Q1 2024 Omnicom Group Inc Earnings Call

Operator: Good afternoon, and welcome to the Omnicom First Quarter 2024 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 star, then 1. If you need assistance during the call, please press star then zero. As a reminder, this conference call is being recorded. At this time, I'd like to introduce you to your host for today's conference, Senior Vice President of Investor Relations, Gregory Lundberg. Please go ahead.

Good afternoon, and welcome to the Omnicom first quarter 'twenty 'twenty four 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 Star then one.

If you need assistance during the call. Please press Star then zero.

As a reminder, this conference call is being recorded.

At this time I'd like to introduce you your host for today's conference Senior Vice President of Investor Relations Gregory Lundberg. Please go ahead.

Gregory H. Lundberg: Thank you for joining our first quarter 2024 earnings call. With me today are John Wren, Chairman and Chief Executive Officer, and Phil Angelastro, Executive Vice President and Chief Financial Officer. On our website, omnicomgroup.com, you'll find a press release and a presentation covering the information we'll review today. An archived webcast will be available when today's call concludes. Before we start, I'd like to remind everyone to read the forward-looking statements and non-GAAP financial and other information that we've included at the end of our investor presentation.

Gregory H. Lundberg: Thank you for joining our first quarter 2024 earnings call with me today are John <unk>, Chairman and Chief Executive Officer, and Phil Angel, Austro Executive Vice President and Chief Financial Officer.

Gregory H. Lundberg: On our website Omnicom group Dot Com Youll find our press release and the presentation covering the information we will review today.

Gregory H. Lundberg: An archived webcast will be available when today's call concludes.

Gregory H. Lundberg: Before we start I would 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.

Gregory H. Lundberg: Certain of the statements made today may constitute forward-looking statements, and these statements are only 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 2023 Form 10-K. 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 gap measures in the presentation material. 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. And I'll now hand the call over to John.

Gregory H. Lundberg: Certain of the statements made today may constitute forward looking statements and these statements are present expectations relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings, including our 2023 Form 10-K.

Gregory H. Lundberg: During the course of today's call. We will also discuss certain non-GAAP measures.

Gregory H. Lundberg: You can find the reconciliation of these to the nearest comparable GAAP measures in the presentation materials.

Gregory H. Lundberg: We will begin the call with an overview of our business from John and Phil will review, our financial results for the quarter and after our prepared remarks, we will open up the line for your questions and I'll now hand, the call over to John.

John: Thank you Greg.

John D. Wren: Good afternoon, and thank you for joining us today for our first quarter 2024 results. I'm pleased to report that we're off to a solid start this year.

John: Good afternoon, and thank you for joining us today on our first quarter 2024 results.

John: I am pleased to report that we're off to a solid start to the year.

John D. Wren: Organic growth in the first quarter was 4%, with strong growth in our advertising and media and precision marketing. As a result, EBITDA margin, which excludes amortization of acquired and strategic platform intangibles, was 13.8% for the quarter, and operating margin was 13.2%. Non-GAAP adjusted earnings per share, which excludes after-tax amortization of acquired and strategic platform intangibles, was $1.67, up 3.7% versus the comparable As a result of our strong performance in the first quarter, we're increasing our full-year organic growth range to between 4% and 5%.

Speaker Change: <unk> growth in the first quarter was 4% with strong growth in our advertising and media and precision marketing disciplines.

Speaker Change: EBITDA margin, which excludes amortization of acquired and strategic platform intangibles was 13, 8% for the quarter.

Speaker Change: Operating margin was 13, 2%.

Speaker Change: non-GAAP adjusted earnings per share.

Speaker Change: Would you exclude after tax amortization of acquired and strategic platform intangibles was $1, 67% to 3.7% versus the comparable number in Q1 2023.

Speaker Change: As a result of our strong performance in the first quarter, we are increasing our full year organic growth range to between 4% and 5%.

