. And I think that the incremental Drag and Q3 was really there and to a much lesser extent that some of the larger new business did not ramp at the pace that we anticipated.

Ellen Johnson: I'd sort of say that we don't like to see the Delta because we've obviously been on the other side of that for some time, but I don't see that the Delta or key competitors has changed over the course of this year. And so there is some of what's been on this call, which is the things we talked about, what I just mentioned to you, and then potentially the question Michael asked around media, a client mix question, or perhaps the some degree asset mix positive to us over time.

Ellen Johnson: Now clearly there's one competitor who credits them is benefiting from asset mix, but I don't know that there's anything outside of those that gets me to a dramatically different perspective. And then looking at our workforce, if you're looking for broad-based trends based upon your question, if I go back post-the pandemic, labor was tight, nutrition was high, those trends have attenuated, but we're not one business as you know. We are many businesses and we recruit many different types of talent.

Ellen Johnson: So we're the skill set for more scarce. There is that supply and demand mix, but we have truly great labor force in our talent. And so we are very competitive in that regard. But the broad-based trends that were called out in post-the pandemic those haven't attenuated. Thank you.

Tim Nollen: And our next question is from Tim Nullen with McQuarry. You may go ahead. Hi, Philippe Ellen. Thanks very much. Just I wonder if you could give a little bit more explanation around the new business trends. You've said it two or three times on this call that you've seen some, I guess, delays in the conversion and onboarding of some of the wins that you've been talking about for a little while, supposed to come through in the second half.

Tim Nollen: I mean, maybe this happened sometimes. I just don't really recall that occurrence before. I just want to be going to explain, is it part of these new clients seeing these slowdowns and worrying about spending in the fourth quarter and just sort of deciding to go slower? Or is it a change in the scope of work that's coming on and just hadn't really heard that commentary before? And relatedly, the general mills win sounds pretty big.

Tim Nollen: I didn't check the numbers. I wonder if you could just help us maybe scope out kind of of the long list of wins that you've had in the last several months, like which are the biggest ones? Thanks.

Philippe Krakowsky: Now I think on the large headlight wins, that's the onboarding of those that are at a modestly lower in a smaller pace, is not the key driver. It's what Stephen was just asking about around, you know, I think that it's the TVG conversion that I would really point to in Q3. And then in terms of scale, I think that we've got quite a few. I mean, so from Guy, you know, Guy, go at the, I think.

Philippe Krakowsky: I think a general mill is at the scale of a Geico, Bristol Myersquib is maybe modestly smaller than that, constellation brands is sizable, they do cluster into the media sector, and then Pfizer is very large, you know, and is probably different in that, in that clearly it was integrated across creative, you know, the health and medical communications and expertise and public relations, and some are global, one like that, or general mills, whereas, you know, a Geico or a BM, I mean, a constellation brands are domestic, but I do think that as I said, it's not, it's not the scale, we have one of the larger wins that is onboarding a bit more slowly than anticipated, but broadly speaking, it's the PBG conversion. Thanks.

Philippe Krakowsky: I mean, Ellen, you know, at some point, we can break down for you kind of, you know, given, as she said, it's a lot of businesses inside of business, and a lot of them are project businesses, so where we, where we drive new business is still significantly in the day to day converting of work at a much more local level. Thank you.

Jason Bazinet: The next question is from Jason Bazzini with city, you may go ahead. I had a quick question on the tech telco weakness that you called out, when, when do we begin to laugh that would you say that's a second quarter event? I think that's the first quarter member or is it more Q1 of next year.

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

Julien Roch: Our next question is from Julian Roke with Barclays. You may go ahead. Good morning, Philip. Good morning, and thank you for taking the question.

Philippe Krakowsky: Two, if I may, I was hoping you could give us the number of employees at the huge and RGA today, and the second question is margin versus gross next year. So this is doing 500 blind goes and I'm become 4% for the full year is they make the numbers in Q4 on flat margin either cost, including employees are 45 while yours are flat. So as talent and these days investment intake is key to growth in agency land, could that be an issue for next year?

Philippe Krakowsky: I don't know that we would break out that by unit employee numbers. I think the second question is a good question, and to Ellen's point earlier, I mean we are running a portfolio of businesses and as you could see a number of them, quite a few of them, whether it's media, health, a lot of the experiential businesses are performing well for us and others are going through some challenges so I don't know that you approach the comp component of it similarly across the board and we haven't for quite a few years so we've been finding talent in the growth businesses which means that we're able to compensate them appropriately and when you look at the model as it is now you see a number for us which is an all-in number and it averages out but what you're seeing in there are a range of outcomes or a range of realities and making sure that we are rewarding and investing the folks who are driving the performance and who are the strong performers you know shouldn't be an issue and there's clarity across our group and all of our operators in terms of how their incentives are very very directly aligned to our results and what we're accountable to you all for people understand where and how they're earning the compensation so I don't see that as a meaningful concern. Okay thank you. Thank you.

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

Philippe Krakowsky: Thank you Sue.

Unknown Attendee: Again thank you all for the time and we look forward to sharing better news with you in February. Thank you.

Unknown Attendee: This concludes today's conference you may disconnect at this time.