Q3 2023 Omnicom Group Inc Earnings Call

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[music] good afternoon, and welcome to the Omnicom third quarter 2023 earnings release Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session to.

Speaker 1: Good afternoon and welcome to the Omni-Comfort third quarter, 2023 earnings release conference call. At this time, all participants are in a list-nonely mode. Later, we will conduct a question-to-answer session. To participate, please press one-then-zero. If you need assistance during the call, please press star-then-zero. As a reminder, this conference call is being recorded. At this time, I'd like to introduce you to your host for today's conference.

Please press one day zero, if you need assistance during the call. Please press Star then zero as a reminder, this conference call is being recorded at this time I'd like to introduce you to your host for today's conference Senior Vice President of Investor Relations Gregory Lundberg. Please go ahead.

Speaker 1: Senior Vice President of Investor Relations, Gregory Lumber, please go ahead.

Speaker 2: Thank you for joining our third quarter, 2023 earnings call. With me today are John Ren, Chairman and Chief Executive Officer, and Phil Angelostro, Executive Vice President and Chief Financial Officer.

Thank you for joining our third quarter 2023 earnings call with me today are John Wren, Chairman and Chief Executive Officer, Jill Angela Ostrow Executive Vice President and Chief Financial Officer on our website Omnicom group Dotcom, we've posted a press release, along with the presentation covering the information or viewed today as well as the webcast of this.

Speaker 2: On our website omnikomgroup.com, we've posted a press release along with a presentation covering the information we'll review today, as well as a webcast of this call. An archive version will be available in today's call.

Paul and <unk>.

Archived version will be available on today's call concludes.

Speaker 2: Before we start, I'd like to remind everyone to read the forward-looking statements and non- GAAP financial and other information that we've included at the end of our investor presentation.

Before we start I'd like to remind everyone to read the forward looking statements and non-GAAP financial and other information that we have included at the end of our Investor presentation.

Speaker 2: certain of the statements made today may constitute forward-looking statements, and these statements are our present expectations.

Certain of the statements made today.

Constitute forward looking statements and these statements are our present expectations.

Speaker 2: Relevant factors that could cause actual results to different materially are listed in our earnings materials and in our SEC filings, including our 2022 form 10K.

Relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings, including our 2022 Form 10-K.

Speaker 2: During the course of today's call, we will also discuss certain non-GAAP measures. You can find the reconciliation of these to the nearest comparable GAAP measures in the presentation. We will begin the call with an overview of our business from John . Then Phil will review our financial results for the quarter, and after our prepared remarks, we will open the lineup for your questions. I'll now hand the call over to John .

During the course of today's call. We will also discuss certain non-GAAP measures you can find a reconciliation of these to the nearest comparable GAAP measures in the presentation. We will begin the call with an overview of our business from John and Phil will review, our financial results for the quarter and after our prepared remarks, we will open the lineup for your questions I'll now hand, the call over to John .

Thank you Greg.

Speaker 3: Good afternoon everyone and thank you for joining us today for our third quarter result.

Good afternoon, everyone and thank you for joining us today for our third quarter results.

Speaker 4: Before we discuss the quarter, I want to touch on something that is top of mind for many of us. The horrific attacks on Israel and the subsequent war have been devastating to witness. We've seen a complete lack of humanity displayed and that hate has no place in this world.

Before we discuss the quarter I wanted to touch on something that is top of mind for many of us the horrific attacks on Israel and the subsequent war have been devastating to witness we've seen a complete lack of humanity displayed.

He has no place in this world.

We mourn the innocent lives lost.

Speaker 4: and our thoughts remain with all those personally impacted.

Our thoughts remain with all those personally impacted.

Turning to our results.

Speaker 3: Organic growth was 3.3% for the quarter, which is in line with our expectation.

<unk> growth was three 3% for the quarter, which is inline with our expectations.

Speaker 3: operating income margin was 15.7

Operating income margin was 15, 7% and diluted earnings per share for the quarter.

Speaker 3: and diluted earnings per share for the quarter was $1.86, up 5.1% versus the comparable period in 2022.

Was $1.86 up five 1% versus the comparable period in 2022.

Speaker 3: Our results for the quarter keep us on pace to maintain our full year organic growth target of 3.5% to 5%.

Our results for the quarter keep us on pace to maintain our full year organic growth target of three 5% to 5%.

Speaker 3: and our operating margin target of 15% to 15.4%

And our operating margin target of 15%.

15, 4%.

Speaker 3: Phil will cover our results in more detail during his remarks.

So I'll cover our results in more detail during his remarks.

Speaker 3: Our cash flow continues to support our primary uses of gas.

Our cash flow continues to support our primary uses of cash.

Speaker 3: dividends, acquisitions, and cherry purchases. And our liquidity and our balance sheet remain very strong.

Do you have at Ames acquisitions and share repurchases.

Our liquidity and our balance sheet remained very strong.

Speaker 3: During the quarter, we continue to make solid progress on our key strategic priorities to position Omnicham for sustainable and profitable long-term growth.

During the quarter, we continued to make solid progress on our key strategic priorities.

<unk> omnicom for sustainable and profitable long term growth.

Speaker 3: Starting on the talent front, we made several key leadership changes as part of our succession planning.

Starting on the talent front, we made several key leadership changes.

Part of our succession planning.

Speaker 3: Alex Luvar was named Global CEO of DVB Worldwide.

Alex Blue bar.

He was named Global C E O D V B worldwide.

Speaker 3: Alex served as the global president and chief operating officer of DDB and succeeds Mario Hallering will become chairman. In addition Glenn Lomas currently CEO of DDB and Mayup has been elevated to global president and chief operating officer in partnership.

Alex served as the global President and Chief operating officer of DDB and succeeds Marty O'halloran will become chairman. In addition, Glenn Lamas currently C. E O D V. B EMEA has been elevated to global President and Chief operating officer in partnership with Alex.

Speaker 3: Nancy Razz is moving from her post as CEO of KBWA New York to become CEO of the Americas at BBDO. Nancy succeeds Cynchon Walsh who has been with BBDO for 27 years.

Nancy Raz is moving from her post as CEO of <unk>, New York to become CEO of the Americas at D. V. D O. Nazi succeed Synching Walsh, who has been with D V D for 27 years.

Speaker 3: Guy Marks, previously on the Comedia Group's CEO of Amia, was named the CEO of Ph.D. worldwide.

Guy Mark previously Omnicom media group's CEO of EMEA was named the CEO of ph D worldwide.

Speaker 3: Guy succeeds Philip Brown, who is leaving the media industry after nearly four decades.

Guy succeeds Philip a brown who's, leaving the media industry after nearly four decades.

Speaker 3: Dan Clay's who led, I'm the Comes Meeting Group UK, a CEO , will fill the CEO of OMG Amia's position. I wanna congratulate Alex, Glenn Nancy, Guy, and Dan, and extend my gratitude to Marty, Singen, and Philippa for their many years of service to I'm the...

Dan Clays, who led omni.

I was meeting with U K C E O.

Well, the CEO of OMG amazed position.

I wanted to congratulate Alex Glenn Nancy Guy I'm Dan.

Extend my gratitude to Marty Xinjiang and silver.

There are many years of service to Omnicom.

Speaker 3: This series of announcements is a testament to our emphasis on succession planning and ensuring our networks and practice areas have the right teams to lead them into the future.

This series of announcements is a testament to our emphasis on succession planning and ensuring our networks and practice areas have the right teams to lead them into the future.

Speaker 3: During the quarter, we continue building our generative AI capabilities with the rollout of AMNI assist.

During the quarter, we continued building our generative AI capabilities with the rollout of omni assist.

Speaker 3: a proprietary version of chat GBK that enhances every task within Omni. Omni Assist is just one example of how we are improving our capabilities and efficiency through generative AI. We continue assessing how generative AI will affect the way we work across the organization and preparing ourselves for the future.

Our proprietary version of chat GBT that enhances every task within omni Omnis. This is just one example of how we are improving our capabilities and efficiency.

Jarrod AI we.

We continue assessing how generative AI will affect the way we work across the organization and preparing ourselves for the future.

Speaker 3: We broaden our capabilities through strategic acquisitions in high growth areas in the quarter. In July , Amnicon Media Group required a promo and global shop-

We broadened our capabilities through strategic acquisitions in high growth areas in the quarter and.

In July Omnicom media group required.

Promo and global shopper.

Speaker 3: Two of Brazil's leading connected commerce and retail media agencies. These acquisitions create a dedicated end-to-end e-commerce and retail media performance agency in the Brazilian market for Omnika Media Group.

Sure Brazil's leading connected commerce and retail media agencies. These acquisitions create a dedicated end to end E Commerce and retail media performance agency.

The Brazilian market, well Omnicom media group.

Speaker 4: OPRG strives its services through the acquisition of plus communications at the top.

O P. R. G strengthen is services through the acquisition of plus communications.

Public affairs firm.

Speaker 3: and FB1 strategies are leading political consultancy. The Beltway-based acquisitions, further solidified, OPRG's leadership position, and portfolio in public affairs and crisis communications, particularly in the healthcare...

F P. One strategies, a leading political consultancy.

Beltway based acquisitions further solidified O P. R Gs leadership position and portfolio and public affairs and crisis communications, particularly in the healthcare and technology.

Speaker 3: We recently announced the formation of Omnicon advertising services in India.

We recently announced the formation of Omnicom advertising services, India.

Speaker 3: Christ Emperor Am le comce cri tok

Rise of Omnicom's creative agencies located in India.

E V O O D D B and T be that'd be right.

Speaker 3: On become advertising services will be able to offer the best creative capabilities and talent for our clients across the group. The formation of on become advertising services in India follows the launch of our global delivery services and centers of excellence in India, which we announced earlier this year.

Omnicom advertising services will be able to offer the best creative capabilities and talent.

Our clients across the group.

The formation of Omnicom advertising services, India follows the launch of our global delivery services and centers of excellence in India, which we announced earlier this year.

Speaker 3: Today we have over 4,000 people in global centers of excellence in four major cities, supporting our clients and agencies around the world.

Today, we have over 4000 people in global centers of excellence in four major cities supporting our clients and agencies around the world.

Speaker 3: We are rapidly scaling the operations and expect the triple the size of the next 24 to 36 months.

We are rapidly scaling the operations and expect to triple the size over the next 24 to 36 months.

Speaker 3: Our centers of excellence are helping our company transform from within, improving our client offerings and providing operating efficiency.

Centers of excellence are helping our company transformed from within.

Improving our client offerings and providing operating efficiencies.

Speaker 3: While we position on the council long term, we're driving growth through significant new business.

While we position omnicom for the long term are driving growth through significant new business wins.

Speaker 3: Some of these wins this quarter include only come media group won the global media business for Uber and HSBC

Some of these wins this quarter include Omnicom Media group, one the global media business for Uber and HSBC.

Speaker 3: Buyers Dough selected OMD as its media agency of record for Europe and North America.

Buyers to off selected L. M D. As its media agency of record for Europe , and North America on the greater front I know many D V. B picked up Amazon's creative business in Europe , Omnicom Health group and our advertising collectors also continued to grow their relationship with Novartis.

Speaker 3: On the creative front, Adam and Eve, DDB, picked up Amazon's creative business in Europe . On the Com Health Group and our advertising collective also continue to grow their relationship with Novartis.

Speaker 3: expanding in oncology and winning significantly in farmer, including their Reno portfolio.

Expanding in oncology and winning significantly in pharma, including their renal portfolio.

Speaker 4: Finally, TbWA was awarded the Creative Doos as Telstra, Australia's largest mobile network.

