Q4 2023 Omnicom Group Inc Earnings Call
Operator: Good afternoon, and welcome to the Omnicom fourth quarter and full year 2023 earnings release conference call. At this time, all participants are in a listen-only mode.
Good afternoon, and welcome to the Omnicom fourth quarter and full year 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 participate. Please press one 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.
Operator: Later, we will conduct a question and answer session. To participate, please press 1 then 0. If you need assistance during the call, please press star then 0.
Operator: 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 Lumbert. Please go ahead.
I'd like to introduce you to your host for today's conference Senior Vice President of Investor Relations Gregory Lundberg. Please go ahead.
Gregory Lumbert: Thank you for joining our fourth quarter and full year 2023 earnings call. With me today is John Wren. Chairman and Chief Executive Officer, and Phil Angelastro, Executive Vice President and Chief Financial Officer. Also joining for the question and answer session will be Duncan Painter, CEO of Flywheel Digital, and Paolo Uvienco, Omnicom's Chief Technology Officer. On our website, omnicomgroup.com, is a press release and a presentation covering the information we'll review today, as well as a webcast of this call. An archived version will be available when this call concludes.
Gregory Lundberg: Thank you for joining our fourth quarter and full year 2023 earnings call.
Gregory Lundberg: With me today are John Wren.
Speaker Change: Chairman and Chief Executive Officer, and Phil Angela Ostrow, Executive Vice President and Chief Financial Officer.
Speaker Change: Also joining for the question and answer session will be Duncan painter.
Speaker Change: Oh flywheel digital and Pollo, UV NGO Omnicom, Chief Technology Officer.
Speaker Change: On our website Omnicom group Dot Com is a press release and the presentation covering the information will review to date as well as a webcast of this call.
An archived version will be available when today's call concludes what.
Gregory Lumbert: Before I 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. Certain of the statements made today may constitute forward-looking statements, and these statements are our present expectations. Relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings, including our 22 Form 10-K and our 23 Form 10-K, which we expect to file shortly. 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 materials. We'll 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'll open up the line for your questions. I'll now hand the call over to John.
Speaker Change: Before I 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 Change: Certain of the statements made today may constitute forward looking statements and these statements are our present expectations relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings, including our 'twenty two Form 10-K, and our 23 10-K, which we expect to file shortly during the course of <unk>.
Speaker Change: His 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 materials. 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 up the line for your questions I'll now hand, the call over to John.
John D. Wren: Thank you, Greg. Good afternoon, and thank you for joining us today for our fourth quarter and full year 2023 results. I'm pleased to report our fourth quarter performance was very strong. For the fourth quarter, organic growth of 4.4% exceeded our expectations, and full year organic growth was 4.1%, excluding acquisition transaction fees related primarily to flywheels. Operating profit margin for the quarter was 16.3%. For the full year, operating profit margin adjusted for certain non-GAAP items was 15.2%.
John D. Wren: Thank you Greg good afternoon, and thank you for joining us today for our fourth quarter and full year 2023 results.
Phil: I'm pleased to report our fourth quarter performance was very strong for the fourth quarter organic growth of four 4% exceeded our expectations and full year organic growth was four 1%.
Phil: Adding acquisition transaction fees related primarily to flywheel.
Phil: Operating profit margin for the corner was 16, 3%.
Phil: For the full year operating profit margin adjusted for certain non-GAAP items was 15, 2%.
John D. Wren: Earnings per share for the quarter, adjusted for acquisition transaction fees, was $2.20, up 5.3% versus the fourth quarter of 2022. For the full year, EPS adjusted for certain non-GAAP items was $7.41, an increase of 6.9% compared to the full year of 2022. In 2023, we generated approximately $1.9 billion in free cash flow and returned $1.1 billion to shareholders through dividends and share repurchases. Our liquidity and balance sheet remain very strong and continue to support our primary uses of cash, dividends, share repurchases, and acquisitions. On January 2nd, we closed the acquisition of Flywheel Digital. It is the biggest acquisition in Omnicom's history and brings scaled capabilities to the fastest growing segments of the industry, retail media, and digital commerce. Flywheel enables brands to sell goods across digital marketplaces such as Amazon, Walmart, Alibaba, and more than 100 other marketplaces around the world.
Phil: Earnings per share for the quarter adjusted for acquisition transaction fees was $2 20.
Phil: A five 3% versus the fourth quarter of 2022.
Phil: For the full year EPS adjusted for certain non-GAAP items was $7 41.
Phil: An increase of six 9% compared to the full year of 2022.
In 2023, we generated approximately $1 9 billion and free cash flow and returned $1 1 billion to shareholders through dividends and share repurchases.
Phil: Our liquidity and balance sheet remained very strong and continue to support our primary uses of cash dividends share repurchases and acquisitions.
Phil: On January 2nd we closed the acquisition of flywheel digital it is the biggest acquisition omni commerce history and bring scale capabilities in the fastest growing segments of the industry retail media and digital commerce flywheel enables brands to sell goods across digital marketplaces, such as <unk>.
Phil: Amazon, Walmart Alibaba and more than 100 out of the marketplaces around the world.
John D. Wren: Flywheel opens up an entirely new market opportunity for Omnicom, transforming us from an advertising and marketing-focused company to a marketing and sales-focused company. We can now seamlessly integrate end-to-end services from brand media to precision marketing to e-commerce and in-store commerce, ultimately delivering superior results for our clients. In January, we began combining Omni's audience and behavioral data with marketplace point-of-purchase sales data in Flywheel's Commerce Class, giving us an unmatched set of data not only to more effectively drive sales for clients, but to be fully able to measure return on advertising spend. It's a unique offering that no one has been able to achieve, and our competitors can't match. I'm also proud to inform you that last week, Flywheel captured its first significant win as part of Omnicom, winning the Hallion e-commerce business in Europe from one of our competitors.
Phil: We'll opens up an entirely new market opportunity for omnicom, transforming us from an advertising and marketing focused company to a marketing and sales focused company. We can now seamlessly integrate end to end services from Brian media to precision marketing e-commerce and in store.
Phil: Ultimately delivering superior results for our clients.
Phil: In January we began combining armies audience and behavioral data with marketplace point of purchase sales data in Flywheels Commerce cloud.
Phil: Giving us an unmatched set of data not only to more effectively drive sales for our clients, but to be fully able to measure return on advertising spend.
Phil: The unique offering that no one has been able to achieve and our competitors can't match I'm also proud to inform you that last week.
Phil: Little captured its first significant win as part of Omnicom, winning the Holly E Commerce business in Europe from one of our competitors. This is a unique partnership and opportunity in January we welcomed CEO Duncan painter and more than 2000 flywheel, others around the world to Omnicom and we are excited.
John D. Wren: This is a unique partnership and opportunity. In January, we welcomed CEO Duncan Painter and more than 2,000 Flywheelers around the world to Omnicom, and we are excited about what we can achieve for our clients together. In the fourth quarter, we acquired Coffee & TV, a UK-based creative studio that specializes in CGI and visual effects.
Phil: About what we can achieve for our clients together.
Phil: In the fourth corner, we acquired coffee and tea V. A U K based creative studio that specializes in CGI and visual effects the acquisition as part of our strategy to leverage the scale of our production operations and launch a holistic suite of global content and production services under a single year.
John D. Wren: The acquisition is part of our strategy to leverage the scale of our production operations and launch a holistic suite of global content and production services under a single unit, Omnicom Content Studios. Omnicom Content Studios creates content for brands across all consumer experiences and touchpoints, from long and short-form videos to social, experiential, digital, and everything in between. In addition to these acquisitions, we continue to invest in high-growth areas through internal investments and partnerships. Last month at CES, we introduced several new ways to offer planning and measurement in the booming area of influencers. We announced several first-of-a-kind partnerships with TikTok, Google, Amazon, and Meta to optimize the use of influencers, seamlessly integrate creator assets in campaigns, and measure influencer-driven commerce. In November, we announced the first move of our collaboration with Getty Images that provides us early access to this new generative AI tool. It pairs Getty's library of creative content with Omni's data and AI technology so our agencies can produce commercially safe and legally indemnified customized images for our clients. In 2023, we launched OmniAssist, a virtual assistant our people use to create, plan, and execute ad campaigns using the trove of data in Omni. OmniAssist accesses Open AI's GPT models through Microsoft.
Phil: Unit.
Phil: [noise] become content studios Omnicom content studios creates content for brands across all consumer experiences and touch points from long and short form videos to social experiential digital and everything in between.
Phil: In addition to these acquisitions, we continue to invest in high growth areas through internal investments and partnerships.
Phil: Last month at CES, we introduced several new ways to offer planning and measurement in the booming area of influences, we announced several first of a kind partnerships with tic Toc, Google Amazon and meta to optimize the use of influencers seamlessly integrate create our assets and campaigns and measure.
Phil: As long as they're driven commerce in November we announced the first move in collaboration with Getty images that provides us early access to this new generative AI tool.
Phil: Perez Getty's library of creative content with on these data and AI technology. So our agencies can't produce commercially safe and legally indemnified customize images for our clients in 2023, we launched omni assist a virtual assistant our people used to create.
Phil: We plan and execute AD campaigns, using the trove of data in the army.
Phil: I'm the assist access is open.
Phil: G P T models through Microsoft as far as holding company and second company overall to be giving full access to open AI models in Microsoft's Xu our environment, we have a significant first mover advantage, allowing us to expand right prototype and launch applications within the off platform before.
John D. Wren: As the first holding company and second company overall to be given full access to open AI models in Microsoft's Azure environment, we have a significant first mover advantage, allowing us to experiment, prototype, and launch applications within our platform before any other organization. Historically, we've invested tens of millions of dollars in AI. Going forward, generative AI investments and partnerships to enhance our platforms and educate our knowledge workers are expected to require greater resources. These investments will result in increased productivity and success for our clients. From e-commerce to influencers to generative AI, we're investing in all the areas that will shape the future of our industry. When these capabilities are combined with our legendary creativity, we remain positioned at the forefront of change and innovation.
Phil: Any other organization historically, we've invested tens of millions of dollars in AI going forward generative AI investments and partnerships to enhance our platforms and educate our knowledge workers are expected to require greater resources. These investments will result in increased productivity and.