John D. Wren: As discussed during the quarter, we raised 600 million euros through a senior note offering to partially finance the acquisition of Flywheel. Our cash flow and balance sheet remain very strong and support our primary uses of cash, i.e., dividends, acquisitions, and share repurchase.

Speaker Change: Discuss during the quarter, we raised 600 million euros through a senior note offering to partially finance the acquisition of flywheel.

Speaker Change: Our cash flow and balance sheet remained very strong.

Speaker Change: Support our primary uses of cash flow.

Speaker Change: Dividends acquisitions and share repurchases.

John D. Wren: The flywheel acquisition is off to a great start. Flywheels Commerce Cloud is fully integrated into Omnicom. Omni Audience and Behavioral Data combined with Flywheel's Digital Marketplace Point-of-Purchase Transaction Data provides us with the most comprehensive data set in the industry. Across several significant Omnicom clients, Flywheel teams are now fully engaged to deliver the enhanced value of our combined capabilities and insights to them, including new ways to plan and build audiences using Omni audience data and Flywheel's performance benchmarks, full-funnel investment management built on Omni, and enhanced with Flywheel's data specific to performance across commerce platforms.

Speaker Change: The flywheel acquisition is off to a great start.

Speaker Change: Flywheels Commerce cloud is fully integrated into the omni.

Speaker Change: Omni audience and behavioral data combined with flywheel digital marketplace point of purchase transaction data.

<unk> us with the most comprehensive data set in the industry.

Speaker Change: Across several significant omnicom clients flywheel teams are now fully engaged to do deliver the enhanced value of our combined capabilities and insights to them, including new ways to plan and build audiences using omni audience data and flywheel performance benchmarks for our final investment management Bill.

Speaker Change: Amit and enhanced with flywheel status specific performance across commerce platforms.

John D. Wren: Using Omni Influencer capabilities and connecting them to commerce and retail outcomes from Flywheel, as well as holistic video measurement and optimization based upon integrating Omni's video viewership data with Flywheel's commerce outcome. These products and services are helping our clients sell more goods more efficiently across hundreds of digital marketplaces and optimize their investment across media platforms. In addition to integrating Flywheel Commerce Cloud, we made important updates to Omni's generative AI functionality during the quarter.

Speaker Change: Using omni influencer capabilities and connecting them to commerce on retailer comes from flywheel and holistic video measurement and optimization based upon integrating on these video viewership data with Flywheels commerce outcomes. These products and services are helping our clients sell more goods more efficiently across <unk>.

Speaker Change: <unk> digital marketplaces, and optimizing our investment across media platforms. In addition to integrating flywheel commerce cloud, we made important updates to Amit Jared of AI functionality. During the corner. This includes completing a first mover partnership with Shutterstock. It allows us to integrate.

John D. Wren: This includes completing a first-mover partnership with Shutterstock that allows us to integrate its text-to-image model into Omni. As part of our first-mover partnership established with Google and their Vertex AI platform last year, we became the first holding company to receive access to the Gemini 1.5 Next Generation model.

Speaker Change: It's techs to image model into omni.

Speaker Change: As part of our first mover partnership establish with Google and their vertex AI platform last year.

We became the first holding company to receive access to the Gemini one five next generation model.

John D. Wren: We remain committed to Omni's open architecture and flexibility, leveraging these valuable partners. For example, we've seen notable traction with OmniAssist, the generative AI tool we launched in 2023. Employees from more than 40 markets globally have access to OmniAssist and are using it to produce audience intelligence, summarize cultural trends, recommend influencers, and much more. Some of our agency teams are also creating client-specific OmniAssist agents. For example, a client-dedicated marketing consultant, media consultant, and briefing agent to streamline global multi-brand client agency planning.

Speaker Change: We remain committed on these open architecture and flexibility leveraging these valuable partnerships.

Speaker Change: We've seen notable traction with Omnia says regenerative AI to relaunch in 2023.