Finally, <unk> was awarded the creative games with Telstra Australia's largest mobile network overall.

Speaker 3: Overall, we're pleased with our financial results and our progress on our key strategic initiatives.

Overall, we're pleased with our financial results and our progress on our key strategic initiatives.

Speaker 3: While we remain optimistic entering the fourth quarter, as in past years, our performance in the fourth quarter will be impacted by the amount of year-end projects spend that are coins executed, and that our AGCs are successful capture.

While we remain optimistic entering the fourth quarter as in past years, our performance in the fourth quarter will be impacted by the amount of year end project spend that our clients execute and their agencies are successful captured.

Speaker 3: We continue to plan cautiously, given the uncertainties in the macroeconomic and geopolitical environment, including higher interest rates, oil prices, instability due to the wars in Ukraine and Israel, and the continuing risk of a recession in the United States.

We continue to plan cautiously given the uncertainties in the macroeconomic and geopolitical environment.

Including high interest rates oil prices instability juices, the wars, and Ukraine, and Israel and the continuing risk of a recession in the United States.

Speaker 3: I will now turn the call over to Phil for a closer look at our financial results. Phil? Thanks, John .

I will now turn the call over to Phil.

Also look at our financial results. So thanks John .

Speaker 2: John said our business is solid, despite the challenges of the current macroeconomic environment.

John said, our business is solid despite the challenges of the current macroeconomic environment.

Speaker 2: before we open the call up for questions and answers. Let's go through our third quarter results and more to...

Before we open the call up for questions and answers, let's go through our third quarter results in more detail.

Speaker 2: Starting with the summary income statement for the second quarter on slide three.

Starting with the summary income statement for the second quarter on slide three.

Speaker 2: reported revenue increased by 3.9% and organic growth was 3.3%.

Reported revenue increased by three 9% and organic growth was three 3%.

Speaker 2: The reported operating income increased by 2.7% to 560.8 million, and the related margin was 15%.

Reported operating income increased by 2.7% to $568 million.

And the related margin was 15, 7%.

Speaker 2: That interest expense was 38.3 million for the quarter. An increase of 9.2 million compared to the third quarter of 2022.

Net interest expense was $38 3 million for the quarter, an increase of $9 2 million compared to the third quarter of 2022.

Speaker 2: Do import the lower interesting come on cash and shortcoming the

Due in part to lower interest income on cash and short term investments.

Speaker 2: Chief, four, we expect that compared to the prior year, that interest expense will experience a similar increase. Our reported

Q4, we expect that compared to the prior year net interest expense will experience a similar increase.

Our reported income tax rate was 26%.

Speaker 2: This is lower than our 27% estimate from July due to reduction in tax expense, resulting from the vesting of share-based compensation. For the fourth quarter, we estimate our tax rate will be 27%.

This is lower than our 27% estimate from July due to a reduction in tax expense, resulting from the vesting of share based compensation.

For the fourth quarter, we estimate our tax rate will be 27% reported net income in Q3 increased by 2%.

Speaker 2: And the looted earnings per share was up 5.1%. Driven by both higher net income and by lower shares at standing, resulting from share repair.

And diluted earnings per share was up five 1% driven by both higher net income and by lower shares outstanding resulting from share repurchases.

Speaker 2: Let's turn to revenue on slide four. As mentioned, organic growth on the third quarter was 3.3%. The impact on foreign currency translation reversed course in the third quarter. Increasing reported revenue by 1.7%.

Let's turn to revenue on slide four as mentioned organic growth in the third quarter was three 3% impact from foreign currency translation reversed course in the third quarter, increasing reported revenue by one 7%.

Speaker 2: For each day where they are currently, we estimate the impact of foreign currency translation will be a benefit of approximately 0.5% for Q4 and a reduction of approximately 0.5% of the year.

The rates stay where they are currently we estimate the impact of foreign currency translation will be a benefit of approximately <unk>, 5% for Q4, and a reduction of approximately 0.5% for the year.

Speaker 2: The impact of acquisition and disposition revenue is negative 1.1%. Primarily reflecting the sale in Q2 of our research.

The impact of acquisition and disposition revenue was negative one 1%, primarily reflecting the sale in Q2 of our research businesses.

Speaker 2: We expect a reduction of 75 basis points for the fourth quarter, and expect that the recent acquisitions will result in an increase in reported acquisition and disposition revenue next.

We expect a reduction of 75 basis points for the fourth quarter.

I would expect that the recent acquisitions will result in an increase in reported acquisition and disposition revenue next year.

Speaker 2: John Disgust, our organic growth outlook for the year remains unchanged. At 3.5% with a stretch...

As John discussed our organic growth outlook for the year remains unchanged at 3.5%, where the stretch target of 5%, which still factors in some uncertainty about the level of year end incremental marketing spend and project work that we expect our agencies will be successfully capture them in the fourth quarter.

Speaker 2: still factors in some uncertainty about the level of year-end incremental marketing spend in project work that we expect our agencies will be successfully capturing in the fourth quarter.

Speaker 2: Now let's turn to slide 5 to review our organic revenue growth by this

Now, let's turn to slide five to review, our organic revenue growth by discipline.

Speaker 2: During the quarter, advertising media posted 6.1% growth.

During the quarter advertising and media posted a six 1% growth.

Speaker 2: strongest this year, driven by continued strength in our media business globally.

Strongest this year driven by continued strength in our media business globally.

Precision marketing grew four 3%.

Speaker 2: Solid performance given the comparison to the 16.2% growth that experienced in Q3 of 22.

Solid performance given the comparison to the 16, 2% growth experienced in Q3 of 'twenty two.

Speaker 2: and the challenging backdrop of certain of their technology and telecom points that we discussed last course.

And the challenging backdrop of certain of their technology and telecom clients that we discussed last quarter.

Speaker 2: Commerce and brand declined by 1.7%. Thruven by reductions that are shopper marketing aids.

Commerce, and Brandon declined by one 7% driven by reductions at our shopper marketing agencies.

Speaker 2: Experiencial grew 9.2% led by Asia, Europe , and the UK. Which are offset negative growth in the US and the Middle East.

Experiential grew nine 2% led by Asia, Europe , and the U K, which offset negative growth in the U S and the middle East.

Speaker 2: Execution and support declined 3.6%. You primarily did declines in our merchandising business. The public relations.

Execution and support declined three 6% due primarily to declines in our merchandising business.

Public relations was down five 5%, reflecting difficult comps against the 12, 6% growth we delivered in Q3 of 2022.

Speaker 2: reflecting difficult comps against the 12.6% growth we delivered in Q3 of 2022.

Speaker 2: Approximately half of the reduction relates to the less revenue connected to the 2022 election cycle. And the balance was due to a...

Approximately half of the reduction relates to less revenue connected in 2022 election cycle.

And the balance was due to a slowing of project spend in the quarter.

Speaker 2: We expect a similar headwind related to reduction in revenue in Q4 compared to the benefit from the election cycle in Q4 of 20.

We expect a similar headwind related to reduction in revenue in Q4 compared to the benefit from the election cycle in Q4 of 2022.

Speaker 2: Finally, healthcare grew 3.8%. With good momentum and several loggers.

Finally health care grew three 8% with good momentum at several large clients.

Speaker 2: Turning to slide six, we saw growth across our larger regions, offset by decline in Canada, as well as a decline in the Middle East and Africa, which grew by 12.2% in Q3 of 2022, causing part by the cyclicality and experience.

Turning to slide six we saw growth across our larger regions offset by a decline in Canada as well as a decline in the middle East and Africa, which grew by 12, 2% in Q3 of 2022.

Caused in part by the cyclicality and experiential.

Speaker 2: Looking at the year-to-date revenue by industry sector on slide seven, compared to the third quarter of last year, we had higher relative weights in two of our larger categories. Food and beverage.

Looking at the year to date revenue by industry sector on slide seven compared to the third quarter of last year, we had higher relative weights and two of our larger categories food and beverage and automotive.

Speaker 2: and has expected a lower relative weight in technology and a reduction, although smaller, in Telk.

And as expected a lower relative weight in technology, and a reduction although smaller in telecom.

Speaker 2: Now let's turn to slide 8, where you can see good progress on our expenses year over year.

Now, let's turn to slide eight.

Where you can see good progress on our expenses year over year.

Speaker 2: Salar-related service costs were down as a percentage of revenue year over year. Driven by our repositioning actions, and through changes in our global employees.

Salary related service costs were down as a percentage of revenue year over year, driven by our repositioning actions and through changes in our global employment.

Speaker 2: Third-party service costs increased in connection with growth in our revenue.

Third party service costs increased in connection with the growth in our revenues. These costs include third party supplier cost when we act as principal and providing services to our clients.

Speaker 2: These costs include third-party supplier costs when we act as principal in providing services to our clients.

Speaker 2: They're an integral part of our service offering to our clients and we generate profit.

There are an integral part of our service offering to our clients and we generate profit on them.

Speaker 2: Third-party incidental costs increase due to an increase in client-related travel and incidental at a pocket cost that a bill declines directly at our cost at no profit.

Third party incidental costs increased due to an increase in client related travel and incidental out of pocket costs that are billed to clients directly at our cost at no profit.

Speaker 2: Occupancy and other costs were helped by reductions in our real estate portfolio in the first quarter of 2020

Occupancy and other costs were helped by reductions in our real estate portfolio in the first quarter of 2023.

Speaker 2: Productions and ran expense were offset partially by an increase in operating expenses from higher levels of inequality.

Reductions in rent expense were offset partially by an increase in operating expenses from higher levels of in office work globally.

Speaker 2: S-G-N-A expenses were up a bit. Primarily due to higher professional fees related to the acquisitions we recently completed.

SG&A expenses were up a bit primarily due to higher professional fees related to the acquisitions. We recently completed.

Speaker 2: Turning to slide 9, operating income in Q3 was up 2.7% on a reported basis, and a related margin was 15.7%. Down slightly as expected.

Turning to slide nine operating income in Q3 was up two 7% on a reported basis.

The related margin was 15, 7%.

Down slightly as expected from.

15, 9% in the third quarter of 2022.

Speaker 2: For the full year we remain comfortable with the expected operating margin range of between 15 and 15.4%.

For the full year, we remain comfortable with the expected operating margin range of between 15 and 15, 4%.

Speaker 2: On a nine month year to date, now in Gapajussa basis has presented here on slide nine.

On a nine month year to date non-GAAP adjusted basis as presented here on slide nine.

Speaker 2: Operating income margin was 14.8% compared to 14.9% in 2020.

Operating income margin was 14, 8% compared to 14, 9% in 2022.

Speaker 2: or even on margin in Q3, 16.2%.

Our EBITA margin in Q3 16, 2%.

Speaker 2: Also down slightly from 16.4% in the third quarter of 2020.

Also down slightly from 16, 4% in the third quarter of 2022.

Speaker 2: A nine-month year-to-date non-gapaget justice basis where Ibrah margin was 15.3% compared to 15.3%.

On a nine month year to date non-GAAP adjusted basis, our EBITDA margin was 15, 3% compared to 15, 5% in 2022.

Speaker 2: Ride 10 is our cash low performance for the first nine months of the year.

Slide 10 is our cash flow performance for the first nine months of the year.

Speaker 2: We define free cash flow as net cash provided by operating activities, excluding changes in the working cap.

We define free cash flow as net cash provided by operating activities, excluding changes in working capital.

Speaker 2: Free cash flow for the third quarter of 2023 was 1.3 billion. An increase of 9.4 billion.

Free cash flow for the third quarter of 2023 was $1 3 billion.

An increase of nine 4% from last year.

We continue to expect changes in working capital would be close to flat for the year as it usually is.