Phil: Success for our clients.
Phil: From ecommerce two influences degenerative AI, we are investing in all the areas that will shape the future of our industry. When these capabilities combined with our legendary creativity, we remained positioned at the forefront of change and innovation.
Phil: In new business, we had a very successful 2023.
We secured record business with Amazon buyers Dos HSBC Jaguar land Rover Novartis Philips Telstra.
Phil: Under armour vans and Virgin voyages among others.
John D. Wren: In new business, we had a very successful 2023. We secured record business with Amazon, Buyersdorf, HSBC, Jaguar, Land Rover, Novartis, Philips, Telstra, Uber, Under Armour, Vans, and Virgin Voyages, among others. And we close the year with exciting news that BMW consolidated its U.S. Creative, Digital, and CRM and its Meteor accounts with us. Before I discuss our outlook for 2024, I want to welcome the newest member of our board of directors, Casey Santos, who was recently appointed as an independent director and a member of the Finance Committee. Casey joins one of the most diverse boards within the Fortune 500. Now at 11 members, our board is proud to have seven women and six diverse members.
Phil: And we closed the year with exciting news that P. M. W. Consolidated its U S creative digital and CRM and its media accounts with us before I discuss our outlook for 2024 I want to welcome the newest member of our board of Directors Casey Santos, who was recently appointed as an independent director.
Casey Santos: And a member of the Finance Committee Casey joined as one of the most diverse boards within the Fortune 500.
Casey Santos: Now at 11 members. Our board is proud to have seven women and six diverse members Casey's deep expertise in technology makes her a valuable addition to our board I also want to thank our people around the world for helping US successfully closed out 2023 years.
Casey Santos: Your dedication and commitment to do outstanding work allow our agencies clients and omnicom to succeed.
Casey Santos: We entered 2024 from a position of strength.
Casey Santos: Supported by our solid financial performance and balance sheet, new business wins and key strategic investments in the areas that will drive significant growth in the years ahead, while we continue to plan cautiously given the uncertainties in the macroeconomic and geopolitical environment based on current market conditions, we are.
John D. Wren: Casey's deep expertise in technology makes her a valuable addition to our board. I also want to thank our people around the world for helping us successfully close out 2023. Your dedication and commitment to do outstanding work allow our agencies, clients, and Omnicom to succeed. We enter 2024 from a position of strength, supported by our solid financial performance and balance sheet, new business wins, and key strategic investments in the areas that will drive significant growth in the years ahead. While we continue to plan cautiously, given the uncertainties in the macroeconomic and geopolitical environment, based on current marketing conditions, we are targeting 2024 organic revenue growth between 3.5 and 5%. Our range of organic growth during the year will be impacted by new business won in the fourth quarter, which doesn't positively impact us until the second quarter, and flywheel growth, which is typically stronger in the second half of the year. I'll now turn the call over to Phil for a closer look at our financial results. Okay, Phil?
Casey Santos: Targeting in 2020 for organic revenue growth between 3.5% to 5%.
Casey Santos: A range of organic growth during the year will be impacted by new business won in the fourth quarter, which doesn't positive really impact us until the second quarter and Flywheels gross which is typically stronger in the second half of the year.
Casey Santos: I'll now turn the call over to Phil for a closer look at our financial results.
Phil: Thanks, John.
Phil: We finished the year on a strong note in terms of revenue growth and profitability.
Phil: Even though the business environment was uncertain in 2023.
Phil: As we look towards 2024, we are optimistic about the performance of our agencies and an improving economy.
Let me spend a few minutes reviewing the financial details of the quarter.
Speaker Change: And then we'll open the lines up for questions and answers.
Speaker Change: Let's start with a review of our revenue performance on slide four.
Speaker Change: Organic growth in the quarter was four 4%.
Speaker Change: The impact from foreign currency translation increased reported revenue by one 2%.
Speaker Change: If rates stay where they are currently we estimate the impact of foreign currency translation will be close to flat in Q1 2024.
Philip J. Angelastro: Thanks, John. We finish the year on a strong note in terms of revenue growth and profitability, even though the business environment was uncertain in 2023. As we look towards 2024, we're optimistic about the performance of our agencies in an improving economy. Let me spend a few minutes reviewing the financial details of the quarter, and then we'll open the lines for questions and answers. Let's start with a review of our revenue performance on slide four. Organic growth in the quarter was 4.4%. The impact of foreign currency translation increased reported revenue by 1.2%.
Speaker Change: For the full year.
Speaker Change: The net impact of acquisition and disposition revenue on a reported revenue.
Speaker Change: It's a negative 0.7%.
Speaker Change: Primarily reflecting the sale in Q2 'twenty three.
Speaker Change: Of our research businesses.
Speaker Change: In 2024.
Speaker Change: We expect a positive contribution beginning in the first quarter with an increase of about 1.5%.
Speaker Change: And about 2% for the full year, reflecting recent acquisitions and are having moved past recent dispositions.
Speaker Change: For the full year organic revenue growth was four 1%. This was in line with our revised guidance of three 5% to 5%. We made some good progress toward this target despite a challenging comparison to nine 4% growth in 2022.
Philip J. Angelastro: For each day where they are currently, we estimate the impact of foreign currency translation will be close to flat in Q1 2024 and for the full year. The net impact of acquisition and disposition revenue on reported revenue was negative 0.7%, primarily reflecting the sale in Q2 of 23, of our research business. In 2024, we expect a positive contribution beginning in the first quarter, with an increase of about 1.5% and about 2% for the full year, reflecting recent acquisitions and having moved past recent dispositions. For the full year, organic revenue growth was 4.1%.
In an uncertain macroeconomic environment during the year.
Speaker Change: As John discussed organic revenue growth outlook for the full year 2024.
Speaker Change: It's between three 5% and 5%.
Speaker Change: Now, let's turn to slide five to review, our organic revenue growth by discipline.
Speaker Change: During the quarter advertising and media growth was very strong at nine 3%.
Speaker Change: Once again, driven by global media performance, which was partially offset by softer results for my advertising agencies.
Speaker Change: Precision marketing growth contracted 1.1%, reflecting a difficult comp to 11, 5% growth in Q4 of 2022.
Speaker Change: And cycling some client spending reductions from earlier in the year.
Speaker Change: As we look forward to 'twenty 'twenty four we expect us to once again be one of our fastest growing discipline.
Philip J. Angelastro: This was in line with our revised guidance of 3.5% to 5%. We made some good progress toward this target, despite a challenging comparison to 9.4% growth in 2022 and an uncertain macroeconomic environment during the year. As John discussed, our Organic Revenue Growth Outlook for the full year 2024 is between three and a half percent and five percent. Now, let's turn to slide 5 to review our Organic Revenue Growth by Discipline. During the quarter, advertising and media growth was very strong, at 9.3%.
Speaker Change: Commerce and branding grew by 1% compared to growth of seven 5% last year, driven primarily by growth in specialty production Joe.
Speaker Change: Offset reductions in the quarter at our branding and commerce agencies.
Speaker Change: Experiential was down 8%, reflecting a difficult comp of 17% growth in Q4 of 2022 with the FIFA World Cup in Qatar, primarily offset by strong growth in Europe in the quarter.
Speaker Change: While quarterly results can be choppy based on the timing of certain client events.
Speaker Change: <unk> remains a solid business and as important to our clients marketing plans.
Speaker Change: Execution and support declined by 0.4% with mixed results that included a solid performance in field marketing public relations declined two 9% in the quarter.
Speaker Change: Due to difficult comps related to the U S midterm elections of 2022.
Philip J. Angelastro: Once again, driven by global media performance, which is partially offset by softer results from our advertising agency. Precision marketing growth contracted 1.1%, reflecting a difficult comp to 11.5% growth in Q4 of 2022 and cycling some client spending reductions from earlier in the year. As we look forward to 2024, we expect this to once again be one of our fastest growing disciplines. Commerce and branding grew by 1% compared to growth of 7.5% last year, driven primarily by growth in specialty production, which offset reductions in the quarter at our branding and commerce agencies. Experiential is down 8%, reflecting a difficult comp to 17% growth in Q4 of 2022 with the FIFA World Cup in Qatar, primarily offset by strong growth in Europe in the quarter.
Speaker Change: When growth exceeded 12%.
Speaker Change: As well as softness in certain international markets.
Speaker Change: Finally health care continued its steady growth of three 6% during the quarter.
Speaker Change: Turning to geographic growth on slide six we saw growth in our five largest markets offset again by declines in Canada, and the cyclical impact of experiential revenue in Middle East and Africa.
Speaker Change: The U S was up <unk>, 6% in the quarter on solid performances by advertising and media led by media and our health care businesses.
Speaker Change: Offset primarily by execution and support public relations and commerce and branding.
Speaker Change: Slide seven shows our revenue by industry sector for the full year in the quarter.
Speaker Change: Looking at the full year, which tends to eliminate the volatility of client changes in the quarter.
Speaker Change: We saw a notable increase of two points in automotive and one point increases in both food and beverage and financial services.
Speaker Change: Weaker markets in technology and entertainment.
Speaker Change: Which had been discussed widely in the industry over the course of the year resulted in reductions of three points and one point respectively.
Speaker Change: Now, let's turn to slide eight for a look at our expenses.
Speaker Change: In the fourth quarter salary and related service costs were higher due to increased staffing levels were down as a percentage of revenue year over year, driven by our repositioning actions earlier in the year.
Philip J. Angelastro: Quarterly results can be choppy based on the timing of certain client events. Experiential remains a solid business and is important to our clients' marketing. Execution and support declined by 0.4%, with mixed results that included a solid performance and field market. Public relations declined 2.9% in the quarter due to difficult comps related to the U.S. midterm elections of 2022, when growth exceeded 12%, as well as softness in certain international markets
Speaker Change: Through ongoing changes in our global employee mix.
Speaker Change: Third party service costs increased in connection with the growth of our revenues we generated profit on these costs and the higher levels in the fourth quarter of 2023 compared to 22.
Speaker Change: Driven primarily by strong growth in our media business.
Speaker Change: Disposition activity during the quarter and the year did not have much of an impact on this cost category.