Speaker Change: Employees for more than 40 markets globally have access to omni assess and using it to produce audience intelligence summarized cultural trends.

Speaker Change: Recommend influences and much more.

Speaker Change: Some of our agency teams are also credit and client specific Ami assist agents.

Speaker Change: For example, the client dedicated marketing consulting.

Speaker Change: Media consultant and briefing agent to streamline global multi brand client agency planning.

John D. Wren: As we work alongside our clients to explore how these new technologies can transform their business, two areas are critical to how we can drive transformation and growth. Our digital transformation consulting business and our content production capability. This past month, our highly successful consulting firm, Cordera, announced the simplification of its organization to offer clients a more streamlined experience. Its services will now be delivered under a single global brand through two primary business units.

Speaker Change: As we work alongside our clients to explore how these new technologies can transform their businesses to areas are critical to how we can drive transformation and growth.

Speaker Change: Our digital transformation consulting business and our content production capabilities.

Speaker Change: This past month, our highly successful consulting firm Cordero announced the simplification of its organization to offer clients a more streamlined experience.

Speaker Change: It services will now be delivered under a single global brand through two primary business units.

John D. Wren: Digital with capabilities in MarTech, e-commerce, and digital platforms, and consulting with capabilities in management and technology consulting, data, AI, and business transformation. Since joining Omnicom in 2018, Cordera has grown from 300 employees in three U.S. offices to over 4,000 people across 17 locations worldwide.

Speaker Change: All of the capabilities and Martech e-commerce, and digital platforms and consulting with capabilities in management and technology consulting data AI and business transformation.

Speaker Change: Since joining omnicom in 2018 Cordero has grown from 300 employees in three U S offices.

Speaker Change: There are over 4000 people across 17 locations worldwide.

John D. Wren: This growth is testament to our track record and success in acquiring and integrating businesses in new, high-growth market segments. Today, our clients demand more high-quality, personalized, creative content delivered across more media channels and at faster speed. We have developed standardized platforms and processes. Automate the Development of Content and Deliver it at the Right Time and Place to Consumers by Combining Cordera's Expertise in Designing and Implementing Intelligent Content Platforms Leveraging our Adobe Partnership, ARPOD, our content orchestration engine, and Omni's audience and data, Our solution provides unmatched outcomes through an open operating system fueled by customer centricity to some of our most important brands, such as AT&T and Nike.

Speaker Change: This growth is a testament to our track record and success in acquiring and integrating businesses in new high growth market segments.

Speaker Change: Today, our clients demand more high quality personalized creative content delivered across more media channels and at faster speeds.

Speaker Change: We have developed standardized platforms and processes to automate the development of content and delivery at the right time and place to consumers by combining <unk> expertise in designing and implementing intelligent content platforms, leveraging our adobe partnership.

Speaker Change: Our content orchestration engine.

Speaker Change: And on these audience and data insights.

Speaker Change: Our solution provides unmatched outcomes through an open operating system fueled by customer centricity to some of our most important brands such as AT&T and Nike.

John D. Wren: I'm pleased that our strategy resulted in industry recognition in the first quarter, including Omnicom being named Warx's number one holding company for effectiveness. Ph. D. being recognized as Adweek's Global Media Agency of the Year. Omnicom Media Group being Reckman's leading global media agency for 2023 with nearly $3 billion in net new business. Although risks and uncertainty continue to exist in the global economic and geopolitical environment, we remain optimistic about our position in the industry, our strategies, and our financial performance.

Speaker Change: I'm pleased that our strategy resulted in industry recognition in the first quarter, including Omnicom being named walks number one holding company for effectiveness Phd being recognized as AD weeks Global media agency of the year.

Speaker Change: Omnicom Media group being referenced leading global media agency for 2023 with nearly $3 billion in net new business.

Speaker Change: Although risks and uncertainty continue to exist in the global economic and geopolitical environment.