Speaker 2: Regarding our uses of cash, we used 424 million of cash. They did it ends to common shareholder.

Guarding our uses of cash we used $424 million of cash to pay dividends to common shareholders and another 47 million for dividends to noncontrolling interest shareholders.

Speaker 2: and another 47 million for dividends that non-controlling interests.

Speaker 2: Capital expenditures of $64 million, similar to last year. Total acquisition payments.

Our capital expenditures was $64 million similar to last year.

Total acquisition payments were $202 million.

Speaker 2: Our stock will purchase activity, net approach each of stock plans, was 530 million year to date. Most of this took place in the first half of the year.

Stock repurchase activity net of proceeds from stock plans was $530 million year to date.

Most of this took place in the first half of the year.

Speaker 2: Flight 11 is a summary of our credit, liquidity and debt maturity.

Slide 11 is a summary of our credit liquidity and debt maturities at the end of the third quarter of 2023 book value of our outstanding debt was $5 6 billion.

Speaker 2: At the end of the third quarter of 2023, the book value of our its standing debt was five points.

Speaker 2: There were no changes in outstanding balances during the quarter other than foreign exchange translations. Our 2.5...

There were no changes in outstanding balances during the quarter other than foreign exchange translations.

Our $2 5 billion revolving credit facility was back stops our $2 billion of U S. Commercial paper program remains undrawn on our cash equivalents and short term investments were $2 8 billion.

Speaker 2: SPAC stops our $2 billion US commercial paper program, remains undrawn, and our cash equivalence and short-term investments.

Speaker 2: Next that maturity is not until November of 2020.

Our next debt maturity is not until November of 2024.

Speaker 2: Slide 12 presents our Starko Returns on two important performance metrics for the 12 months ended September 30th, 20th.

Slide 12 presents our historical returns on two important performance metrics for the 12 months ended September 32023.

Speaker 2: On the comes return on invested capital was 23% and return on equity is 47.

When it comes to return on invested capital was 23%.

Turn on equity was 47%.

Speaker 2: These metrics continue to be an excellent indicator of our conservative capital structure.

These metrics continue to be an excellent indicator of our conservative capital structure and the health of our business.

Speaker 2: closing, despite a challenging macro-environment, we're pleased with our financial results and our year-date organic growth of 4%.

In closing despite a challenging macro environment, we're pleased with our financial results and our year to date organic growth of 4%.

Speaker 2: We believe we are positioned very well for strong growth in the future, when the caution in the macro environment clears.

We believe we are positioned very well for strong growth in the future.

The caution in the macro environment players.

Speaker 2: Operative, please open the lines up for questions and answers.

Operator, please open the lines up for questions and answers. Thank.

Thank you.

Speaker 1: And ladies and gentlemen, if you wish to ask a question, please press one and zero in your telephone keypad. You may withdraw your question at any time by repeating the one zero command. If you can speak a phone, please pick up the answer before pressing the numbers. Once again, if you have a question, you may press one and zero. Our first question comes from the line of Benjamin Swimburn from Morgan Stanley . Please go ahead.

And ladies and gentlemen, if you wish to ask a question. Please press one zero on your telephone keypad you may withdraw your question at any time by repeating the ones Youre command, if you're using a speakerphone. Please pick up the handset before pressing the numbers. Once again, if you have a question you May press 190.

Our first question comes from the line of Benjamin Swinburne from Morgan Stanley . Please go ahead.

Speaker 5: Thank you, good afternoon. John , I guess I'll ask you the standard fourth quarter question around the macro and just trying to parse your words a little bit in understanding whether you're feeling that the caution.

Thank you good afternoon, John or I guess I'll ask you the standard fourth quarter a question around the macro and just trying to parse your words, a little bit of an understanding whether you're you're you're feeling that the caution.

Speaker 5: You guys referenced today is has increased, you know, from earlier this year. Obviously there's a lot of things happening in the world that would necessarily explain that. But I'm just wondering if you could add a little more color on how clients are feeling about Q4 and looking into next year. And then I'll just ask my follow up maybe for Phil or we want to take it.

You guys referenced today is has increased you know from earlier this year, obviously, there's a lot of things happening in the world that would necessarily explain that but I'm. Just wondering if you could add a little more color on how clients are feeling about Q4.

Looking into next year, and then I'll just ask my follow up maybe for Phil or equivalent to take it.

Speaker 5: You know, is it fair to call the tech sector a clear?

Is it fair to call the tech sector a clear.

Speaker 5: and sort of different headwind to the overall business. For Omni Com I noticed.

And sort of different headwind to the sort of the overall business for Omnicom I noticed I think year to date that vertical is down 300 basis points year to year, it's been a big theme across the industry started the year of efficiency I'm. Just wondering if you think that's a fair way to think about what we're seeing in the business in 2023.

Speaker 5: I think you need to date that vertical down through the basis point here to year. It's been a big theme across the industry, sort of the year of efficiency. I'm just wondering if you think that's a fair way to think about what we're seeing in the business in 2023.

Yeah.

Hum.

I do believe yes.

Speaker 4: I can probably go back 21 years where at this point in the year I'm saying this is very similar if not the same thing. A very large

I I can probably go back 21 years, where at this point in the year I'm, saying very similar if not the same thing.

A very large part of.

Speaker 3: Project work that occurs which adds to our growth or doesn't provide our growth, comes from project spend.

The project work that occurs which adds to our growth or doesn't provide our growth.

Comes from project spend.

And.

Clients.

Speaker 3: doing things that they've hesitated to do or push back, you know, throughout the year.

Doing things that they have hesitated to do or pushed back.

Operator: You're conference will begin momentarily, please continue to hold.

Throughout the year.

At this point.

Speaker 4: It's not a lot different than in past years in that we won't have clarity until probably Thanksgiving or thereabouts.

It's not a lot different.

And then in past years, and that we wont have clarity until probably Thanksgiving or thereabouts.

Speaker 3: and you're correct in what you said is it seems to be a lot more going on.

And you're correct in what you said is that it seems to be a lot more going on.

Speaker 3: as we're entering this quarter, as we're going through it, we were already facing the house.

As we're entering.

This quarter as we're going through it.

Were already facing.

Hollywood strike.

Speaker 4: auto strike although that doesn't really impact us as much as many others. And now, what's...

The auto strike, although that doesn't really impact us as much as it may others.

And and now.

What's going on in the Middle East.

Yeah.

Speaker 3: and Ukraine continues as well. But so none of these are great signs and it depends on what that headlines are in the newspapers every day, which dictate.

Yeah.

And Ukraine continues as well but.

So none of these are great signs and it depends on what the headlines are in the newspapers everyday.

Gregory Lundberg: Good afternoon, and welcome to the Omnicom Group 2023 earnings release conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question in the next session to participate. Please press one than zero. If you need assistance during the call, please press star than zero. As a reminder, this conference call is being recorded.

Which dictate.

Speaker 4: Some of us spend it occurs or doesn't occur. So our people are very experienced at this in those 20 plus years. We've only had two years where a significant part of the spend didn't actually come through.

Some of the spend that occurs or doesn't that doesn't occur.

So our people are very experienced at this in those 20 plus years, we've only had two years, where a significant part of the spend didn't actually come through.

Gregory Lundberg: At this time, I'd like to introduce you to your host for today's conference. Senior Vice President of Investor Relations, Gregory Lundberg, please go ahead. Thank you for joining our third quarter, 2023 earnings call. With me today are John Wren, Chairman and Chief Executive Officer, and Phil Angelostro, Executive Vice President and Chief Financial Officer. On our website OmnicomGroup.com, we've posted a press release along with a presentation covering the information we'll review today, as well as a webcast of this call. An archive version will be available when today's call concludes.

Speaker 4: And both of those were around recessions in 2008 and 2001 time frames. Right to the time.

And both of those were you know were around recessions in 2008 2001 time frames.

So at the times.

Speaker 4: eat that, although some some years you feel a little bit more confident about it.

It's eked out although some call. It some years you feel a little bit more confident about it.

Speaker 4: because there aren't all these macroeconomic and geopolitical issues occurring. So...

There arent all these macro economic and geopolitical issues occurred.

So.

We were.

Gregory Lundberg: Before we start, I'd like to remind everyone to read the forward-looking statements and non-gap financial and other information that we've included at the end of our investor presentation. Certain of the statements made today may constitute forward-looking statements, and these statements are present expectations. Relevant factors that could cause actual results to different materially are listed in our earnings materials and in our SEC filings, including our 2022 form 10K. During the course of today's call, we will also discuss certain non-gap measures. You can find the reconciliation of these to the nearest comparable gap measures in the presentation.

Speaker 4: Having said that, and you're certainly aware of it.

Having said that and you just said.

Certainly aware of it.

Speaker 4: As I look past the quarter and past this project work to next year, with all the new business wins we've recently had.

As I look past the quarter past as project work through next year.

With all the new business wins, we've recently had.

Speaker 4: and some of the signals that we're getting, I'm very confident.

And some of the signals that we're getting.

I'm very confident.

Speaker 4: I'll say confident about performance for 24. Because I think...

But I'll say confident.

About our performance.

For 24.

Because I think we have the right products and we certainly have expanded.

Speaker 4: who our clients are. So, some of those wins that I announced.

Who our clients are so so.

Some of those wins that I announced.

Gregory Lundberg: We will begin the call with an overview of our business from John, then Phil will review our financial results for the quarter, and after our prepared remarks, we will open the line up for your questions.

Speaker 2: We will not enjoy really ending your revenue in the fourth quarter. That revenue will principally start January 1st, but it's a good tell when to add. Yeah, I'd certainly echo John's comments as far as the Q4. So where would you push

We will not enjoy really any revenue in the fourth quarter that revenue.

Principally start January one, but it's a good tailwind.

John Wren: I'll now hand the call over to John. Thank you, Greg. Good afternoon, everyone, and thank you for joining us today for our third quarter results.

Yeah, It certainly echo John's comments as far as the.

The Q4 outlook.

Outlook in and.

John Wren: Before we discuss the quarter, I want to touch on something that is top of mind for many of us. The horrific attacks on Israel and the subsequent war have been devastating to witness. We've seen a complete lack of humanity displayed and that hate has no place in this world. We mourn the innocent lives lost, and our thoughts remain with all those personally impacted. Turning to our results, organic growth was 3.3% for the quarter, which is in line with our expectations.

Yeah, the the the.

Speaker 2: very typical process we go through to capture as much of that project spend as we can in the fourth quarter, agency by agency all across the world. Regarding your tech question, Ben, you know, I think...

Very typical process, we go through to capture as much of that project spend as we can in the fourth quarter agency by agency all across the world.

Regarding regarding your Tech question Ben.

Yeah, I think from our perspective.

Speaker 2: given relative comp.

Given.

Relative to comps.

Speaker 2: We don't really see the tack headwind as significant.

We don't we don't really see the tech headwind.

As significantly different than.

Speaker 2: and the broader macro at this point in time. Now that we're through nine months of 20.

And the broader macro at this point in time now that we're through nine months of 'twenty.

John Wren: Operating income margin was 15.7%, and diluted earnings per share for the quarter was $1.86, up 5.1% versus the comparable period in 2022. Our results for the quarter keep us on pace to maintain our full-year organic growth target of 3.5%, 25% and our operating margin target of 15% to 15.4%.

Speaker 2: maybe they close out the year not as strong as they did last year as far as spending, but at some point in the near future we don't see this as a permanent.

Twenty-three.

Maybe maybe they close out the year and not as strong as they did.

Last year as far as spending but at some point in the near future.

We don't see this as a permanent.