Philip J. Angelastro: Finally, healthcare continued its steady growth at 3.6% during the quarter. Turning to geographic growth on slide six, we saw growth in our five largest markets, offset again by declines in Canada and the cyclical impact of experiential revenue in the Middle East and Africa. The U.S. was up 0.6% in the quarter on solid performances by advertising and media, led by media and our health care business, although offset primarily by execution and support, public relations, and commerce and branding. Slide 7 shows our revenue by industry sector for the full year and the quarter. Looking at the full year, which tends to eliminate the volatility of client changes in the quarter. We saw a notable increase of two points in the automotive industry and one point increase in both food and beverage and financial services.
Speaker Change: Third party incidental costs were close to the same level as last year.
Speaker Change: Reflect client related travel and incidental out of pocket costs that.
Speaker Change: At a build declines directly at our cost with no profit.
Speaker Change: Occupancy and other costs were down in both dollar amount and relative to revenue driven by ongoing rationalizations in our real estate portfolio as G&A expenses were up primarily due to $14 5 million in professional fees related to acquisition costs incurred in the quarter, the majority of which related to the flywheel. Excluding these.
Speaker Change: Cause quarterly SG&A levels were comparable to last year.
Speaker Change: Now, let's turn to slide nine and look at our quarterly and annual income statement.
The numbers more comparable the table and footnotes describe some of the other adjustments that were made during this year and last year that we discussed on prior calls.
Speaker Change: Our operating income margin was negatively impacted by $14 5 million of costs in connection with the flywheel acquisition as I just discussed.
Speaker Change: Adjusting for this amount resulted in an operating income margin of 16, 3%.
Philip J. Angelastro: Weka Markets and Technology and Entertainment, which have been discussed widely in the industry over the course of the year, resulted in reductions of three points and one point respectively. Now, let's turn to slide 8 for a look at our expenses. In the fourth quarter, salary and related service costs were higher due to increased staffing levels, but they were down as a percentage of revenue year-over-year driven by our repositioning actions earlier in the year and ongoing changes in our global employment.
Speaker Change: And an EBITDA margin of 16, 8%.
Speaker Change: For the full year, our adjusted operating income margin was 15, 2%.
Speaker Change: Within our expected range of 15% to 15, 4%.
Speaker Change: As a result of the flywheel acquisition, we will have higher levels of amortization expense in past years we.
Speaker Change: And we will be focusing on margin expectations on EBIT.
Speaker Change: We continue to expect integration costs as well as operating synergies related to the flywheel acquisition during 2024 and that the acquisition will be accretive to diluted EPS adjusted for amortization expense.
Philip J. Angelastro: Third-party service costs increased in connection with the growth in our revenue. We generated profit on these costs, and the higher levels in the fourth quarter of 2023 compared to 22 were driven primarily by strong growth in our media business. Our disposition activity during the quarter and the year did not have much of an impact on this cost category. Third-party incidental costs were close to the same level as last year and reflect client-related travel and incidental out-of-pocket costs for which a bill declines directly at our cost with no profit. Occupancy and other costs were down in both dollar amount and relative to revenue, driven by ongoing rationalizations in our real estate portfolio.
Speaker Change: The fourth quarter.
Speaker Change: For the full year 2024, we expect adjusted EBITDA as a percentage of reported revenue to be close to flat with last year.
Speaker Change: Also in this slide you can see that our non-GAAP adjusted income tax rate of 26% for the full year 2023.
Speaker Change: It was comparable to 2022.
Speaker Change: Do not expect a flywheel business to change our tax rate outlook for 2024.
Speaker Change: But the 2024 rate will be negatively impacted primarily related to increases in the statutory rates of certain international countries.
Speaker Change: For full year 2024, we expect our rates approximate 27%.
Speaker Change: Acquisition costs related to flywheel and better performance at agencies with minority shareholders.
Philip J. Angelastro: SG&A expenses were up primarily due to $14.5 million in professional fees related to acquisition costs incurred in the quarter, the majority of which related to flywheel. However, excluding these costs, quarterly SG&A levels were comparable to last year. Now let's turn to slide 9 and look at our quarterly and annual income statements to make the numbers more comparable. This table and footnotes describe some of the other adjustments that were made during this year and last year that we discussed on prior calls. Our operating income margin was negatively impacted by $14.5 million of costs in connection with the flywheel acquisition, as I just discussed. Adjusting for this amount results in an operating income margin of 16.3%, and an EBITDA margin of 16.8%. For the full year, our adjusted operating income margin was 15.2%, within our expected range of 15 to 15.4%.
Speaker Change: Tribute to a decrease in reported net income of 1%.
Speaker Change: But an increase of 2.1% on an adjusted basis.
Speaker Change: Lastly, adjusted diluted EPS of $2 20 for the fourth quarter increased five 3% from last year.
Speaker Change: For the year adjusted EPS increased by six 9%.
Speaker Change: Slide 10 is our cash flow performance for the year, we define free cash flow as net cash provided by operating activities excluding changes in operating capital.
Speaker Change: Free cash flow for 2023 was $1 9 billion, an increase of six 5%.
Speaker Change: This increase was driven in part from operational improvements compared to 2022, and the use of operating capital, which we expect to improve further in the future.
Speaker Change: Regarding our uses of cash we.
Speaker Change: We used $563 million of cash to pay dividends to common shareholders and another 71 million for dividends to noncontrolling interest shareholders.
Philip J. Angelastro: As a result of the flywheel acquisition, we will have higher levels of amortization expense than in past years. We will be focusing our margin expectations on EBITDA. We continue to expect integration costs as well as operating synergies related to the flywheel acquisition during 2024 and that the acquisition will be accretive to diluted EPFs adjusted for amortization expense by the fourth quarter. For the full year 2024, we expect adjusted EBITDA as a percentage of reported revenue to be close to flat with last year. Also, on this slide, you can see there is a non-GAAP adjusted income tax rate of 26% for the full year 2023, comparable to 2022.
Speaker Change: Our capital expenditures of $78 million.
Speaker Change: Similar to last year.
Speaker Change: We expect 2024 levels to be higher due to growth investments that flywheel.
Speaker Change: Total acquisition payments were $249 million, although we closed the flywheel acquisition on January 2nd 2020 for using cash on hand of approximately $845 million.
Speaker Change: It remains our intention as we stated in the October 30th announcement to finance two thirds of the purchase price with new debt, which I'll discuss in a moment.
Speaker Change: Finally, our stock repurchase activity net of proceeds from stock plans was $535 million year to date.
Philip J. Angelastro: I do not expect the flywheel business to change our tax rate outlook for 2024, but the 2024 rate will be negatively impacted, primarily related to increases in the statutory rates of certain international countries. For a full year 2024, we expect our rate to approximate 27%. Acquisition costs related to Flywheel and better performance at agencies with minority shareholders contributed to a decrease in reported net income of 1%, but an increase of 2.1% on an adjusted basis. Lastly, adjusted diluted EPS of $2.20 for the 4th quarter increased 5.3% from last year. For the year, adjusted EPS increased by 6.9%. Slide 10 is our cash flow performance for the year. We define free cash flow as net cash provided by operating activities, excluding changes in operating capital.
Speaker Change: Within our expected range.
Speaker Change: Our capital allocation in 2024 will be consistent with our practice of returning cash to shareholders through a healthy dividend, making strategic acquisitions that lead to accelerated growth.
Speaker Change: And using a portion of residual cash to repurchase common stock.
Speaker Change: Since 2024 began with the closing of a larger than normal acquisition.
Speaker Change: We expect the total share repurchases in 2024 will approximate 50% of our recent average.
Speaker Change: Slide 11 is a summary of our credit liquidity and debt maturities at the end of the fourth quarter of 2023, the book value of our outstanding debt was $5 $6 billion.
There were no changes in outstanding balances during the quarter other than foreign exchange translations.
Speaker Change: Our $2 5 billion revolving credit facility, which backstops, our $2 billion U S. Commercial paper program remains undrawn and our cash equivalents and short term investments were $4 4 billion.
Speaker Change: We will continue to monitor the credit markets throughout 2024, and we expect to enter the debt markets to finance approximately $550 million or two thirds of the $845 million. We spent on the flywheel acquisition.
Philip J. Angelastro: Free cash flow for 2023 was $1.9 billion, an increase of 6.5%. This increase was driven, in part, from operational improvements compared to 2022 and the use of operating capital, which we expect to improve further in the future as regards our uses of cash. We used $563 million of cash to pay dividends to common shareholders and another $71 million for dividends to non-controlling interest shareholders.
Speaker Change: And during the year, we will refinance the $750 million of 365% senior notes.
Speaker Change: Which are due on November one 2024.
Speaker Change: Financing the flywheel acquisition will increase our interest expense of 2024.
Speaker Change: It's also likely that refinancing November notes will increase interest expense by some amount.
Speaker Change: But it is too early to estimate.
Speaker Change: For 2024, we expect that our internal financing of the flywheel acquisition in early January with cash on hand prior to an expected financing of two thirds of the purchase price coupled with a declining global interest rates will lead to lower interest income in 2024 compared to 2023.
Philip J. Angelastro: Our capital expenditures were $78 million, similar to last year. We expect 2024 levels to be higher due to growth and investments. Absolutely. Total acquisition payments were $249 million.
Speaker Change: Slide 12 presents our historical returns on two important performance metrics for the 12 months ended December 31 2023.
Philip J. Angelastro: Although we closed the flywheel acquisition on January 2, 2024, using cash on hand of approximately $845 million, it remains our intention, as we stated in the October 30th announcement, to finance two-thirds of the purchase price with new debt, which I'll discuss in a moment. Finally, our stock repurchase activity, net of proceeds from stock plans, was $535 million year-to-date, within our expected range.
Speaker Change: Omnicom's return on invested capital was 26%.
Speaker Change: And return on equity is 41%.
Speaker Change: Both reflecting very strong performance.
Speaker Change: Healthy returns like these reflect the strength of our industry.
Speaker Change: Our operating discipline.
Speaker Change: And the preservation of our conservative balance sheet.
Speaker Change: Operator, please open the lines up for questions and answers.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Wish to ask a question. Please press one then 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.