Speaker Change: We remain optimistic about our position in the industry, our strategies and our financial performance I remain confident that our management teams are well prepared to drive operational excellence, even as they monitor and adapt to the changes in the macro environment.

John D. Wren: I remain confident that our management teams are well-prepared to drive operational excellence, even as they monitor and adapt to the changes in the macro environment. I'll now turn the call over to Phil for a closer look at our financial results. Phil? Thank you.

Speaker Change: I'll now turn the call over to Phil for a closer look at our financial results Phil.

Philip J. Angelastro: Thanks, John.

Philip J. Angelastro: We began the year with solid results, and we're optimistic about the year ahead. Let's review the first quarter performance in detail, beginning with revenue on slide four. Organic growth in the quarter was 4%, and the impact from foreign currency was relatively flat, decreasing reported revenue by 0.1%.

Philip J. Angelastro: We began the year with solid results and we're optimistic about the year ahead.

Philip J. Angelastro: Let's review the first quarter performance in detail beginning with revenue on slide four.

Philip J. Angelastro: Organic growth in the quarter was 4%.

Philip J. Angelastro: The impact from foreign currency was relatively flat.

Decreasing reported revenue by <unk>, 1%.

Philip J. Angelastro: If rates stay where they are currently, we estimate the impact of foreign currency translation will be negative 1% for Q2'24 and FLAT for the full year 2024. The Net Impact of Acquisition and Disposition Revenue on Reported Revenue Negative 1.5% due primarily to the acquisition of flywheel this January. Based on transactions completed to date, we expect a positive contribution of approximately 2.5% for Q2 and 2% for the year. Now, let's turn to slide 5 to review our Organic Revenue Growth by Distribution.

Philip J. Angelastro: If rates stay where they are currently we estimate the impact of foreign currency translation will be negative 1% for Q2 24.

Philip J. Angelastro: And flat for the full year 2024.

Philip J. Angelastro: The net impact of acquisition and disposition revenue on reported revenue.

Philip J. Angelastro: Was positive one 5% due primarily to the acquisition of flywheel. This January.

Philip J. Angelastro: Based on transactions completed to date.

Philip J. Angelastro: We expect a positive contribution of approximately two 5% for Q2.

Philip J. Angelastro: And 2% for the year.

Speaker Change: Now, let's turn to slide five.

Speaker Change: A review of our organic revenue growth by discipline.

Philip J. Angelastro: During the quarter, advertising and media growth was very strong at 7%, driven by excellent performance at our global media business. Precision Marketing, which now includes Flywheel, grew 4.3%. We expect this to continue to be one of our fastest growing disciplines in the future. Public relations declined by 1.1% in the quarter.

Speaker Change: During the quarter advertising and media growth was very strong at 7% driven by excellent performance at our global media businesses.

Speaker Change: Precision marketing, which now includes flywheel grew four 3%.

Speaker Change: We expect us to continue to be one of our fastest growing disciplines in the future.

Speaker Change: Public relations declined by one 1% in the quarter.

Philip J. Angelastro: We expect this discipline will improve the rest of the year and benefit from the 2024 U.S. election. Healthcare grew 2.1% during the quarter, as we continue to cycle through some client losses from 2023, which we expect to lap after Q2. Branding and retail commerce declined by 3.8%. Driven by a challenging environment for our branding agencies that are more aligned with project-based engagement, they faced a difficult comparison to Q1 of 2023 when they grew by 9%.

Speaker Change: We expect this discipline will improve the rest of the year and benefit from the 2024 U S elections.

Speaker Change: Health care grew two 1% during the quarter as we continue to cycle through some client losses from 2023, which we expect to lap after Q2.

Speaker Change: Branding and retail commerce declined by three 8% driven.

Speaker Change: Driven by a challenging environment for our branding agencies.

Speaker Change: More align on project based engagements and face a difficult comparison to Q1 of 2023, when they grew by 9%.

Speaker Change: You'll note that we've updated the name for this discipline, which was formerly called Commerce and branding.