Speaker 3: We think they're going to come back and invest in their brands and begin to spend at a higher level at some point in the near future. The only problem they would add to our Phil's comments is most of that decline is...

Decline, we think they're going to come back and invest in their brands and begin to spend.

Yeah.

We had them at a higher level at some point in the near future.

John Wren: Phil will cover our results in more detail during his remarks. Our cash flow continues to support our primary uses of cash, dividends, acquisitions, and sharey purchases, and our liquidity and our balance sheet remain very strong.

The only probably never to add to what Phil's comments were.

Is <unk>.

Most of that decline is a decline.

Speaker 4: with existing clients, so it's not because of client loss. So as a product.

With existing clients, so it's not because of a quiet laws so right.

Products.

Speaker 4: get released into the marketplace and they get through whatever

Get released into the marketplace and they get through whatever.

John Wren: During the quarter, we continue to make solid progress on our key strategic priorities to position Omnicom for sustainable and profitable long-term growth. Starting on the talent front, we made several key leadership changes as part of our succession planning. Alex Lubar was named Global CEO of DDB Worldwide. Alex served as the Global President and Chief Operating Officer of DDB and succeeds Mario Hallering will become chairman. In addition, Glenn Lomas, currently CEO of DDB and Mia has been elevated to Global President and Chief Operating Officer in partnership with Alex.

Speaker 4: problems they've adjusted to during 2000 and 23, we're still very confident about the sector.

Problems they've adjusted to during 2023.

There were still very confident about the sector.

Sure. Thanks, John Thanks, Phil.

Sure.

Speaker 1: Our next question comes from line of Stephen K. Hall with Wells Fargo. Please go ahead.

Our next question comes from the line of Steven Kay Hall with Wells Fargo. Please go ahead.

Thank you.

Speaker 6: John , when you think about the trends this year, it seems like Tekken Tell Co has been a headwind and maybe the overall macro and geopolitical environment that you talked about has cast some additional uncertainty more recently. And then I think you have new business and maybe M&A is as tailwind. So heading into next year where a lot of your clients are probably in their budget cycles now.

John when you think about the trends this year it seems like tech and telco has been a headwind and maybe the overall macro and geopolitical environment that you talked about his cast some additional uncertainty more recently.

And then I think you have new business and maybe M&A is as tailwind so heading into next year, where a lot of your clients are probably in their budget cycles. Now do you feel like it's setting up for a more challenging industry backdrop or do you think that those tailwind you have or the.

John Wren: Nancy Razz is moving from her post as CEO of KBWA New York to become CEO of the Americas at BBDO. Nancy succeeds Cynchon Walsh who has been with BBDO for 27 years. Guy Marks previously Omnicom Media Group's CEO of Amia was named the CEO of PhD Worldwide. Guy succeeds Philip Brown who is leading the media industry after nearly four decades. Dan Clay's who led Omnicom Media Group UK as CEO will fill the CEO of OMG Amia's position.

Speaker 6: Do you feel like it's setting up for a more challenging industry backdrop or do you think that those tailwinds you have or the AI investments that you've been making can lead you to have some acceleration as you move into next year? That's the first one. And then second, maybe for John or for Phil, I think you last raised the dividend in February 2021. Your dividend then was pretty competitive versus the rate environment. Obviously, the rate environment has changed a lot since then.

The AI investments that you've been making.

Can lead you to have some acceleration as as you move into next year at.

That's the first one and then second maybe for John or for Phil I think you last raised the dividend in February 2021. Your dividend then was pretty competitive versus the rate environment. Obviously the rate environment has changed a lot. Since then so when you think about recommendations to the board about capital allocation how are you thinking of.

Speaker 6: So when you think about recommendations to the board about capital allocation, how are you thinking about what the right level of the dividend should be and whether this is an environment that you feel comfortable growing it? Thank you.

'bout, what the right level of the dividend should be and whether this is an environment that you feel comfortable growing it. Thank you.

John Wren: I want to congratulate Alex, Glenn, Nancy, Guy, and Dan and extend my gratitude to Marty, Syngen, and Philippa for their many years of service to Omnicom. This series of announcements is a testament to our emphasis on succession planning and ensuring our networks and practice areas have the right teams to lead them into the future.

So to answer your first question.

Speaker 4: We're not quite ready to give you guidance for 24 just yet because our people are out doing a bottoms up plan.

We're not quite ready to give you guidance for 'twenty for it just yet because our people are out doing a bottoms up plan.

Speaker 4: We say one present to us for another six or seven weeks and then that

Which I won't present to us for another six to seven weeks and then that gets tweaked throughout the balance of the year.

Speaker 4: move onto higher

John Wren: During the quarter, we continue building our generative AI capabilities with the rollout of Omnic Assist, a proprietary version of Chat GBT that enhances every task within Omnic. Omnic Assist is just one example of how we are improving our capabilities and efficiency through generative AI. We continue assessing how generative AI will affect the way we work across the organization and preparing ourselves for the future.

Hum, but.

Speaker 4: with the experience that I've had, with the new business wins that we've enjoyed. And the places where we faced head wins this year, it's, we're set up. And we're set up.

With the experiences that I've had with the new business wins that we've won.

We've enjoyed.

And the places where we faced headwinds this year.

It's we're set up very well to.

Speaker 4: to have a very successful 2020-24. And that's what I anticipate to see when we actually get...

To have a very successful 2020 for and Thats, what I anticipate to see when we actually get.

Speaker 4: that bottoms up, we review back from our competence. So.

A bottoms up review back from our companies.

So.

John Wren: We broaden our capabilities through strategic acquisitions in high growth areas in the quarter. In July, Omnicom Media Group required a promo and global shopper to a Brazil's leading connected commerce and retail media agencies. These acquisitions create a dedicated end-to-end e-commerce and retail media performance agency in the Brazilian market for Omnicom Media Group. OPRG strives in its services through the acquisition of plus communications, top public affairs firm, and FP1 strategies, a leading political consultancy. The Beltway-based acquisitions further solidify OPRG's leadership position and portfolio in public affairs and crisis communications, particularly in the healthcare and technology.

I'm confident.

And.

Speaker 4: I don't see any significant adjustments that we have to make to our portfolio.

I don't see any significant adjustments that we have to make to our portfolio.

Speaker 4: which in and of itself is very flexible to service those client needs and enjoy the gr...

Which in and of itself is very flexible.

To service those client needs and enjoy.

The growth that's associated with it.

Speaker 4: I'm just a dividend too. The dividend is really a board matter and it will come up.

Do you want to take the second question.

Under the dividend two dividends really a board matter and it will come up.

Speaker 4: you know in the board meetings that come between now and say February well more to say

Yeah in the board meetings that come between now and say February well have more to say.

So as is.

Those meetings occur.

Speaker 2: Yeah, I wouldn't take it in the fact that we haven't raised the dividend in 2023 as a lack of confidence in the business at all. Given the broader macro, I think we've always approached it and the board is always approached it with a level of conservatism.

Yeah, I wouldn't I wouldn't take it.

The fact that we haven't raised the dividend in 2023 is a lack of confidence in the business at all.

Yeah, given the broader macro I think we've always approached it and the board is always approach it with a level of conservatism.

John Wren: We recently announced the formation of Omnicom Advertising Services India, comprised of Omnicom's creative agencies located in India, BVL, GDB, and TBWA. Omnicom Advertising Services will be able to offer the best creative capabilities and talent for our clients across the group. The formation of Omnicom Advertising Services India follows the launch of our Global Delivery Services and Centers of Excellence in India, which we announced earlier this year. Today, we have over 4,000 people in Global Centers of Excellence in four major cities supporting our clients and agencies around the world.

Speaker 2: and really continuing to keep the flexibility we have in the capital structure right now, given the broader macro, but it's certainly something that's on the agenda, and I would not view it as a function of a lack in confidence in the business.

And and really continuing to keep the flexibility we have.

In the capital structure right now, Kevin given the broader macro, but but it's certainly something that's on the agenda and and I would not view it as a yeah as a function of a lack of confidence in the business.

At all.

Thank you.

Sure.

Speaker 1: And our next question comes from line of Kim Nolan with McCarrie. Please go ahead.

And our next question comes from the line of Tim Nolan with Macquarie. Please go ahead.

Speaker 1: Great, thanks very much. I'd like to pick up on one actual word that you used in your last comment, John , and that is flexibility. I saw this WFA survey recently talking about.

Great. Thanks, very much I'd like to pick up on one actual word that you used in your last comment John and that is flexibility.

John Wren: We are rapidly scaling the operations and expect to triple the size over the next 24 to 36 months. Our Centers of Excellence are helping our company transform from within, improving our client offerings, and providing operating efficiencies.

I saw this ws a survey recently talking about clients I guess coming up with more reasons why they want their agencies to do more and I'm. Sure. This is an age old discussion that you have but you've done a lot of work to reposition the business reinvesting in data and technology and things over the years divested assets.

Speaker 1: clients, I guess, coming up with more reasons why they want their agencies to do more. And I'm sure this is an age old discussion that you have. But you've done a lot of work to reposition the business, reinvesting in data and technology and things over the years, divested assets.

John Wren: While we position Omnicom for the long term, we're driving growth through significant new business wins. Some of these wins this quarter include Omnicom Media Group, one the Global Media Business for Uber and HSBC, Buyers Doff selected OMD as its media agency of record for Europe and North America. On the creative front, Adam and Eve, DDB picked up Amazon's creative business in Europe. Omnicom Health Group and our advertising collective also continue to grow their relationship with Novartis, expanding in oncology and winning significantly in Farmer, including their Reno portfolio. Finally, TBWA was awarded the Creative Doodies as Telstra Australia's largest mobile network.

Speaker 1: You just ran in your prepared marks to a number of management changes internally that you've done recently. We saw today WPP just merged a couple of its big agencies. I just wondered, John , if you could maybe expand a little bit on what this WSA report means and how Omnicon seal positioned, given that commentary.

You just ran in your prepared remarks through a number of management changes internally that you've done recently, we saw today W. P. P. Just merged a couple of its big agencies I just wondered if you could maybe expand a little bit on what this WSJ report means and how omnicom seals positioned given that commentary.

Speaker 4: Sure. Oh, I have to admit to not reading the report that you're referring to. But in terms of our portfolio, yes, there's been...

Sure Oh I have to admit to not reading the report that you're referring to.

But in terms of our portfolio, yes, it has been.

It's a significant expansion in our media business and that is growing there's been.

Speaker 4: significant expansion in our media business and that is growing. There's been quite a bit of...

Quite a bit of.

Success in that if you look at the <unk>.

Speaker 4: Convergence, we're probably said that wrong report.

Conversions were probably said that wrong report.

Speaker 4: when you take media wins versus media losses, we are, we continue.

When you take media wins versus media losses.

John Wren: Overall, we are pleased with our financial results and our progress on our key strategic initiatives. While we remain optimistic entering the fourth quarter, as in past years, our performance in the fourth quarter will be impacted by the amount of year-end projects that our clients execute and their agencies are successful capturing. We continue to plan cautiously, given the uncertainties in the macroeconomic and geopolitical environment, including higher interest rates, oil prices, instability due to the wars in Ukraine and Israel, and the continuing risk of a recession in the United States.

We are we continue to come out.

Speaker 4: on top and I'm confident that that is going to hold. And there's a few opportunities with...

On top and I'm confident that that is going to hold them.

And there's a few opportunities, which we expect.

Speaker 4: to be asked to participate in reviewing which are offensive opportunities where we're not defending existing business.

To be asked to participate and reviewing which are.

Offensive opportunities, where we're not defending existing business.

Speaker 4: in it other than in some statutory audit reviews. And...