Philip J. Angelastro: Our capital allocation in 2024 will be consistent with our practice of returning cash to shareholders through a healthy dividend, making strategic acquisitions that lead to accelerated growth, and using a portion of residual cash to repurchase common stock. 2024 began with the closing of a larger than normal acquisition. We expect the total share of purchases in 2024 will approximate 50% of our recent average. Slide 11 is a summary of our credit, liquidity, and debt maturities. At the end of the fourth quarter of 2023, the book value of our outstanding debt was $5.6 billion. There were no changes in outstanding balances during the quarter, other than foreign exchange translations, and our $2.5 billion revolving credit facility.
Speaker Change: Once again, if you have a question you May press one day zero at this time.
Speaker Change: Our first question comes from the line of Cameron Mcknight with Morgan Stanley. Please go ahead.
Speaker Change: Yeah.
Cameron Mcknight: How are you guys thinking about the cadence of growth and margins over the course of 2024 from what can you can see now comps ease as the year progresses. Many of the Summer Olympics and the U S election in November. So curious any color you can provide on how you expect the year to shape up.
Speaker Change: Then I have a follow up.
Speaker Change: Sure well the comps in the first quarter.
[noise] remains probably the most difficult comps that we have going into the year.
Speaker Change: But it's not that as much as it is.
Speaker Change: Cause I will which we closed on January the second.
Is just seasonally natural or at least stronger in the second half than the first so that's one point.
Speaker Change: And as I said in my prepared remarks.
Speaker Change: A number of the new business wins, we had late in the third quarter early in the fourth.
Philip J. Angelastro: Fact Stops, our $2 billion U.S. commercial paper program, remains undrawn, and our cash equivalents and short-term investments were $4.4 billion. We will continue to monitor the credit markets throughout 2024, and we expect to enter the debt markets, financing approximately $550 million, or two-thirds of the $845 million we spent on the flywheel acquisition. And during the year, we will refinance the $750 million of 3.625% senior notes, which are due November 1, 2024. Financing a flywheel acquisition will increase our interest expense in 2024. It's also likely that refinancing the November notes will increase interest expense by some amount.
Speaker Change: Fourth quarter or throughout the fourth quarter.
Speaker Change:
Speaker Change: Laughs, we want them.
Speaker Change: And we have to ramp up our expenses in order to handle them with.
Speaker Change: With the notice periods the company's debt lost those accounts.
Speaker Change: We don't start getting revenue really until the second quarter or so.
Speaker Change: So.
The additive.
Speaker Change: And so that won't happen until then.
Speaker Change:
Speaker Change: You're absolutely correct that as we go through the year, if all goes well.
Speaker Change:
Speaker Change: The Olympics will add something to the revenue as well the U S elections at something as we get a little bit later into the second quarter than the third quarter.
Speaker Change: And there'll be a tail to it also in the fourth quarter. So that's kind of reflected in the range that we've given you.
Speaker Change: And we want to emphasize that.
Speaker Change: Yeah.
Speaker Change: While we.
Speaker Change: We expect.
Speaker Change: Just a ramp is it didn't start ramping on January the first.
Speaker Change: Yeah, I I think I would I would just add that.
Speaker Change: Yeah, I think it's it's probably logical or margin expectations would kind of mirror.
Speaker Change: That as the year goes on.
Philip J. Angelastro: But it is too early to ask. For 2024, we expect that our internal financing of the flywheel acquisition in early January with cash on hand prior to an expected financing of two-thirds of the purchase price, coupled with a decline in global interest rates, will lead to lower interest income in 2024 compared to 2023. Slide 12 presents our historical returns on two important performance metrics for the 12 months ended December 31, 2023. Omnicom's return on invested capital is 26%, and return on equity is 41%.
Speaker Change: And as as performance built.
Speaker Change: As John had said.
Speaker Change: You'll see some consistency in the performance of the margins as well.
Speaker Change: Great. Thanks, and a question for Duncan.
Duncan Painter: You ran a central and built flywheel.
Duncan Painter: Now what are you excited about now that you're part of Omnicom what are your thoughts.
Duncan Painter: Yes.
Duncan Painter: First the camera is if it's a pleasure to be here on Nicole.
And.
Speaker Change: I'm delighted to be part of the leadership pretty but on the call and now we have the chance to work alongside only come for a long time for me 12 years.
Speaker Change: And we always admired the pride in the quality that they focused on you know always leading with the best in class quality products and services in the market and it was always.
Philip J. Angelastro: Both of which reflect very strong performance. Healthy returns like these reflect the strength of our industry or Operating Discipline. Preservation of our Conservative Balance Sheet. Operator, please open the lines up for questions and answers. Thank you. Thank you. If you wish to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you're using a speakerphone, please pick up the handset before pressing the number.
Speaker Change: Very clear and having built a platform flywheel that focused on exactly the time.
Speaker Change: That was very important to us and since we've been here, it's really clear how these company really focuses on high quality products and great service to customers.
Speaker Change: Natural fit that I'm, saying.
Speaker Change: Saying for them as temporary but policy permanent is showing in the company you know the other.
Speaker Change: The thing from outside is.
Speaker Change: You know, we really do think the scale of clients in the very early engagement, we've already had with clients on.
Speaker Change: Nicole has where they clearly have very trusted relationships with them is giving us great access to not just maintain our growth rates, but.
Operator: Once again, if you have a question, you may press 1, then 0 at this time. The first question comes from the line of Cameron McVeigh with Morgan Stanley. Please go ahead.
Speaker Change: I have some sense that we've got a chance to accelerate them and that's exciting for us and you know would be great to see that come through in or just the quality of our ability to just expand across.
John D. Wren: How are you guys thinking about the cadence of growth and margins over the course of 2024 from what you can see now? Comps ease as the year progresses and you have the Summer Olympics and the U.S. election in November. So curious any color you can provide on how you expect the year to shape up, and I have a follow-up. Sure. Well, the comp's in the first quarter, remain probably the most difficult comps that we have going into the year. But it's not that as much as it is, flywheel, which we, closed on January the 2nd. , , , , , , , , , , , , , , seasonally, naturally stronger in the second half than the first, so that's one.
Speaker Change: Range of really high quality clients, and then finally and perhaps the most exciting for us and the thing that we I think John alluded to in his presentation is that are you know.
Speaker Change: There's no doubt from our diligence of all knee. It's a multiple next generation platform that has by far the largest scale trading data on them on the marketing side and having built on the fly wheel side, the biggest trading data platform on the market place as well.
Speaker Change: Really excited about the ability to combine that information. We think is a unique opportunity and it really is for the first time ever going to give clients the ability.
John D. Wren: And as I said in my preparatory moment, a number of the new business wins we had late in the third quarter, early in the fourth quarter, or throughout the fourth quarter. Plus, we've won them. And we have to ramp up our expenses in order to handle them. With the notice periods, the companies that lose those. We don't start getting revenue really until the second quarter. So the additive tailwind for that won't happen until then.
Speaker Change: The ability to make his mark.
Speaker Change: Marketing sales and one guy who so that's definitely.
Speaker Change: Definitely the most exciting element that we see.
Speaker Change: That's great. Thank you.
Thank you.
Speaker Change: Next question will come from the line of David Karnofsky with J P. Morgan. Please go ahead.
David Karnofsky: Thanks for taking the question John some of your peers had pushed AI to the front of conversations recently and highlighted potential competitive advantages around data or attack.
John D. Wren: You're absolutely correct that as we go through the year, if all goes well, the Olympics will add something to the revenue, as will the U.S. election. The Bulletproof Executive 2013, There'll be a tell on that also. So, that's kind of reflected in the range that we've given you. And we want to emphasize that it was. We expect. Mr. Ramp, It didn't start ramping up in January.
David Karnofsky: I'm interested first do you think is AI is integrated into the holding company's bad real differentiation and execution is going to emerge that will be visible to clients and then secondly for omnicom. How do you think about the timeline of moving from testing AI capabilities to deploying it in a way that is going to be visible to investors on the <unk>.
David Karnofsky: Offline or in cost.
Speaker Change: Sure there's a lot that.
Speaker Change: First of all on AI.
Speaker Change: As just AI, we've been investing in that for close to a decade more seriously in the last five years you see it reflected in I may assist.
John D. Wren: Yeah, I think I would, I would just add that, um... The Omnicompany, LLC. All rights reserved. Probably logical or margin. Great. Makes sense. And a question for Duncan. As you ran Essential and built Flywheel, what are you excited about now that you're part of Omnicom? Love your thoughts.
Speaker Change:
Speaker Change: What they're really talking about is the impact of generative AI I think.
Speaker Change: And what it's going to do to the entire landscape.
Speaker Change: And we've taken the view that.
Speaker Change: It's going to make us more productive and make what I referred to as our knowledge workers.
Speaker Change: Better faster.
Speaker Change: Able to get come up with better answers and insights for our clients.
Speaker Change:
Speaker Change: It's unknown territory.
Duncan Painter: Yeah, so, firstly, Cameron is... It's a pleasure to be on this call, and I'm delighted to be part of the leadership group at Omnicom. We had the chance to work alongside Omnicom for a long time, for me, 12 years, and we always admired the pride and the quality that they focused on, always leading with the best-in-class quality products and services in the market. And it was always very, very clear.
Speaker Change: One of the immediate concerns we had and it's reflected in.
Speaker Change: Comments that I made earlier and it was released in November.
Speaker Change: When you look at AI and <unk>.
Speaker Change: Technology always travels faster than societies ability to absorb it and the laws and regulations that generally follow it.
Speaker Change: So making certain that we don't expose our clients to anything that can be.
Speaker Change: Create a problem because of its.
Speaker Change: Because it was handled improperly.
Speaker Change: The key and the first move we made there was entering into majority images.
Duncan Painter: And having built a platform in Flywheel that focused on exactly the same, that was very important to us. And since we've been here, it's really clear how this company really focuses on high-quality products and great service to customers. So there's a natural fit there. That old saying, form is temporary, but class is permanent, is showing.
Speaker Change: So.
Speaker Change: We're capable of accessing those and teaching our programs in <unk>.
Speaker Change: And platforms, how do you utilize that in our fab.
Speaker Change: Fast and efficient way and more of those type of.
Speaker Change: Arrangements are going to.
Speaker Change: Occur as we go forward.
Speaker Change: Also I think because governments.
We'll be late and catching up with how they want to protect the consumer well.