Speaker Change: Experiential grew a strong nine 5% led by the U S.

Philip J. Angelastro: You'll note that we've updated the name for this discipline, which was formerly called Commerce and Branding. Experiential grew a strong 9.5%, led by the U.S., which all saw a small reduction in revenue internationally. We expect this discipline to benefit later in the year from the Summer Olympic Games in Paris.

Speaker Change: Which offset a small reduction in revenue internationally.

Speaker Change: We expect this discipline to benefit later in the year from the summer Olympic games in Paris.

Speaker Change: And execution and support declined by four 3% with mixed results that overshadowed continued strength in field marketing.

Speaker Change: Turning to geographic growth on slide six we.

Speaker Change: We saw growth in six of our seven regions led by the U S and Europe and strong growth in Latin America, driven by advertising and media.

Philip J. Angelastro: And execution and support declined by 4.3% with mixed results that overshadowed continued strength in field markets. Turning to geographic growth on slide 6, we saw growth in six of our seven regions, led by the U.S. and Europe, and strong growth in Latin America driven by advertising and media.

Speaker Change: Slide seven shows our revenue by industry sector.

Speaker Change: First quarter results were very similar to last year.

Speaker Change: Now, let's turn to slide eight for a look at our expenses.

Speaker Change: In the first quarter salary related service costs.

Speaker Change: Grew as a result of increased staffing levels, primarily as a result of our acquisition of flywheel digital.

Speaker Change: But they were down as a percentage of revenue year over year, driven by our repositioning actions last year.

Philip J. Angelastro: Slide 7 shows our revenue by industry sector. First quarter results were very similar to last year. Now let's turn to slide 8 for a look at our expenses. In the first quarter, salary and related service costs grew as a result of increased staffing levels, primarily as a result of our acquisition of flywheel digitization. But they were down as a percentage of revenue year-over-year, driven by our repositioning actions last year and through ongoing changes in our global employee. Third-party service costs increased in connection with the growth in our revenue, and third-party incidental costs increased somewhat, primarily as a result of increases in reimbursed travel and Incidental Out-of-Pocket Costs.

Speaker Change: Our ongoing changes in our global employee mix.

Speaker Change: Third party service costs increased in connection with the growth in our revenue.

Speaker Change: The third party incidental costs increased somewhat primarily as a result of increases in reimbursed travel.

Speaker Change: And incidental out of pocket costs.

Speaker Change: Occupancy and other costs increased primarily due to our acquisition activity during the period.

Speaker Change: But were essentially flat as a percentage of revenue.

Speaker Change: Due to lower rents as a result of our prior year real estate rationalizations.

Speaker Change: SG&A expense was down both in dollar amount and as a percentage of revenue.

Speaker Change: Now, let's turn to slide nine and look at our income statement in more detail.

Speaker Change: Our operating income increased two 8%.

Philip J. Angelastro: Occupancy and other costs increased primarily due to our acquisition activity during the period, but we're essentially flat as a percentage of revenue due to lower rents as a result of our prior year real estate rationalization. SG&A expense was down both in dollar amount and as a percentage of revenue. Now let's turn to slide nine and look at our income statement in more detail. Our operating income increased 2.8%, and the related margin was 13.2%, down slightly from the prior year adjusted margin of 13.5%, arising primarily from our acquisition activity, including Flywheel. As you may recall, our margin estimate for this year is based on EBITDA, which we have and continue to use as a measure of operating performance.

Speaker Change: The related margin was 13, 2% down.

Speaker Change: Down slightly from the prior year adjusted margin of 13, 5%.

Speaker Change: Arising primarily from our acquisition activity, including flywheel.

Speaker Change: As you May recall, our margin estimates this year is based on EBITDA.

Which we have and continue to use as a measure of operating performance.

Speaker Change: Similar to our peers and in response to requests from investors. This reflects an adjustment for the amortization of intangible assets the.