And other than in some statutory audit reviews.

And.

Our CRM business.

Which.

Speaker 4: We grew very strongly and hit a couple of road bumps in the beginning of this year.

Grew very strongly.

Here's a couple of road bumps in beginning of this year.

Phil Angelastro: I will now turn the call over to Phil for a closer look at our financial results Phil. Thanks John.

Has come.

Speaker 4: come out of it very strong and just one of you very large and significant clients that are going to help us next year.

Come out of it very strong and just one of you.

Very large and significant clients that are going to help.

Help us next year.

Speaker 3: It becomes an increasing part of our portfolio as well.

It becomes an increasing part of our portfolio as well.

Speaker 4: Our PR unit, even though it's suffering a little bit because of the compobles of not being in an election year, next year is an election year, so that same group will be benefited as a result of that. So the portfolio has been tweaked. We've gotten rid of, you know, in a very sensible way, assets in the past. And I think going forward.

Our PR unit, even though its suffering a little bit because of the comparables of not being in an election year.

Next year is an election year. So that same group will be benefited as a result of that so.

The portfolio has been tweaked, we've gotten rid of.

In a very sensible way.

Assets in the past.

And I think going forward.

I don't know if Phil commented on it or not but.

Speaker 4: I think where we were showing net divestitures for probably the last three years, we're now with the acquisition activity we had, adding to the portfolio, from a net perspective, we're growing those areas and we're buying into those areas to support our companies where we see the greatest growth.

I think where we were showing net divestitures for probably the last three years.

Phil Angelastro: I will now turn the call over to Phil for a closer look at our financial results Phil. Our reported income tax rate was 26%. This was lower than our 27% estimate from July due to reduction in tax expense, resulting from the vesting of share-based compensation. For the fourth quarter, we estimate our tax rate will be 27%. Reported net income in Q3 increased by 2% and diluted earnings per share was up 5.1%. Driven by both higher net income and by lower shares outstanding, resulting from share repurchases.

We're now with the acquisition of activity, we had in adding to the portfolio.

From a net perspective, we're growing in those areas and we're buying into those areas to support our companies, where we see the greatest growth.

Speaker 1: Yep, great. No, I think that answers it. The survey was basically talking about advertising clients looking for more flexibility and streamlined services from their agencies. It sounds very much like that's what you've been doing and even your comments today about some of the changes you've made seem to support that. So, thanks.

Yep, Great no that I think that answers it for the survey was basically talking about advertising clients looking for more flexibility and streamline services from their agencies. It sounds very much like what you've been doing and in your comments today about some of the changes you've made it seem to support that so thanks.

Speaker 1: The only thing I would add to that is as I get more people back into the offices, which we continue to have success with, but there's still work to do, I think that will further support our growth.

Phil Angelastro: Let's turn to revenue on slide 4. As mentioned, organic growth on the third quarter was 3.3%. The impact on foreign currency translation reverse course in the third quarter increasing reported revenue by 1.7%. For each day where they are currently, we estimate the impact of foreign currency translation will be a benefit of approximately 0.5% for Q4 and a reduction of approximately 0.5% for the year. The impact of acquisition and disposition revenue is negative 1.1%, primarily reflecting the sale in Q2 of our research businesses. We expect a reduction of 75 basis points for the fourth quarter and expect that the recent acquisitions will result in an increase in reported acquisition and disposition revenue next year.

Yeah.

The only thing I would add to that as they get more people back into the offices, which we continue.

We have success with but there's still work to do.

I think that will further support our growth.

Collaboration is easier in person.

Yes, Sir.

Thanks, a lot.

Thank you.

Speaker 1: And our next question comes from the line of David Karnowski. Please, from, I'm sorry, J.B. Morgan, please begin.

Yes.

And our next question comes from the line of David Karnofsky. Please what's from I'm, sorry, a J P. Morgan please begin.

Speaker 3: Thank you. Xiaomi's already an uptake in precision marketing in the corner. Wanted to see if you could provide more color there as that just comes. Sir.

Thank you John .

Uptake and precision marketing in the quarter wanted to see if you could provide more color. There is that just comps or are you starting to see some movement on projects that may be were paused previously and then fulfill on principal cost.

Speaker 3: Are you starting to see some movement on on projects that maybe were paused previously and then fulfill on principle costs.

Speaker 4: looks like, or sorry, third party service cost, looks like road accelerated there, a touch in the corner. Can you parse that out between maybe principal trading and other areas like events, and then just with principal trading generally, I don't know how much you're willing to quantify in terms of organic revenue contribution, but maybe you could discuss the business at a high level what the reception is implying to the offer. Thank you. Sure. Hand on your first question. good.

Looks like our historic third party service cost looks like growth accelerated there a touch in the quarter can you parse that out between maybe principal trading and other areas like event and then just with principal trading generally I don't know how much you're willing to quantify in terms of organic revenue contribution, but maybe you could discuss the business at a high level what the risk.

Phil Angelastro: As John discussed, our organic growth outlook for the year remains unchanged at 3.5% for the stretched target of 5%, which still factors in some uncertainty about the level of year-end incremental marketing spend in project work that we expect our agencies will be successfully capturing in the fourth quarter.

Section is from clients to the offerings. Thank you.

Sure.

Phil Angelastro: Now let's turn to slide 5 to review our organic revenue growth by discipline. During the quarter, advertising media posted 6.1% growth. It's strongest this year driven by continued strength in our media business globally. Precision marketing grew 4.3%, solid performance given the comparison to the 16.2% growth that experienced in Q3 of 22, and the challenging backdrop of certain of their technology and telecom points that we discussed last quarter. Commerce and brand declined by 1.7%, driven by reductions that are shopper-marketing aid.

On your first question.

Some of the crimes and challenges.

In the.

Speaker 4: Telecommunication and tech sector were probably more impactful to that practice area and the procedure marketing practice area. And as

Telecommunication and tech sector.

Were probably more impactful to that practice area.

Precision marketing practice area.

And as Phil mentioned earlier.

We think that.

Speaker 4: The good news is we didn't lose clients. We've continued to win clients in that area.

The good news is we didn't lose clients will continue to win clients in that area.

Speaker 4: And we think those companies have gone through their adjustments much earlier, the latter part of last year and early part of this year.

And we think those companies have gone through their adjustments much Earl.

The latter part of last year and early part of this year.

Phil Angelastro: Experiencil grew 9.2% led by Asia, Europe, and the UK, which are offset negative growth in the US and the Middle East. Execution and support declined 3.6%, due primarily to declines in our merchandising business. Public relations was down 5.5%, reflecting difficult comps against the 12.6% growth we delivered in Q3 of 2022. Approximately half of the reduction relates to less revenue connected to 2022 election cycle, and the balance was due to a slowing of project spend in the quarter. We expect a similar headwind related to reduction in revenue in Q4 compared to the benefit from the election cycle in Q4 of 2022. Finally, healthcare grew 3.8%, with good momentum and several large clients.

So.

Speaker 4: So we're ascending. This quarter was better than last, which was probably the toughest comparison we had. And with some of the new business wins that they've had very recently, 2024 sets up.

So were ascending.

It was this quarter was better than last which was probably the toughest comparison when we had.

And then with some of the new business wins that they've had very recently.

2024 sets up.

To be a very good year.

I can't really can't comment on how many projects, we're going to get in CRM in the next 90 days, but but in terms of the business itself.

Speaker 4: Can't really comment on how many projects we're going to get in CRM in the next 90 days, but in terms of this...

Speaker 4: It's leadership and the products that we're offering are clients and very competent.

Its leadership in the products that we're offering our clients I'm very confident in our performance in that area.

Speaker 2: Sure regarding this second question and third-party service costs, we don't really parse the number.

Regarding the second question and third party service costs.

We don't we don't really parse the number.

Speaker 2: you know in in the way that you suggested but uh...

And in the way that you've you've suggested but.

Phil Angelastro: Turning to slide 6, we saw growth across our larger regions, offset by decline in Canada, as well as the decline in the Middle East and Africa, which grew by 12.2% in Q3 of 2022, causing part by the cyclicality and experiential.

Speaker 2: You know, we had strong growth, as we said, in our preparator marks in the media business, no question, as well as experiential. Both of those businesses do come with those third-party service costs as part of the business, certainly a...

Yeah, we had strong growth strong growth as we said in our prepared remarks, and the media business no question as well as experiential.

Both of those businesses do come with.

Phil Angelastro: Looking at the year-to-date revenue by industry sector on slide 7, compared to the third quarter of last year, we had higher relative weights in two of our larger categories, food and beverage and automotive, and has expected a lower relative weight in technology and a reduction, although smaller, in telecom.

Those third party service costs as part of the business.

Certainly a.

A.

Speaker 2: a reference back to Tim's question regarding

A reference back to Tim's question regarding clients in there and the flexibility that they are looking for.

Speaker 2: clients and their and the flexibility that they're looking for.

Speaker 2: They're certainly looking for a full suite of products from media perspective and a wide range of marketing services that they'll avail themselves of.

They're certainly looking for a full suite of.

Products.

From a media perspective and.

Phil Angelastro: Now let's turn to slide 8, where you can see good progress on our expenses year over year. Salon-related service costs were down as a percentage of revenue year over year, driven by our repositioning actions and through changes in our global employees. Third-party service costs increased in connection with growth in our revenues. These costs include third-party supplier costs when we act as principal in providing services to our clients. They're an integral part of our service offering to our clients, and we generate profit on them.

A wide wide range of marketing services that that that'll avail themselves of.

Speaker 2: And our service offering you know can cover all of those things that they're looking for so

And our service offering you know it can cover all of those things that theyre looking for so yeah. Some of that growth certainly as in media experiential field marketing as well, but yeah.

Speaker 2: Some of that growth certainly is in media experiential field marketing as well.

Speaker 2: you know we had strong growth uh... through most of our disciplines in the quarter and uh... you know we're we're certainly happy

Yeah, we had strong growth through most of our disciplines in the quarter and.

We're we're certainly happy with those results.

Yeah.

Phil Angelastro: Third-party incidental costs increased due to an increase in client-related travel and incidental at a pocket cost that builds clients directly at our costs at no profit. Occupancy and other costs were helped by reductions in our real estate portfolio in the first quarter of 2023. Reductions and rent expense were offset partially by an increase in operating expenses from higher levels of in-office work globally. SG&A expenses were up a bit, primarily due to higher professional fees related to the acquisitions we recently completed. Turning to slide 9, operating income in Q3 was up 2.7% on a reported basis and a related margin was 15.7%. Down slightly as expected from 15.9% in the third quarter of 2022.

Yeah.

Speaker 1: In our next question comes the line of Michael Nathanson with Moffett Nathanson. Please go ahead.

And our next question comes from the line of Michael Nathanson with Moffett Nathan. Please go ahead.

Speaker 7: Thank you. I have two few, John . One is, as your reference before, you've had a very strong year in immediate business. You've taken a lot of big wins. You talk a bit about what's changed for the positioning of that business, what do you think are the factors driving some of these big wins that you've had versus your competitors. And secondly, the ask you the past about acquisition opportunities, given now maybe the fall, you know, kind of the pressures in.

Thank you I have two for you John .

One is as you've referenced before you've had a very strong year intermediate business, you've taken a lot of big wins, you talked a bit about what has changed for the positioning of that business. What do you think are the factors driving some of these big wins that you have versus your competitors and secondly, I've asked in the past about.

Acquisition opportunities given now maybe the fall you know kind of the pressures in <unk>.

Speaker 7: in venture capital land and the higher rates. Talk a bit about the pipeline opportunity you see to kind of buy more companies in 24 and kind of your willingness to do that in 24, thanks.