Duncan Painter: You know, the other thing from our side is... We really do think the scale of clients and the very early engagement we've already had with clients that Omnicom has, where they clearly have very trusted relationships with them, is giving us great access to not just maintain our growth rates but, you know, to have some sense that we've got a chance to accelerate them, and that's exciting for us. And, you know, we're great to see that come through, and just the quality of our ability to just expand across a range of really high-quality clients. And then, perhaps the most exciting for us, and the thing that...
Speaker Change: We're gonna have to tread very carefully so I think our ability to do things.
Speaker Change: Well exceed whether or not we will use them to do things.
Speaker Change: And we're gonna put the clients interest in safety.
Speaker Change: Above all in that consideration set.
Speaker Change: In terms of debate during a products and things that we're doing.
We already have a few clients.
Speaker Change: Who we.
Speaker Change: We're beta ing products with who are very aware.
Speaker Change: The risks associated with it that we're going to break a few things will go up but at the end of the day.
Speaker Change: Going to create a better more efficient way.
Throw the question to somebody who's sitting here as well colleague Paolo <unk>, who has been first and foremost and heads communities they'll look at this Oh, Hey, David Thanks for the question so.
Duncan Painter: The focus John alluded to in his presentation is that you know what, there's no doubt from our diligence of Omni it's a modern, next-generation platform that has by far the largest scale trading data on the marketing side. And having built on the flywheel side the biggest trading data platform on the marketplaces, you know we're really excited about the ability to combine that information. We think it's a unique experience, www.omnicom.com marketing and sales in one go, and definitely the most exciting. That's great!
Paolo: Just to get back to the first part of your question I think the short answer is yes.
Paolo: And it's precisely the reason why artificial intelligence has been pervasive redeployed across our industry, leading operating system omni.
Paolo: Since we created it you know well over five years ago and more specifically around.
Paolo: We spent the last 18 months working with you know really the tightened in enterprise ready January including the likes of Microsoft Google Amazon Adobe.
Paolo: John mentioned Getty you know we're having.
Operator: Thank you. The next question will come from the line of David Karnovsky with J.P. Morgan. Please go ahead.
Paolo: Had first mover advantage with all of these partners really in testing and integrating their models to change and optimize the way we are delivering outcomes for our clients. So you know with over.
John D. Wren: Thanks for taking the question. John, some of your peers have pushed AI to the forefront of conversations recently and highlighted potential competitive advantages around data or tech. I'm interested first, do you think as AI is integrated into the holding companies that real differentiation and execution is gonna emerge that will be visible to clients? And then secondly, for Omnicom, how do you think about the timeline of moving from testing AI capabilities to deploying it in a way that is going to be visible to investors on the top line or in cost? There's a lot there.
50000 people across omnicom, both clients and our employees kind of using than it had been provisioned access to omni.
Paolo:
Paolo: We've already started to bring these capabilities to life.
Paolo: John mentioned on several clients and select accounts.
Paolo: And actually you know cause.
Paolo: Second part of your question, we've actually launched these capabilities back in June of 2023 with Omnia says Omnia is utilizing those large language models diffusion models and they're already starting to make the jobs of our people easier and frankly to work for our clients better.
Speaker Change: Great. Thanks, and then maybe one more just on the technology vertical it's been a headwind across the industry for some time now.
Speaker Change: There's been some investor optimism that this could improve with easier comps of the year same time, we keep seeing layoffs in the technology space I know, it's been generally less an issue for omnicom, but interested to know what youre seeing here and whether there's any read through to business lines like precision marketing.
John D. Wren: First of all, AI as just AI. We've been investing in that for close to a decade, more seriously in the last five years, and you can see it reflected in OmniAssist. What they're really talking about is the impact of generative AI and what it's going to do to the entire landscape. And we've taken the view that it's going to make us more productive and make what I refer to as our knowledge work able to come up with better answers and insights for our clients. It's unknown territory, so one of the immediate concerns we had was that. Collected in, Comments that I made earlier, and it was released in November. When you look at AI, technology always travels faster than. Society's ability to absorb it and the laws and regulations that generally follow it.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Okay.
Speaker Change: Certainly there'll be easier comps, but as you suggest.
I don't think in our prior calls.
Speaker Change: We've been moaning too much about the impact that technology has had whereas I think our competitors have had much greater heads.
Speaker Change: Hmm, probably means that there wasn't much easier comps going forward.
Speaker Change:
Speaker Change: But yes, we expect an uplift.
Speaker Change: You know from the base of technology clients that we have.
In the forecast as it rolls through the rest of the year.
Speaker Change: Okay.
Speaker Change: And the next question comes from the line of Adam Berlin with UBS. Please go ahead.
Adam Berlin: Hi, Good evening I'll ask two questions. If I can the first one is can you say a bit more about why advertising and media was so strong in the fourth quarter and what does it do with account wins can you quantify how big the account wins, what could you say something about how much was media and how much was created within that.
John D. Wren: So making certain that we don't expose our clients to anything that can create a problem because it was handled improperly. Key, and the first move we made there, was entering into a dual image. So... We're capable of accessing those and teaching our programs, platforms how to utilize that in a fast and efficient way, and more of those types of arrangements are going to occur as we go forward. Also, I think because the government will be late in catching up with how they want to protect the consumer. We're going to have to tread very carefully.
Speaker Change: Right.
Speaker Change: Well I'll answer that.
Speaker Change: The second part of your question first.
Speaker Change:
Speaker Change: Media is certainly was stronger than advertising, but we choose to treat it as one.
Speaker Change: Reporting entity, when we put both of those numbers together because quite often.
John D. Wren: So I think our ability to do things... will exceed whether or not we will use them to do this, and we're going to put the client's interest and safety above all, in that consideration... In terms of discussing products and things that we're doing, we already have a few clients who we're negotiating products with, who are very aware of the risks associated with it, that we're going to break a few things, but at the end of the day, we're going to create a better, more efficient way. I'm going to throw the question...
Speaker Change: They're they've come together.
Speaker Change:
Speaker Change: More specific net.
Speaker Change: I don't think it's a productive way to look at the business.
Speaker Change:
Speaker Change: Yes, there are a lot of a lot of strength in the fourth quarter and media.
Speaker Change:
Speaker Change: They're a great number of projects and spending.
Speaker Change: It was conservatively held back and then released into the fourth quarter and we benefited from it as you can see.
C.
Speaker Change: The numbers and I would say that was through the west.
Speaker Change: Including Western Europe.
Speaker Change: And can I ask one more question then about working capital.
Paolo Uvienco: There's somebody who's sitting here as well, and my colleague, Paulo, who... first and foremost and head. Hey David, thanks for the question. To get back to the first part of your question, the short answer is yes. Precisely the reason why artificial intelligence..., www.omnicom.com and more specifically around..., www.omnicom.com The Bulletproof Executive 2013, Please see the complete disclaimer at www.sites.google.com or at www.google.com Microsoft Office Word Microsoft, Inc. Title Microsoft Office Word Document MSWordDoc Word. Document.8, Google, Amazon, Adobe.
Speaker Change: About working capital and I know you exclude it from your free cash flow, but it was still quite a large number of $467 million.
Speaker Change: Do you expect that to come down in 2024 could you say a little bit about why it still so high.
Speaker Change: Sure.
Speaker Change: For the year are.
Speaker Change: Certainly the change in working capital was positive almost a $400 million improvement.
Speaker Change: Which we're pretty satisfied with I think.
Speaker Change: Relatively speaking, though the overall negative.
Speaker Change:
Speaker Change: It reflects the fact that the actions of the fed and overtime.
Speaker Change: Global treasuries.
Speaker Change: Have obviously made it a more challenging area to manage them.
Paolo Uvienco: We're having First Mover Advantage with all of these partners, www.omnicom.com, their models to change and optimize the way we are delivering outcomes for our clients, with over 50,000 people across Omnicom, and vision access to Omnicom. We've already started to bring these capabilities to life. And actually, we.., second part. We actually launched these capabilities back in June of 2023 with Omnicom, you know. The Ultimate Parody Site! www.omnicom.org, and they're already starting to make the jobs. You're in. Great, thanks, and then maybe one more.
Speaker Change: The fact that yeah, we'd cut the change in half or we cut.
Speaker Change: Got the number in a half in.
Speaker Change: In 2023, it was really reflective of good performance all throughout the organization.
Speaker Change: It's really a matter of.
Speaker Change: Yeah, three yards and a cloud of dust in terms of blocking and tackling to them to improve those numbers.
Speaker Change: We're certainly going to strive to get the number back to.
Speaker Change: To neutral if not positive.
Speaker Change: As we go but.
Speaker Change: That isn't going to happen overnight I think.
Speaker Change: You know as has the economic environment changes and as the rates.
Speaker Change: Eventually come down I think I think.
Speaker Change: You'll see some some continued improvement is certainly an area we're very focused on.
Speaker Change: And we're not done in terms of improving our performance.
Speaker Change: But it has been more challenging in the last few years than in the past.
Speaker Change: Thank you very much.
Speaker Change: Sure.
Speaker Change: And the next question comes from line of Steven Cahall with Wells Fargo. Please go ahead.
John D. Wren: Just on the technology vertical, it's been a headwind across the industry for some time now, but I think there's been some investor optimism that this could improve with easier comps later in the year. At the same time, we keep seeing layoffs in the technology space. I know it's been generally less of an issue for Omnicom, but I'm interested to know what you're seeing here and whether there's any read-through to business lines like precision marketing, www.omnicom.org. Certainly it'll be easier come. But as you suggest, I don't think any of my prior calls. We've been moaning too much about...
Steven Cahall: Thanks, maybe first just to expand on.
Steven Cahall: The question around advertising and media. So I think you talked about how creative has been lagging and then you've got a lot of strength in media and you've definitely showed off strong capability, there and what a lot of business. John I'm. Just wondering if there's anything bigger to read about how the industry is changing and the acceleration in media with the slowdown in creative do you think that's a change in the <unk>.
Steven Cahall: Hey, marketers just think about the future of our marketing and marketing spend is much more about the delivery than the content in and if so are there any other changes that you might think about your business longer term. If that is in fact, the case and then just you know in Q4 your organic growth.
John D. Wren: The impact that technology has had, whereas I think our competitors have had greater hits. Oh, well; it means that they brush up much easier.
Operator: Omnicom Group Inc., But yes, we expect an uplift from the base of technology clients that we have in the forecast as it rolls through the rest. And the next question comes from Adam Berlin with UBS. Please go ahead. Hi, good evening.
Steven Cahall: It's pretty similar to what you've guided to for 2020 for them.
John D. Wren: I'll ask two questions, if I can. The first one is, can you say a bit more about why advertising and media was so strong in the fourth quarter? Was it to do with account wins?
Steven Cahall: You know the EBIT margins were solid they weren't necessarily up year on year I know, there's a lot of moving pieces. Then this year with flywheel, but can you just talk about what's holding those margins a little flattish like the guidance that you gave and is there anything that could drive more margin expansion in the future. Thank you.
John D. Wren: Can you quantify how big the account wins were? And can you say something about how much was media and how much was creative within that segment? Well, I'll answer the... Second part of your question first. Media certainly was stronger than advertising, but we choose to treat it as one.
John D. Wren: Supporting entity When we put both of those numbers together, quite often, they've come together. More specific than that, I don't think it's a productive way to look.
Speaker Change: Sure there's a lot there.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: You bring up an interesting point and I, probably won't do justice to it in my response.
Speaker Change: But created.
John D. Wren: Yes, there was a lot of... a lot of strength in the fourth quarter in media, a great number of projects and spending that were conservatively held back and then released in the fourth quarter. And I would say that was through the web. And can I ask one more question then about working capital? about working capital. I know you exclude it from your free cash flow, but it was still quite a large number, $460 million. Do you expect that to come down in 2024, or can you say a little bit about why it's still so high?
Speaker Change: Is our IP at the end of the day.
Speaker Change: What you see in reflection or your yes.
Speaker Change: As to the impact on the.
Speaker Change: The way that the business has been organized and then reported.
Speaker Change: What you see is technology.
Speaker Change: Has.
Speaker Change: Probably had a greater impact.
Speaker Change: On the traditional setup of an agency in terms of how.
Speaker Change: How we can utilize great ideas.
Philip J. Angelastro: for more information. Thank you. Thank you. For the year, certainly, the change in working capital was positive, almost $400 million. The Ultimate Parody Site! satisfied with, you know, the overall negative. It reflects the fact that the actions of the Fed... Global Treasures, have obviously made it a more challenging area.
Speaker Change: And through algorithms and through automation deliver those ideas to the right.
Speaker Change: Venue to present them to reach customers.
Speaker Change: And so that has an impact that in fact is why we don't separate the two.
Speaker Change: Because they they feed off each other but I think one of the things that has always.
Philip J. Angelastro: ...... really reflect. It's all... It's really a matter of... Yeah, three yards on a cloud of dust in terms of blocking in tact.
Speaker Change: Hum.
Philip J. Angelastro: I'm certainly going to strive to get the number back. Buh-bye! I'm going to have to pause, as we go with, that isn't going to happen, as it has happened to Shubhashree Mukherjee, but it has.
Speaker Change: Differentiated us.
Speaker Change: Is actually the quality of our creative products and the quality of our agencies and people that were able to attract and that's not to be diminished because somebody is trying to do.
Philip J. Angelastro: Thank you very much. And the next question comes from the line of Stephen Cahill with Wells Fargo. Please go ahead.
Speaker Change: A an analysis.
Speaker Change: Which doesn't is not really reflective of what we're trying to accomplish.
John D. Wren: Thanks. Maybe I would just expand on the question around advertising and media. So I think you talked about how creative has been lagging, and then you've had a lot of strength in media, and you've definitely shown off strong capability there in what a lot of business. John, I'm just wondering if there's anything bigger to read about how the industry is changing with the acceleration in media with the slowdown in creative. Do you think that's a change in the way marketers just think about the future of marketing and spend as much more on delivery than content? And if so, are there any other changes that you might think about for your business longer term if that is in fact the case? And then just in Q4, your organic growth was pretty similar to what you've guided for 2024. The EBIT margins were solid. They weren't necessarily up year on year.
Speaker Change: And in.
Speaker Change: So you have to you do have to look at them jointly and we fully expect that.
Speaker Change: It's going to continue to shift but to our benefit as we bring other technologies and benefits to the client.
Speaker Change: Because anytime we can save a dollar and prove that we saved it effectively for our clients. It's been my experience that the client expanded their relationship with us.
Speaker Change: So.
Speaker Change: So I'm very confident about that I would never want to lose that IP that creative IP.
Speaker Change: Because of it.
Speaker Change: Shift in the way that I'm all good.
Speaker Change:
Fill: The second question, Yeah, I'll give it to fill in on on on margins and expectations I think as we've said in the past.
Fill: We we certainly strive over time to make steady progress on margins and make improvements certainly in in our two two of our largest expenses salary and service costs and occupancy and other.
John D. Wren: I know there's a lot of moving pieces this year with Flywheel, but can you just talk about what's holding those margins a little flattish, like the guidance that you gave? And is there anything that could drive more margin expansion in the future? Thank you.
Fill: You know, we see future opportunities.
Fill: Certainly on on the salary related side.
Philip J. Angelastro: Um, there's a lot there. Omnicom Group Inc. You bring up an interesting point, and I probably won't do justice to it in my response, by creators, is our IP at the end of the day, what you see in the reflection or your guest as to the impact on. The way that the business has been organized and then reported. What you see is that technology has probably had a greater impact on the traditional setup of an agency in terms of how we can utilize great ideas through algorithms and through automation. Deliver those ideas to the right venue to present them to reach customers. Um, and so that has an impact. That, in fact, is why we don't separate, because they feed off each other.
Fill: There's still a.
Fill: Quite a few initiatives we have.
Fill: Benefit from Offshoring and automation there are strong initiatives that we're pushing and we'll continue to push in those areas.
Fill: And yeah, we continue to go through a real estate rationalization.
Fill: And expect to benefit from that over time as well.
Fill: And we continue to make some improvements there.
Fill: You know I think I think however, yeah, we talked a lot about AI on this call that'll be part of what helps us.
Fill: To be more efficient and generate some of these benefits.
Fill: But at the same time it requires investments that we're going to continue to make in the business.
Fill: That you know as we've talked about in the past many of the investments we've made have run through the P&L.
Fill: It's the right thing to do to make sure that our platforms.
John D. Wren: But I think one of the things that is always... Omnicom Group Inc. differentiated is actually the quality of our creative products and the quality of our agencies and people that we're able to attract. That's not to be diminished because somebody's trying to do an analysis, which is not really reflective of what we're trying to accomplish. So you do have to look.
Fill: We are ready to give us the sustainable growth that we've been able to achieve and expect to achieve in the future.
Fill: So it's a continual balance.
Fill: That would go through in terms of making those investments and generating the appropriate returns from a margin perspective and.
Speaker Change: Yeah benefits for our shareholders ultimately as well so.
Speaker Change: Yeah, I think I think that's that's a balance that we.
Speaker Change: Continue to manage we look at it every year, we look at it every day.
Speaker Change: It's both.
Speaker Change: So hopefully that's helpful.
Speaker Change: Thank you.
Speaker Change: And the next question comes from the line of Michael Nathanson with Moffett Nathanson. Please go ahead.
John D. Wren: Join us, and we fully expect that. It's going to continue to shift, but to our benefit as we bring other technologies and benefits to the climate, because anytime we can save a dollar and prove that we've saved it effectively for a client, it's been my experience that the client expands their relationship. So. So I'm very confident about that. I would never want to lose that IP, that creative IP, because of that.
Michael Brian Nathanson: Thanks, I wanted to know kind of John Electric tell Duncan can you give us a sense of your client mix you see omnicom.
Michael Brian Nathanson: You know their clients and their exposures to talk about a bit of your biggest clients with verticals. You serve then and John This is a big deal for you obviously.
Anything you can say he used to have a child complex client complex. When you look at Dunkin' is listen Europe, perhaps.
Philip J. Angelastro: Shubhashree Mukherjee, John Janedis, Omnicom Group Inc., Omnicom Group Inc. Second question? Yeah, I'll give it to Phil and I'll..., on more I think, as we've said in the past, you know. We certainly strive to make steady progress on, certainly in, two of our largest expenses, salary and service costs. Omnicom.com, www.omnicom.com, certainly on the salmon-related side, still quite a few have benefited from offshoring and automation; there are strong, Thank you. Thank you. Thank you.
Michael Brian Nathanson: It is the ability to upsell your common list of clients or any kind of challenges and then fill yep yep over the years. We've asked you about media and then third party service costs. This quarter. It looks like you grew media or the EMEA library very quickly organically via service costs were actually pretty flat on a constant currency basis can you talk a bit about what's.
Michael Brian Nathanson: Happening on the on the ground our margin when you dig into that sector between organic and service costs.
Philip J. Angelastro: Omnicom Group Inc., and we continue to go through a real estate rationalization and expect benefits over time as well, at omnicom.com. You know, I think, I think, however, we talked a lot about AI on this call, that'll be part of what helps us, www.omnicom.com, to generate some of these benefits. But at the same time, it requires investment that we're going to continue to make in the business Um, that, you know, as we've talked about in the past, many of the investments we've made have run the right way. Make sure that our platforms are up to date. Thank you, we're ready to go. www.omnicom.com that we've been able to... So it's a continual balance that we go through in terms of making those investments. You know, I think that's a balance. To manage it, we look at it every year; we look at it every day. Hope.
Michael Brian Nathanson: Sure.
Michael Brian Nathanson: Conflicts really are not.
Michael Brian Nathanson: It's been in quite a while since.
Michael Brian Nathanson: It really has become a topic or an item that concerns us most clients are very sophisticated these days and they're more interested in the teams.
Michael Brian Nathanson: People that are servicing them on a consistent basis, and we and I think you'd see this experienced throughout the industry have been able to cope very comfortably with that because those people who never meet.
Michael Brian Nathanson: Only at the holding company level that they get consolidated.
Michael Brian Nathanson: With respect to.
Michael Brian Nathanson: Sectors.
You know there will be challenges and all.
Michael Brian Nathanson: And there'll be benefits in some and some will have low come since I'm a lot more difficult comps.
Michael Brian Nathanson: The one area that.
Michael Brian Nathanson: It has never been.