In venture capital and in the higher rates talk a bit about the pipe of opportunity you see to kind of buy more companies.

In 2004, and kind of your willingness to do that in 'twenty four.

Phil Angelastro: For the full year, we remain comfortable with the expected operating margin range of between 15 and 15.4%. On a nine-month year-to-date non-gap adjusted basis, as presented here on slide 9, operating income margin was 14.8%, compared to 14.9% in 2022. Or even on margin in Q3 was 16.2%. 3.5% also down slightly from 16.4% in the 3rd quarter of 2022. On a nine-month year-to-date non-gap adjustment basis, 2020-23 was 1.3 billion, an increase of 9.4% from last year.

Speaker 4: Sure. I think this is the success of the media operation is down one to management of that.

Sure I think this is Seth.

The success of the media.

Operation.

Is down one to management.

Of that specific operation.

Speaker 4: We've expanded the suite of services that we make available to clients in the media area.

We've expanded the suite of services that we make available to clients.

And the media area.

It is.

Of all of our services.

Speaker 4: Probably one of the most measurable in terms of the youth when we utilize the data and the amount of data that we have, we're able to...

Probably one of the most measurable.

In terms of the.

When we utilize the data and the amount of data that we have we're able to.

Speaker 4: uh... optimized for uh... to for the benefit of the client uh... how they spend their money improve it so there's a great deal of analytics there today that weren't even possible four or five years ago

Optimized for the.

The benefit of the client.

How they spend their money and prove it.

So there's a great deal of analytics there.

Are there today that weren't even impossible four or five years ago.

Speaker 4: And I think, well, I do know this to be true.

And.

I think well I do know this to be true.

Phil Angelastro: We continue to expect changes in working capital to be close to flat for the year, as it usually is. Regarding our uses of cash, we used 424 million of cash to pay dividends to common shareholders, and another 47 million for dividends to non-controlling interest shareholders. Our capital expenditures were 64 million, similar to last year. Total acquisition payments were 202 million, and our stock will purchase activity, net approach each of stock plans, was 530 million year-to-date. Most of this took place in the first half of the year.

Speaker 4: We have a reputation of delivering on what we promise when we're pitching for business.

We have a reputation of delivering.

On what we promise when we're pitching for business.

Speaker 4: And we I dare say we have the best reputation in the industry of Delivering what we promise and that has benefited us through this process You want to comment first on M&A?

And <unk>.

I Dare say, we have the best reputation in the industry of delivering what we promise and that has benefited us.

Through this process.

Do you want to call it first on M&A.

Sure.

Yes, we're.

We've always.

Hi.

Hello.

Phil Angelastro: Slide 11 is the summary of our credit, liquidity, and debt maturities. At the end of the 3rd quarter of 2023, the book value of our its standing debt was 5.6 billion. There were no changes in outstanding balances during the quarter other than foreign exchange translations. Our $2.5 billion revolving credit facility, which back stops our $2 billion US commercial paper program, remains undrawn, and our cash equivalents in short-term investments were $2.8 billion. Our next debt maturity is not until November of 2024.

Speaker 4: The M&A pipeline remains very strong for us.

Yeah.

The M&A pipeline remains very strong for us.

Speaker 4: have a team that's constantly looking at opportunities. They have to meet all of our internal criteria. It has to typically be something that's additive to the portfolio services that we offer our clients. If it's something that we can build and is expensive, we've steered away from it in the past.

We have a team that's constantly looking at opportunities.

They have to meet all of our internal criteria.

You have to typically be something that's additive.

To the portfolio of services that we offer our clients. If it's something that we can build and is expensive we stared steered away from it in the past.

Speaker 4: and we've been pretty consistent about that in the last, at least the 26 years that I've been the CEO . Um.

And we've been pretty consistent about that in the last at least the 26 years that I've been the CEO .

Phil Angelastro: Slide 12 presents our historical returns on two important performance metrics for the 12 months ended September 30 of 2023. On the comes of return on invested capital was 23%, and return on equity was 47%. These metrics continue to be an excellent indicator of our conservative capital structure, and the health of our business.

Speaker 4: and uh... but there are opportunities some of them are in areas that we

And but there are opportunities and some of them are in areas that we've.

Speaker 4: had on our list for a very long period of time that looked more reasonable than.

Had on our list for a very long period of time.

That.

Look more reasonable then.

They did run at interest rates at zero.

Speaker 2: Yeah, I think that what we've seen certainly is that sellers' expectations have kind of adjusted to the market.

Phil Angelastro: In closing, despite a challenging macro-environment, we're pleased with our financial results and our year-date organic growth of 4%. We believe we are positioned very well for strong growth in the future, when the caution in the macro-environment clears.

Yeah, I think I think that what we've seen.

Certainly as the sellers' expectations have kind of adjusted.

So the marketplace and you know to.

Speaker 2: you know, to the macro environment that we're dealing with. So strategically, you know, there are some opportunities.

So the macro environment that we're dealing with so strategically.

You know that there are some opportunities out there that.

Operator: Operator, please open the lines up for questions and answers. Thank you. Ladies and gentlemen, if you wish to ask a question, please press 1.0 on your telephone keybed. You may withdraw your question at any time by repeating the 1.0 command. If you're using a speaker phone, please pick up the answer before pressing the numbers. Once again, if you have a question, you may press 1.0.

Speaker 2: that we've been looking at uh... some of which we completed in the third quarter uh... that have been more attractive than and uh... they certainly were not that long ago

We've been looking at.

Some of which we completed in the third quarter.

That had been more attractive than than they certainly were not that long ago.

Thank you guys.

Sure.

Yeah.

Speaker 1: And the next question comes from the line of Craig Huber with Huber Research Partners. Please go ahead.

And the next question comes from the line of Craig Huber with Huber Research partners. Please go ahead.

Benjamin Swinburne: Our first question comes from the line of Benjamin Swimburn from Morgan Stanley. Please go ahead. Thank you. Good afternoon. John, I guess I'll ask you the standard fourth-quarter question around the macro, and just trying to parse your words a little bit in understanding whether you're feeling that the caution that you guys referenced today has increased from earlier this year. Obviously, there's a lot of things happening in the world that would necessarily explain that, but I'm just wondering if you could add a little more color on how clients are feeling about Q4 and looking into next year.

Speaker 8: Thank you. I've got a few questions. I'll maybe just go one at a time to make it easier. Can you just talk a little bit further about the tone of conversations with your clients as they annunciate to you what their thoughts are on a preliminary basis for 2024, at this stage, maybe versus what the conversations were like roughly six months ago?

Thank you I've got a few questions I'll, maybe just go one at a time to make it easier.

Could you just talk a little bit further about the tone of conversations with your clients as they say and then Cte what their thoughts are on a preliminary basis for 2020 for it at this stage maybe versus what the conversations are like roughly six months ago.

Well.

Yeah.

Speaker 4: I think, well, there's still a lot of uncertainty in the marketplace because of all of the things we talked about in previous answers in our prepared remarks. Having said that.

I think.

Well, there's still a lot of uncertainty in the marketplace because of all of the things we've talked about in previous answers in our prepared remarks.

Having said that.

Benjamin Swinburne: Then I'll just ask my follow-up maybe for Phil or if we want to take it. Is it fair to call the tech sector a clear and different headwind to the overall business for Omnicom? I noticed a year-to-date that vertical is down 300 basis points a year. It's been a big theme across the industry, sort of the year of efficiency. I'm just wondering if you think that's a fair way to think about what we're seeing in the business in 2023.

Clients are pretty sophisticated.

Speaker 4: and they know that no matter what the difficulties are, they have to continue to support their brands.

And they know that no matter what the difficulties are.

They have to continue to support their brands.

Because if they don't.

Speaker 4: when the good times return, they'll have a much more difficult time regaining or maybe...

When the good times return.

They'll have a much more different.

Much more difficult time.

Regaining or maintaining their market share.

So.

Benjamin Swinburne: I do believe, I can probably go back 21 years where at this point in the year, I'm saying this is very similar, if not the same thing, a very large part of the project work that occurs which adds to our growth or doesn't provide our growth comes from project spend and clients. Doing things that they've hesitated to do or push back throughout the year. At this point it's not a lot different than in past years in that we won't have clarity until probably Thanksgiving or thereabouts.

Speaker 4: As we look at clients in 24, 23 was a tough year for many sectors, and we referenced a couple of times.

As we look at clients in 'twenty four 2023 it was a tough year for many sectors.

And that's.

As Fred we referenced a couple of times earlier the tech sector.

I would say.

Speaker 4: In my opinion, 23 was the first time the tech sector had to face readjusting.

In my opinion.

23 was the first time in the tech sector had to face readjusting its.

Speaker 4: business. And people went earlier in the year went through massive layoffs and cutbacks of their own staffing.

Its business and people went earlier in the year went through massive layoffs and cutbacks.

Their own staffing.

<unk>.

Speaker 4: They hadn't had any experience in their history of even needing to do this pure growth prior to this.

They hadn't had any experience in their history.

Even needing to do is pure growth prior to this year.

Speaker 4: That's behind them now. They're a lot more experienced than they once were as we look forward.

That's behind them now, they're a lot more experience than they once were as we look forward.

Benjamin Swinburne: And you're correct in what you said it seems to be a lot more going on as we're entering this quarter as we're going through it. We were already facing the Hollywood strike, the auto strike although that doesn't really impact us as much as many others. And now what's going on in the Middle East and Ukraine continues as well. But so none of these are great signs and it depends on what that headlines are in newspapers every day which dictate some of the spend that occurs or doesn't occur.

So.

Clients arent.

Speaker 4: they know we're not through all the hurdles that exist out there but they're confident that

They know we're not through all of the hurdles that exist out there, but they're confident that.

Speaker 4: that the brands and their positioning from their companies, they've taken a lot of pain and they're positioned well to go into.

That the brands and their positioning from their companies they've taken a lot of pain and they are positioned well to go into the future.

Speaker 2: Certainly a lot has changed. It's been an odd year. Certainly a lot has changed, especially if you compare things to the last six months. But as we were going into 23 about a year ago, most of the conversation...

Certainly a lots changed it's been an odd year or certainly a lots changed, especially if we compare things for the last six months, but as we were going into 'twenty three about a year ago.

Yeah, most of the conversations were about.

Speaker 2: You know, was there a recession coming? Was it likely?

Was there was there a recession coming or is it likely.

Speaker 2: uh... and and i think yet twelve months ago was more likely to happen the first half that it changed to more likely to happen second half it's kind of been happening in slow motion so uh... you know the recent events in the middle east certainly have changed things versus six months ago but uh...

Benjamin Swinburne: So our people are very experienced at this in those 20 plus years. We've only had two years where a significant part of the spend didn't actually come through and both of those were around recessions in 2008 and 2001 time frames. The rest of the time it's eat out although some some years you feel a little bit more confident about it because there aren't all these macro economic and geopolitical issues occurring. So we're having said that and you're certainly aware of it as I look past the quarter and past this project work to next year with all the new business wins we've recently had. And some of the signals that we're getting I'm very confident I'll say confident about performance for 24 because I think we have the right products and we certainly have expanded who our clients are.

And I think yeah 12.

12 months ago, it was more likely to happen in the first half then it changed to more likely to happen in the second half, it's kind of been happening in slow motion. So.

You know the recent events in the Middle East certainly have changed things versus six months ago, but.

Speaker 2: Yeah, I would echo John's comments in terms of our view on 24 and client sentiment. They know they need to continue to invest in their brands. And I think that's been proven, certainly throughout the COVID period. Thank you.

Yeah, I would echo John's comments in terms of our view on 24.