Michael Brian Nathanson: Strong or as strong maybe as it could be.
Michael Brian Nathanson: For Omnicom isn't C P J F.
Michael Brian Nathanson: And I think that with changes that we made first of the Commerce group in terms of leadership and then with the addition of flywheel and the expertise that he brings omnicom now.
John D. Wren: Thank you. And the next question comes from the line of Michael Nathanson with Moffett Nathanson. Please go ahead. Thanks. I have one for Duncan and John and one for Phil.
Michael Brian Nathanson: Has.
Michael Brian Nathanson: Thousands of more people, who are confident in addressing the needs of our CPG type of clients and I think we'll be more competitive than we've been historically in that area as a result.
John D. Wren: Duncan, can you give us a sense of your client mix? You've seen Omnicom's list, you know, kind of, their clients and their exposures. Can you talk about a bit about some of your biggest clients or verticals you serve? And then, John, this is a big deal for you, obviously.
Speaker Change: So I'm very excited about that.
Speaker Change: So doing this I think that I think I think maybe talking if we turn it over to you first.
Speaker Change: Wanna comment I'll add some commentary on your side.
Speaker Change: Yes.
Speaker Change: Yes, thanks for the question.
Speaker Change: Flywheel has always been very strong in CPG, we serve already 50 of the top 100, and we're already seeing opportunities for us to combine as John says.
John D. Wren: Anything you can say about channel conflicts, client conflicts, when you look at Duncan's list and yours, and perhaps either the ability to upsell, you know, a common list of clients or any kind of challenges? And then, Phil, over the years, we've asked you about media and then third-party service costs. This quarter looks like you grew media or the media line very, very quickly organically, but your service costs were actually pretty flat on a consequential basis. Can you talk a bit about what's happening on the ground or margin when you dig into that sector between organic and service costs? Thanks. Sure. Conflicts really are not.
Speaker Change: By email capabilities and <unk> capabilities to further in all of a sudden response experiences.
Speaker Change: And I wish I Omnicom does have a client mix that helps us expand into a number of the LPG is we haven't said so it's a there's a good combination.
Speaker Change: But I can do that but actually what's exciting for us as other categories.
Speaker Change: We've seen strong potential over time, Oh, when they call them, a very strong and K electronics is a big area check and electronic something called that has very good relationships there.
Speaker Change: And primarily with the high quality providers.
Speaker Change: Customers in those segments.
Speaker Change: You know sadly.
Speaker Change: Our ability to now work with potentially a number of the top 20 brands that you sell through Amazon. For example is very exciting and then in addition to that.
John D. Wren: It's been quite a while, and it really has become a topic or an item that, http://www.omnicom.com Most clients are very sophisticated these days, and they're more interested in the team, the people that are servicing the Monacan system. We, and I think you'd see this experience throughout the industry. I've been able to cope very comfortably with that because those people never get involved. It's only at the holding company level that they get involved.
Speaker Change: Attunity is that are definitely coming through to the business transformation for these industries, particularly around areas like automotive.
Speaker Change: If you look at the secondary palm small cats and <unk>.
Speaker Change: <unk> service markets of automotive.
Speaker Change: Marketplaces are becoming so each one of the fastest growing segments in marketplaces and of course on the call me is perfectly positioned to position as seen with those kind of organization is trying to work out how they really maximize that opportunity. So yeah, we are where we can see.
John D. Wren: Um, with respect to... Sec. You know, there'll be challenges in all, and there'll be benefits in some, and some will have low competition, and some will have more difficulty. The one area that has never been so strong, or maybe as strong maybe as it could be, for Omnicom is in CPG. And I think that with the changes that we made first to the Commerce Group in terms of leadership, and then with the addition of Flywheel and the expertise that it brings, Omnicom now has thousands of more people who are competent in addressing the needs of PG type of clients, and I think we'll be more competitive than we've been historically in that area as a result. So I'm very excited. So during the second question...
Speaker Change: Okay.
Speaker Change: Strength in our existing segments, but actually opening up beautifully some new segments for us.
Speaker Change: And then on on on your last question.
Speaker Change:
Speaker Change: I think certainly media.
Speaker Change: Media experienced very strong growth in the fourth quarter and had a great year, yeah that that growth was pretty consistent and strong.
Speaker Change: Across most of the media businesses and agencies, we have in most markets for.
For a number of reasons and certainly some of what you see in third party service courses.
Speaker Change: A result of the gross media businesses performing well also.
Duncan Painter: I think... I think... Yes, so thanks for the question. Flywheel has always been very strong in CPG.
Speaker Change: A bit of a mix difference between.
Those businesses within our media operation, but they complement each other quite nicely.
Duncan Painter: We already serve 50 of the top 100, and we're already seeing opportunities. All combined, as John says, www.omnicom.com, and also Omnicom does have a client mix that helps us. www.omnicom.com. There's a good combination there, but actually, what's exciting for us is other categories where we've seen strong potential over time and Omnicom is very strong. And clearly electronics is a big area, you know, the tech and electronics Omnicom has, and primarily with high-quality providers, and our ability to now work with potentially a number of the top 20 brands, www.omnicom.com,...
Speaker Change: And I think you know, we certainly have an offering that clients are very.
Speaker Change: Track two in and you know find very helpful and useful and valuable to meet their needs.
Speaker Change: Thank you.
Speaker Change: And our next question comes from <unk> comes from the line of Tim Nolan with Macquarie. Please go ahead.
Tim Nolan: Hi, everyone. Thanks, very much I've got a numbers question then a broader question as well. The numbers question is if you could please comment a bit further on the.
Tim Nolan: The shifts in growth rates between the U S slowing in Q4, and a lot of international markets. It looks like accelerating in Europe Asia Pac.
Tim Nolan: Just kind of curious I heard what you said about the U S side, just thinking a bit more color on that and why Conversely, some of those international markets, Let's say accelerated year over year and then the broader question is.
Tim Nolan: About cookie deprecation and all the changes that Google has perhaps bringing about this year I just wonder what your take is on.
Philip J. Angelastro: And then, in addition to that, opportunities that are definitely coming through business transformations for these industries, particularly around areas like automotive, where if you look at the secondary parts market, and of course Omnicom is perfect, with those kind of organizations trying to work out how they really maximize. Yeah, we can see strength in our existing segments but actually opening up beautifully soon. And then on your last question... Subs by www.zeoranger.co.uk, I think, certainly, media... We experienced very strong growth in the fourth quarter and had a great year. Um, that growth, consistent and strong, has certainly some of what you see in third-party service costs, wrote, and O.L. Also, a little bit of a mix there; those businesses within our media operations complement each other quite well, certainly have an offering that clients find very attractive, and Barry Halperin. Subs by www.zeoranger.co.uk. Thank you.
Tim Nolan: The likelihood of purpose ending up being fully deprecated by yearend or some other recent news flow is.
Tim Nolan: Perhaps holding up.
Tim Nolan: Progress there.
Tim Nolan: Just curious how engaged omnicom agencies might be in the privacy sandbox.
Tim Nolan: Sure.
Tim Nolan: You know when you look at where the strength was the fourth quarter.
Tim Nolan: It really has.
Tim Nolan: Three components to it its clients releasing projects new business wins and its impact and then it.
Tim Nolan: If you've lost anything where we're feeling that impact.
Tim Nolan: You know as you net down to what we report as organic growth.
Speaker Change: I'd say that.
Speaker Change: The project work came in very strong stronger than we expected and in some parts of Western Europe.
Speaker Change: And.
Speaker Change: We have a thesis about why but.
Speaker Change: It's certainly not something we planned for.
Speaker Change:
Speaker Change: It came in decently in North America, but North America.
Speaker Change: Is where we were cycling through.
Speaker Change: A number of losses that occurred in the advertising sector.
Operator: And our next question comes from the line of Tim Nolan with Macquarie. Please go ahead. Hi, everyone. Thanks very much.
Speaker Change: Over a year ago.
And.
Speaker Change: You know when you lose something that's bad news, but then you have to live with it.
John D. Wren: I've got a numbers question and a broader question as well. The numbers question is, if you could please comment a bit further on the shifts in growth rates and the U.S. Flowing in, and a lot of international... Accelerating Europe. I'm just kind of curious, I heard what you said about the U.S. side, just maybe a bit more color on that, and then why conversely... And then the broader question is about cookie deprecation and all the changes that Google. Perhaps...............
Speaker Change: As you cycle through it so all of that.
Speaker Change: Is the alchemy of how you get to organic growth and.
Speaker Change: And.
Speaker Change: As a result.
Speaker Change: That makes us.
Speaker Change: We're still cautious about.
Speaker Change: This year because of all the unrest in the fed hasn't really started reducing rates yet but.
Speaker Change: In terms of.
Speaker Change: What issues we had.
Speaker Change: They're for the most part behind us.
Speaker Change: And some of the new business wins have not we haven't started benefiting from yet so.
Speaker Change: I'm very comfortable that.
John D. Wren: I just wonder what your take is on... the likelihood of cookies ending up being fully deprecated by year-end, or... perhaps holding it. I'm curious how engaged Omnicom is. Sure. And when you look at where the strength was, the fourth quarter really has three components to it.
Speaker Change: 2024 will probably wind up looking more traditional than a 2023 did.
Speaker Change: In terms of Cookie deprecation, that's something we haven't been fully expecting for a very long time.
Speaker Change: But I can chat about it but I'm going to throw it to Paolo because he's more of an expert in more closely deals with it on a day to day basis. So as John said, we had been expecting it for a very long time and to predict if it's going to actually happen at the end of this year.
John D. Wren: Clients Releasing Projects. New Business Wins in its Impact, and then... If you've lost anything, where you're feeling that impact, as you net down to what we report as organic growth, I'd say that project work came in very strong, stronger than we expected in some parts of Western Europe. We have a thesis about why, but, uh...
Paolo: You know your guess is as good as ours, but we've been preparing for it and we're ready for it in fact omni has been purpose built to actually address a cookie less world just with respect to third party cookies on Google. So in addition to that we've been preparing in other ways like some of the deals that we've struck with.