Client sentiment.

They know they need to continue to invest in their brands.

And I think that's been proven.

Certainly throughout the Covid period.

Thank you and you can't forget that.

You go back a year interest rates were.

Speaker 4: quite different everyone and uh... but a lot of

Were quite different.

For everyone and.

So there's been a lot of sudden change.

Speaker 4: that is the feds increased rates and it takes people a bit of time to adjust.

Is that the fed has increased rates and it takes people a better time to adjust.

Speaker 4: they're doing to those changing environments, but I think at this point

Theyre doing to those changing environments, but I think at this point.

Speaker 4: Everyone thinks they don't know when it's going to reverse itself, but they're adjusting to the current environment, and they don't think they're facing the...

Everyone thinks they don't know when it's going to reverse itself.

They're adjusting to the current environment and.

And they don't think they're facing the same headwinds.

Speaker 4: areas like that going forward. So again, it just adds to.

And areas like that going forward. So again, it just adds to our company.

John Wren: So some of those wins that I announced we will not enjoy really any revenue in the fourth quarter that revenue principally start January 1st but it's a good tell when to add. Yeah I certainly echo John's comments as far as the Q4 outlook and you know the very typical process we go through to capture as much of that project spend as we can in the fourth quarter agency by agency all across the world.

Speaker 8: Thank you for that. My second question, if I could, on a pricing of Apple's, Apple's pricing for your clients, just an aggregate for your company for this year. How do you sort of think about it? You're three and a half to five percent organic growth target for you with five percent being a stretch target. How much should we think about that pricing?

Thank you for that my second question, if I could on a pricing of apples to apples pricing for your clients just in aggregate for your company for this year, how do you sort of think about it you're three NAFTA, 5% organic growth targets for you with 5% being a stretched target how much should we think about the pricing in terms of maybe basis points. This out.

Speaker 8: in terms of maybe basis points as adding to that, is it roughly 100 basis points from pricing on apples-to-apples basis, not just upselling, but pricing on apples-to-apples basis that you're increasing prices in your contracts and stuff, and whatever that number is roughly for this year, at a 3.5% to 5% target for this year, how does that compare to prior years? I'm trying to get at this just because it's a higher inflation environment.

Adding to that is it roughly 100 basis points from pricing on an apples to apples basis, not just upselling, but pricing on an apples to apples basis that you're increasing prices in your contracts and stuff and whatever that number is roughly for this year at a three and half to 5% target for this year, how does that compare to prior years I'm trying to get at this because it's obviously a higher inflation environment.

John Wren: Regarding your tech question then. You know, I think from our perspective, given relative comps, we don't really see the tech headwind as significantly different than the broader macro at this point in time. Now that we're through nine months of 2023, maybe they close out the year not as strong as they did last year as far as spending, but at some point in the near future, we don't see this as a permanent decline, we think they're going to come back and invest in their brands and begin to spend at a higher level, at some point in the near future.

Sure.

Speaker 4: I don't think we've recovered completely.

I don't I don't think we've recovered completely.

Speaker 4: the inflation that we faced when you look at this from a Western Europe , U.S.

The inflation that we faced.

When you look at visits.

From a western Europe U S.

And then emerging markets.

Yeah.

Inflation has been more severe.

Speaker 4: We have some pricing flexibility, but not to the extent of how fast inflation's risen. Now, we're hoping that inflation is stabilized, and we'll start to enjoy the benefits of that.

We haven't had some pricing flexibility, but not to the extent of.

How fast inflation has risen.

We're hoping that inflation has stabilized.

And.

We will start to enjoy the benefits of that the other thing which impacts.

Our business.

Is.

Actually an account.

They you win it.

Speaker 4: the next 90 days is probably the least profitable time that you'll have that account because

The next 90 days is probably the least profitable time.

John Wren: The only point I would add to our Phil's comments is, most of that decline is a decline with existing clients, so it's not because of client loss, so as products get released into the marketplace and they get through whatever problems they've adjusted to during 2023, we're still very confident about this sector. Thanks, John. Thanks, Phil.

We'll have that account.

Because you're ramping up staff and you're changing organizations in order to accommodate not drop any balls as the business has passed from one of our competitors to us.

Speaker 4: changing organizations in order to accommodate not drop any balls as the business has passed from one of our competitors to us.

Speaker 4: So that has some kind, that has an impact.

So that has some kind of that it has an impact.

Speaker 4: not on unit pricing, but

Not on unit pricing.

But.

Speaker 4: but on the overall costs that we face as we adjust and staff up for these events.

Phil Angelastro: Sure.

The overall costs that we face as we adjust.

Stephen K. Hall: Our next question comes from a line of Stephen K. Hall with Wells Fargo, please go ahead. Thank you. So, John, when you think about the trends this year, it seems like tech and telco has been a headwind and maybe the overall macro and geopolitical environment that you talked about has cast some additional uncertainty more recently. And then I think you have new business and maybe M&A is as tailwind. So, heading into next year where a lot of your clients are probably in their budget cycles now, do you feel like it's setting up for a more challenging industry backdrop or do you think that those tailwinds you have or the AI investments that you've been making can lead you to have some acceleration as you move into next year?

Staff up for these.

John Wren: That's the first one.

So these events.

Speaker 4: More precise than that, I can't really be. I don't have any hard data.

More precise than that.

Can't really be.

I don't have any hard data which supports.

Specific.

Areas in the company, we one of the reasons, though.

Speaker 4: areas in the company. One of the reasons, though, that we've been able to

That.

We've been able to expand.

Speaker 4: are based in offshore and nearshore markets for more.

Our base in offshore and near shore markets for <unk>.

More of the.

Speaker 4: Functions that we have to fulfill in order to complete our job. We've gotten better at that. We've grown the staff.

The functions that we have to fulfill in order to complete.

Our job, but we've gotten better at that we've grown the staff from with doubled it in this past year.

Phil Angelastro: And then second, maybe for John or for Phil, I think you last raised the dividend in February 2021. Your dividend then was pretty competitive versus the rate environment. Obviously, the rate environment has changed a lot since then. So, when you think about recommendations to the board about capital allocation, how are you thinking about what the right level of the dividend should be and whether this is an environment that you feel comfortable growing it?

Speaker 4: doubled it in this past year and I think in my comments or we've said that we expect

And I think in my comments or we've said that we expect.

Speaker 4: That you grow up two to three times over the next 24 months because we have the infrastructure now.

That to grow two to three times over the next 24 months, because we have the infrastructure now.

Speaker 4: to accommodate that growth. That gives us.

To accommodate that growth that gives us.

Speaker 4: bit of relief on the inflation that we haven't been able to pass on to our clients.

Bit of relief on the inflation that we haven't been able to.

To pass on to our clients.

So.

By doing doing things differently.

John Wren: Thank you. The answer to your first question. We're not quite ready to give you guidance for 24 just yet because our people are out doing a bottoms-up plan. We say we won't present to us for another six or seven weeks. And then that gets tweaked throughout the balance of the year. But with the experience that I've had, with the new business winds that we've enjoyed, and the places where we faced headwinds this year, we're set up very well, to have a very successful 2020-24.

Speaker 8: My final question, if I could, just to see if everybody has questions on this project related to work in the fourth quarter, if historically maybe the range is $200 to $250 million in the fourth quarter, I'm curious, embedded in your 3.5% to 5% organic growth number for the year target, what are you guys assuming?

And my final question, if I could just feel free to ask questions. On this project related work in the fourth quarter is historically, maybe the range is $200 million to $250 million in the fourth quarter I'm curious embedded in your three and half to 5% organic growth number for the year target.

What are you guys assuming for project related.

Speaker 8: work in the fourth quarter versus the year ago number. Is that roughly flat on the bottom end of your three and a half to five percent number? How should we think about that?

Our work in the fourth quarter versus the year ago numbers is that roughly flat on the bottom end of your screen up to 5% number how should we think about that.

Speaker 2: uh... with we don't really we don't really have a number uh... i think certainly every one of our businesses uh...

We don't really we don't really have a number Craig I think certainly every one of our businesses.

John Wren: And that's what I anticipate to see when we actually get that bottoms up, reviewed back from our competence. So I'm confident in I don't see any significant adjustments that we have to make to our portfolio, which in and of itself is very flexible. To service those client needs and to enjoy the growth that's associated with it.

Speaker 2: you know, has some expectations regarding project work in the fourth quarter. The key for us is when we meet with them ensuring they're not keeping staff on hand, hoping to get new business.

<unk> had some expectations regarding project work in the fourth quarter, a key for US is when we meet with them ensuring.

They're not keeping staff on hand, hoping to get new business.

Speaker 2: as we head into the fourth quarter and then the cost structure is out of whack with, you know, their expected revenue.

As we head into the fourth quarter and then the cost structure is is out of whack with with yeah, they're expected.

Back to revenues.

Speaker 2: They need to have some historical analysis, and we've got plenty of that in order for our agencies to have certain amounts of project spend in their forecast. But typically, they're incentivized.

They need to have they need to have some historical analysis and we've got plenty of that.

In order for our.

Our agencies to have certain amounts of project spend in their forecast.

Phil Angelastro: Do you want to take the second question on the other side? Yeah, I'm just giving it in too. Yeah, go ahead. The dividends really are board matter and it will come up in the board meetings that come between now and say February. Well, I'm more to say, you know, as those meetings occur. Yeah, I wouldn't take it, you know, the fact that we haven't raised the dividend in 2023 as a lack of confidence in the business at all.

But but typically they're incentivized to benefit from capturing that that year end project spend.

Speaker 2: to benefit from capturing that year end project spend and our clients.

And our clients buying.

Speaker 2: by and large want to, um, you know, spend the rest of their budget and grow their businesses through the end of the year. Um, so those factors typically help us, um, and help our clients to get to the point where, where we can capture a significant amount of that spend. But, um,

By and large want to.

Phil Angelastro: You know, given the broader macro, I think we've always approached it and the board is always approached it with a level of conservatism and really continuing to keep the flexibility we have in the capital structure right now, given the broader macro, but it's certainly something that's on the agenda. And I would not view it as a function of a lack of confidence in the business at all.

You know spend the rest of their budget and grow their businesses through the end of the year.

So those factors typically help us.

And help our clients to get to the point, where we can capture a significant amount of that spend but.

Kim Nolan: Thank you. Sure.

Speaker 2: you know we don't have a hard and fast number blank percent of the two to two hundred fifty million is in the forecast but certainly some of it in the forecast but we're pretty conservative about how much uh... our agencies you can put in their forecast the last thing we want is people to be young

No we don't have a hard and fast number blank percent of the $2 million to $250 million is in the forecast, but certainly some of it in the forecast.

But we're pretty conservative about how much or agencies.

You can put in their forecast because the last thing we want is people to be.

Hiring ahead of the revenue for keeping people around that don't necessarily have anything to do with the revenue doesn't come through.

That's pretty consistent practice, we've followed for quite some time.

John Wren: And our next question comes from line of Kim Nolan with McCarrie. Please go ahead. Great. Thanks very much. I'd like to pick up on one actual word that you used in your last comment, John, and that is flexibility. I saw this WFA survey recently talking about clients. I guess coming up with more reasons why they want their agencies to do more. And I'm sure this is an age old discussion that you have, but you've done a lot of work to reposition the business, reinvesting in data and technology and things over the years, divested assets.

Great. Thank you, Phil and Sean I appreciate that sure.

Yeah.

And with that.

Speaker 1: that does conclude our conference for today. Thank you for your participation and for using AT&T Teleconferencing Service. You may now disconnect.

That does conclude our conference for today. Thank you for your participation and for using AT&T Teleconferencing service you may now disconnect.

Yeah.

Yeah.

John Wren: You just ran in your prepared remarks through a number of management changes internally that you've done recently. We saw today WPP just merged a couple of its big agencies. I just wondered, John, if you could maybe expand a little bit on what this WFA report means and how on the com field position given that commentary. Sure. I have to admit to not reading the report that you're referring to. But in terms of our portfolio, yes, there's been a significant expansion in our media business.

John Wren: And that is growing. There's been quite a bit of success in that. If you look at the convergence, we're probably said that wrong report. When you take media wins versus media losses, we are, we continue to come out on top. And I'm confident that that is going to hold. And there's a few opportunities. Series, which we expect to be asked to participate in reviewing which are offensive opportunities where we're not defending existing business in it, other than in some statutory order reviews.

John Wren: And our CRM business, which grew very strongly and hit a couple of road bumps in the beginning of this year has just come out of it very strong and just one of few very large and significant clients that are going to help us next year. It becomes an increasing part of our portfolio as well. Our PR unit, even though it's suffering a little bit because of the compobles of not being in an election year, next year is an election year.

John Wren: So that same group will be benefited as a result of that. So the portfolio has been tweaked. We've gotten rid of, you know, in a very sensible way, assets in the past and I think going forward, we've, I don't know, filled comment on it or not, but I think where we were showing net the vestiges for the probably the last three years, we're now with the acquisition activity we had adding to the portfolio from a net perspective where growing those areas and we're buying into those areas to support our companies where we see the greatest growth.

Speaker 9: We're sorry, your conference is ending now. Please hang up.

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John Wren: Yep. Great. No, but I think that answers that the survey was basically talking about advertising clients looking for more flexibility and screen blind services from the Regency. It sounds very much like that's what you've been doing and even your comments today about some of the changes you've made seem to support that. So thanks. Yeah. Sandra. The only thing I would add to that is I get more people back into the offices which we continue to have success with, but there's still work to do. I think that will further support our growth. Collaboration is easier in person. Yes, sir. Thanks a lot. Thank you.

David Karnovsky: And our next question comes from a line of David Karnowski. Please, from, I'm sorry, JB Morgan, please begin. Thank you. John, we saw the update and precision marketing in the quarter. Wanted to see if you could provide more color there as that just comes. Are you starting to see some movement on projects that maybe were paused previously? And then fulfill on principle costs. You know, looks like or sorry, third party service costs looks like growth accelerated there.

David Karnovsky: I touched in the quarter. Can you parse that out between, you know, maybe principle trading and other areas like events? And then just with principle trading generally, I don't know how much you're willing to quantify. In terms of organic revenue contribution, maybe you could discuss, you know, the business at a high level what the reception is implying to the offer. Thank you.

John Wren: Sure. Hand on your first question. And some of the clients and challenges in the Telecommunication and tech sector were probably more impactful to that practice area and the procedure marketing practice area. And as Phil mentioned earlier, we think that the good news is we didn't lose clients, we've continued to win clients in that area. And we think those companies have gone through their adjustments, much later part of last year and early part of this year.

John Wren: So we're ascending. This quarter was better than last, which was probably the toughest comparison we had. And with some of the new business wins that they've had very recently, 2020, 2024 sets up to be a very good year. I can't really comment on how many projects we're going to get in CRM in the next 90 days, but in terms of the business itself, it's leadership and the products that we're offering in our clients.

John Wren: I'm very confident in that performance in that regard regarding the second question and third party service costs. We don't really parse the number in the way that you've suggested, but we had strong growth as we said in our prepared remarks in the meeting business, no question, as well as experiential. Both of those businesses do come with those third party service costs as part of the business, certainly a reference back to Tim's question regarding clients and the flexibility that they're looking for.

John Wren: They're certainly looking for a full suite of products from media perspectives and a wide range of marketing services that they'll avail themselves of, and our service offering can cover all of those things that they're looking for. Some of that growth certainly is in media experiential field marketing as well, we had strong growth through most of our disciplines in the quarter and we're certainly happy with those results. Yeah.

Michael Nathanson: Inter next question comes to line of Michael Natheson with Moffit Natheson, please go ahead. Thank you. I have two for you, John. One is, as your reference before, you've had a very strong year in a media business. You've taken a lot of big wins. You talk a bit about what's changed for the positioning of that business, what do you think are the factors driving some of these big big wins that you've had versus your competitors?

Michael Nathanson: And secondly, I've asked you in the past about acquisition opportunities, given now maybe the fall, you know, kind of the pressures in in venture capital and and the higher rates. Talking a bit about the pipeline opportunity, you see the kind of buy more companies in 24 and kind of your willingness to do that in 24. Thanks. Sure. I think this is the success of the media operation is down one to management of that specific operation.

Michael Nathanson: We've expanded the suite of services that we make available to clients in the media area. It is of all of our services, probably one of the most measurable in terms of the youth when we utilize the data and the amount of data that we have, we're able to optimize for the benefit of the client, how they spend their money and prove it. So there's a great deal of analytics that they're there today that weren't even possible four or five years ago.

Michael Nathanson: And I think, well, I do know this to be true. We have a reputation of delivering on what we promise when we're pitching for business. And I dare say we have the best reputation in the industry of delivering what we promise. And that has benefited us through this process.

John Wren: You want to comment first on M&A? Sure. Yes, we've always had the M&A pipeline remains very strong for us. We have a team that's constantly looking at opportunities. They have to meet all of our internal criteria. They have to typically be something that's additive to the portfolio services that we offer our clients. If it's something that we can build and is expensive, we've stared the steered away from it in the past.

John Wren: And we've been pretty consistent about that in the last, at least the 26 years that I've been the CEO. But there are opportunities. And some of them are in areas that we've had on our list for a very long period of time that look more reasonable than they did on the interest rate to zero. Yeah, I think that what we've seen certainly is that sell is expectations of kind of adjusted to the marketplace and to the macro environment that we're dealing with.

John Wren: So strategically, there are some opportunities out there that we've been looking at, some of which we completed in the third quarter that have been more attractive than they certainly were, not that long ago. Thank you. Sure.

Craig Huber: And the next question comes in line of Craig Huber with Huber Research Partners. Please go ahead. Thank you. I got a few questions. I'll maybe just go one at a time to make it easier. Can you just talk a little bit further about the tone of conversations with your clients as as a nun see to you what their thoughts are on a preliminary basis for 2024. At this stage, maybe versus what the conversations were like roughly six months ago.

Craig Huber: I think, well, there's still a lot of uncertainty in the marketplace because of all of the things we talked about in previous answers in our prepared remarks. Having said that, clients are pretty sophisticated and they know that no matter what the difficulties are, they have to continue to support their brands because if they don't, when the good times return, they'll have a much more difficult time regaining or maintaining their market share.

Craig Huber: So, as we look at clients in 24, 23 was a tough year for many sectors and this fact, we referenced a couple of times earlier the tech sector. I would say, in my opinion, 23 was the first time the tech sector had to face readjusting its business and people went, earlier in the year, went through massive layoffs and cutbacks of their own staffing, which they hadn't had any experience in their history of even needing to do, it was pure growth prior to this year.

Craig Huber: That's behind them now. There are a lot more experience than they once were as we look forward. So, clients aren't, they know we're not through all the hurdles that exist out there, but they're confident that their brands and their positioning from their companies, they've taken a lot of pain and their positions well to go into the future. Certainly a lot's changed, it's been an odd year, certainly a lot's changed, especially if you compare things to the last six months, but as we were going into 23 about a year ago, most of the conversations were about, was there a recession coming, was it likely?

Craig Huber: And I think 12 months ago it was more likely to happen than the first half than it changed to more likely that happened in the second half, it's kind of been happening in slow motion. So, you know, the recent events in the Middle East certainly have changed things versus six months ago, but I would echo John's comments in terms of our view on 24 and client sentiment. They know they need to continue to invest in their brands and I think that's been proven certainly throughout the COVID period.

Craig Huber: And you can't forget that you go back a year, interest rates were quite different for everyone, and there's been a lot of sudden changes as the feds increased rates and it takes people a bit of time to adjust what they're doing to those changing environments. But I think at this point, everyone thinks they don't know when it's going to reverse itself, but they're adjusting to the current environment, and they don't think they're facing the same headwind in areas like that going forward. So, again, it just adds to their confidence.

John Wren: Thank you for that.

Craig Huber: My second question I could on a pricing of apples, apples, pricing for your clients. Just an aggregate for your company for these years. How do you sort of think about it? You're three and a half to five percent or, again, a growth target for you with five percent being a stretched target. How much should we think about that pricing in terms of maybe basis points as adding to that? Is it rough?

Craig Huber: Hopefully, a hundred basis points from pricing on apples, apples, base, not just up selling but pricing on apples, apples, bases that you're increasing prices in your contracts and stuff. And whatever that number is roughly for this year added between half to five percent target for this year. How does that compare to prior years? I'm trying to get at this because I'll be the higher inflation environment. Sure. I don't think we've recovered completely the inflation that we faced when you look at this.

Craig Huber: From a Western Europe, US, and then emerging markets, you know, inflation has been more severe. We have been, have some pricing flexibility, but not to the extent of how fast inflation's risen. Now, we're hoping that inflation has stabilized and we'll start to enjoy the benefits of that. The other thing which impacts our business is actually an account day you win it. The next 90 days is probably the least profitable time that you'll out of that account because you're ramping up staff and you're changing organizations in order to accommodate not drop any balls as the business is going to drop.

Craig Huber: That's passed from one of our competitors to us. So that has some kind, that has an impact. Not on unit pricing, but on the overall costs that we face as we adjust and staff up for these events. More precise than that, I can't really be. I don't have any hard data which supports specific areas in the company. One of the reasons though that we've been able to expand our base in offshore and near shore markets for more of the functions that we have to fulfill in order to complete our job.

Craig Huber: We've gotten better at that. We've grown the staff from, we've doubled it in this past year and I think in my comments or we've said that we expect that to grow 2 to 3 times over the next 24 months because we have the infrastructure now to accommodate that growth. So that gives us a bit of relief on the inflation that we haven't been able to, to pass on to our clients. So by doing things differently.

Craig Huber: In my final question, if I could just see everybody has questions on this project really to work in the fourth quarter, if historically the range is 250 million in the fourth quarter, I'm curious, embedded in your 3.5 to 5% organic growth number for the year target. What do you guys assuming for project really work in the fourth quarter versus the year ago numbers? Is that roughly flat on the bottom end of your 3.5 to 5% number?

Craig Huber: How should we think about that? We don't really have a number, Craig. I think certainly every one of our businesses has some expectations regarding project work in the fourth quarter. The key for us is when we meet with them ensuring they're not keeping staff on hand hoping to get new business as we head into the fourth quarter. And then the cost structure is out of whack with their expected revenues. They need to have some historical analysis and we've got plenty of that in order for our agencies to have certain amounts of project spend in their forecast.

Craig Huber: But typically, they're incentivized to benefit from capturing that year end project spend and our clients by and large want to spend the rest of their budget and grow their businesses through the end of the year. So those factors typically help us and help our clients to get to the point where we can capture a significant amount of that spend. But we don't have a hard and fast number. Blank percent of the 2 to 250 million is in the forecast.

Craig Huber: There's certainly some of them in the forecast. What we're pretty conservative about how much our agencies can put in their forecast because the last thing we want is people to be hiring ahead of the revenue for keeping people around that don't necessarily have anything to do with the revenue doesn't come through. That's pretty consistent practice we followed for quite some time.

Craig Huber: Great. Thank you, Phil and John. I appreciate that.

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