John D. Wren: Certainly not something we planned for. It came in decently in North America, but North America... is where we were cycling through a number of losses that occurred in the advertising sector over a year ago. You know, when you lose something, that's bad news, but then you have to live with it. This is the alchemy of how you get to organic growth, and... As a result... That makes this year, because of all the unrest and because the Fed hasn't really started reducing rates yet.
Paolo: We've clean rooms, and the integration into various clean rooms that are helping us to facilitate first party data and then of course, the acquisition of flywheel and all the data that they bring directly from the marketplace that is helping to drive a better understanding of consumers without the need of those third party cookies.
Paolo: Yeah.
Paolo: Yeah.
Paolo: And the next question comes from the line of Craig Huber with Huber Research partners. Please go ahead.
John D. Wren: But in terms of what issues we have, they're, for the most part, behind us, and some of the new business wins haven't started benefiting us yet. So, I'm very comfortable.
Craig Anthony Huber: Great. Thank you John I wanted to hear your thoughts if I could on two sectors, you're pharmaceutical health care area, where your outlook is for this upcoming year. It's obviously been a very steady growth for number of years and also your thoughts on the auto sector. It looks like you have a very good year last year, you wanted at BMW count recently and stuff how optimistically about auto sector for you guys. This upcoming year.
John D. Wren: That 2024 will probably wind up looking more traditional than 2023. In terms of cookie deprecation, that's something we've been fully expecting for a very long time. But I could chat about it, but I'm going to throw it to Paolo because he's more of an expert and more closely deals with it on a day-to-day basis.
Paolo Uvienco: Yeah. So, as John said, we have been wondering if it's going to actually happen. Our guest is as good as ours. Radio.
Speaker Change: And I have a follow up for Phil Thank you.
Speaker Change: Sure.
Speaker Change: Pharma, we remain very optimistic on the only headwind I think we face.
Paolo Uvienco: In fact, Omni has been purpose-built to actually address... www.omnicom.com, So. In addition to that, we've been preparing in other ways, http://www.omnicom.com, Integration into Various Clean Rooms that are Helping. And then, of course, the acquisition of Flywheel, all the data that they bring directly from the market, that is helping to drive better. And the next question comes from Craig Huber with Huber Research Partners. Please go ahead.
Speaker Change: We go into 'twenty four with pharma was earlier in the year, we lost a pfizer so it'll be cycling through that.
Speaker Change: But.
Phil: The only limitations. We are currently looking for not things that we haven't won or we haven't been asked to work on but have they've gotten through the F. D. A M.
Phil: Because.
Farmer and just the simple science of things and the advances that are occurring.
Phil: Give us tremendous opportunities to continue to grow and I think that'll be.
Operator: Great, thank you. John, I wanted to hear your thoughts, if I could, on two sectors, your pharmaceutical and healthcare area, what your outlook is for this upcoming year. It's obviously been very steady growth for a number of years, and also your thoughts on the auto sector. It looks like you had a very good year last year. You won the BMW account recently and stuff.
Phil: Not only a 24 by 24 and beyond the very strong sector for us.
Phil: Autos, you know autos what it comes down to is we're very well represented in all of those and I think we have.
Phil: The best clients, one could ask in this sector.
Phil:
Phil: There is this.
Tension going on in the marketplace that most auto.
John D. Wren: How optimistic are you about the auto sector for you guys this upcoming year? And I have a follow-up question for Phil. Omnicom Group Inc., Farmer, we remain very optimistic about it. The only headwind I think we face as we go into 24 with Farmer was earlier in the year we lost Pfizer, so we'll be cycling through that. Omnicom Group Inc. Bye. The only limitations we are currently looking through are not things that we haven't won or we haven't been asked to work on, but have they gotten through the FDA? Farmer and just the simple science of things and the advances that are occurring give us tremendous opportunity to continue to grow, and I think that will be, not only 24, but 24 and beyond, a very strong sector. Or does, you know, autos, what it comes down to.
Phil: Oh, Yeah, we're dealing with in terms of what's the mix between the electric cars that we're going to play out in the market.
Phil: More conventional cars and hybrid.
Phil:
Phil: And there's a lot of decision, making and a lot of long lead times that go in to that but in terms of the sector itself.
Phil: There's no question it becomes an information platform.
Phil: For the Oems as we go forward.
Phil: And.
Phil: You know the more of them area from my perspective, and as Duncan mentioned.
Phil: Now with the addition of flywheel.
There was a whole sector of after sales parts that we could do a modest job on but now we can do a much more.
Phil: Robust job one when you look through how those goods are distributed.
Phil: To the ultimate consumer which is.
Phil: In many cases and increasingly in marketplaces. So it's been a strong sector. It should even gets stronger for us where as we extend into that over the coming months and years.
Speaker Change: And we're very very comfortable with it.
Speaker Change: Yeah.
Speaker Change: And then Phil just like just asked two quick housekeeping things how would you sum up how you project related work did for the whole company in the fourth quarter versus a year ago, and then a nitpick question your amortization for number of quarters here, it's been sitting around $20 million.
John D. Wren: We're very well represented in OROS, and I think we have... the best coin. One could ask in the second place... there is this tension going on in the marketplace that most auto... OEMs are dealing with in terms of what's the mix between the electric cars that we're going to put out on the market, more conventional cars, and hybrids. And there's a lot of decision-making and a lot of long lead times that go into that. But in terms of the sector itself... There's no question, it becomes an information platter for the OEM. Moeller Marriott, and as Duncan mentioned, now with the addition of Flywheel. There was a whole sector of after-sales parts that we could do a modest job on, but now we can do much more. A robust job, when you look at how those goods are distributed, is the ultimate consumer, in many cases, and more.
Speaker Change: How much do you think that's going to go up with this flywheel acquisition do you have that handy.
Speaker Change: We don't have the final number because there's a number there's a number of steps that we have to complete given the acquisition.
Speaker Change: It closed in early January so so we have some valuations and other things to do on the intangible assets, which are incomplete I would say.
Speaker Change:
Speaker Change: Gotta be a meaningful increase no question in amortization expense.
Speaker Change:
Speaker Change: And you know we obviously.
Speaker Change: I think the value of the flywheel.
John D. Wren: So, it's been a strong sector, and it should even get stronger as we extend into the at-home market in the coming months. Very, and then Phil, I'd just like to ask two quick housekeeping questions. How would you sum up how your project-related work did for the whole company in the fourth quarter versus a year ago? And then, a nitpick question: your amortization for a number of quarters here has been sitting around $20 million. How much do you think that's going to go up here with this flywheel acquisition? You have that hand.
Speaker Change: I sat in team are going up are going to prove to be a very wise investment but amarin.
Amortization is going to go up in a meaningful way, we just don't have a number yet to them.
Speaker Change: The guide you with but.
Speaker Change: That's something we're working through and we'll be working through them quite diligently over the next few weeks and months.
Speaker Change: Before we finalize it and then.
Speaker Change: As far as as far as projects span goes.
Speaker Change: Yeah, I think I think similar to Q4.
Speaker Change: 22 projects, then was was quite strong.
Speaker Change: But probably not as strong as 22, yeah 22 for sure.
Philip J. Angelastro: We don't have the final number. There's a number of steps that we have to... closed in early January. We have some valuations. It's going to be a meaningful increase, no question in heaven. All rights reserved. We are. Value.
Speaker Change: Was a much more robust.
Speaker Change: Time frame I think.
Speaker Change: Yeah, when we were.
Speaker Change: When we're having discussions in late.
Speaker Change: 'twenty two in early 'twenty, three and probably on our call in January and February of 'twenty or 'twenty three.
Philip J. Angelastro: The Bulletproof Executive 2013, Amortization is going to go up in a meaningful way. That's something we're working on, www.omnicom.com. You know, as far as project span goes... You know, I think, I think similar to, For more information, visit www.omnicom.com of to. The project spend was quite strong, probably not as strong as 22.
Speaker Change: Yeah, there are a lot of clouds.
Speaker Change: That people saw on the horizon in the short term.
Speaker Change: That actually turned out.
Speaker Change: Not to be as dark as some had expected.
Speaker Change: But the fourth quarter environment in 2022 was certainly much more robust than it was this year.
Philip J. Angelastro: 22 for sure, um... was a much more robust uh... time we were. We're having discussions in late, to an early 23 and probably on our call in January. It's everywhere.
Speaker Change: But we're happy with the performance outrageous ease as far as capturing project spend in Q4 of 'twenty three.
But relative to <unk> to 'twenty, two certainly out in 'twenty two is more robust.
Speaker Change: And.
Speaker Change: Don't lose sight of the fact that.
John D. Wren: The Bulletproof Executive 2013, Yeah, there were a lot of clouds that people saw on the horizon in the short term that actually turned out not to be as dark as some had expected, but the fourth quarter environment was certainly much more robust. We're happy with that, our agencies as far as the Capturing Project is concerned, and don't lose sight of the fact that, in 24, as we get into it, we do have the Olympics. We do have a presidential election, and it's... It's been my experience that presidential election years are generally very good for business. One way or the other for the economy, and there gets to be some tension in the media marketplaces, especially in the U.S., as you get later in the year. So that forces people to make decisions, and if the Fed comes through and starts to cut,
Speaker Change: In 'twenty four as we get into it we do have the Olympics.
Speaker Change: We do have a presidential election and its been my experience.
Speaker Change: Spirits that presidential election years are generally very good one way or the other for the economy and if they get so it'd be some tension in the media market places, especially in the U S. As you get later in the year. So that makes people forces people to make decisions sooner.
Speaker Change: And and if the fed comes through and starts to cut that.
Speaker Change: That will be the beginning of.
Speaker Change: I think fuel too to aiding in the outcomes that I just suggested it'll be there. So we're.
Speaker Change: We're cautious but we are optimistic.
Speaker Change: Great. Thank you both.
Speaker Change: Okay.
Speaker Change: And with that at this time there are no. Other further questions that does conclude our conference for today. Thank you for your participation and for using AT&T Conferencing service you may now disconnect.
John D. Wren: That will be the beginning of, I think fuel to aid in, the outcomes that I've just suggested will be there. We're cautious, but we are up. Great, thank you both. And with that, at this time, there are no other further questions. That does conclude our conference for today. Thank you for your participation and for using the AT&T Conferencing Service. You may now... We're sorry, your conference is ending now. Please hang
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: We're sorry your conferences ending now please hang up.