Speaker Change: The adjustment now reflects amortization expense related to both acquired intangible assets.

Speaker Change: And internally developed strategic platform intangible assets.

Speaker Change: Strategic platform intangible assets related to the costs, we are required to capitalize and amortize over future periods.

Philip J. Angelastro: Similar to our peers and in response to requests from investors, this reflects an adjustment for the amortization of intangible assets. The adjustment now reflects amortization expense related to both acquired and tangible assets and internally developed strategic platform intangible assets. Strategic platform and tangible assets relate to the costs we are required to capitalize and amortize over future periods, in connection with the ongoing development of the Omni platform and the Future Ongoing Development of Flywheel Commerce Cloud.

Speaker Change: In connection with the ongoing development of the omni platform.

Speaker Change: And the future ongoing development for the flywheel Commerce cloud platform.

Speaker Change: The amortization expense added back to calculate EBITDA does not include amortization expense for internally developed software related to administrative and back office operations tools, such as ERP or workflow platforms.

Speaker Change: For the first quarter of 2020 for this amortization was $21 $5 million and we expect the remaining quarters of 2024 to approximate this amount.

Philip J. Angelastro: The amortization expense added back to Calculate EBITDA does not include amortization expense for internally developed software related to administrative and back-office operations tools, such as ERP or work platform. For the first quarter of 2024, this amortization was $21.5 million, and we expect the remaining quarters of 2024 to approximate this amount. For comparability purposes, we've included a slide in the appendix of this presentation.

Speaker Change: For comparability purposes, we've included a slide in the appendix of this presentation.

And it reflects the prior year amortization related to acquired intangible assets and internally developed strategic platform intangible assets.

Speaker Change: For the four prior year calendar quarters of 2023 and.

In the full year for 2023 and 2022.

Speaker Change: EBITDA in Q1, 2020 for $504 million increased four 1% year over year.

Speaker Change: And the related margin was 13, 8%.

Philip J. Angelastro: It reflects the prior year amortization related to acquired intangible assets and internally developed strategic platform intangible assets for the four prior year calendar quarters of 2023 and the full year for 2023 and 2022. Even in Q1 2024, 500.4 million increased 4.1% year over year, and the related margin was 13.8%. We continue to expect our fiscal year 2024 EBITDA margin to be close to flat with our 2023 adjusted EBITDA margin of 15.6% for the full year.

Speaker Change: We continue to expect our fiscal year 2020 for EBITDA margin to be close to flat with our 2023 adjusted EBITDA margin of 15, 6% for the full year.

Speaker Change: Moving down the income statement, our income tax rate of 26% was similar to the rate for the first quarter of 2023.

Speaker Change: For full year 2024, we continue to expect our income tax rate to approximate 27%.

Speaker Change: Changes in income from equity investments and income attributed to minority interest investments.

Speaker Change: Were not significant.

Speaker Change: As you can see at the bottom of the slide we have also provided a new line item.

Speaker Change: non-GAAP adjusted net income per diluted share.

Philip J. Angelastro: Moving down the income statement, our income tax rate of 26% was similar to the rate for the first quarter of 2023. For full year 2024, we continue to expect our income tax rate to approximate 27%. Changes in Income from Equity Investments and Income Attributed to Minority Interest Investments were not significant.

Speaker Change: Similar to EBITDA.

Speaker Change: This also excludes the amortization on an after tax basis that I, just discussed related to acquired intangibles and internally developed strategic platform intangibles.

Speaker Change: This new reporting more closely measures the performance of our operating businesses year on year.

Speaker Change: And is similar to our peer groups approach of adding back after tax amortization expense when calculating non-GAAP diluted earnings per share.

Speaker Change: For the first quarter of 2024, this metric increased to $1 67, or three 7% compared to the non-GAAP adjusted diluted earnings per share of $1 61 to Q1 2023.

Philip J. Angelastro: As you can see at the bottom of the slide, we have also provided a new lineup of non-gap adjusted net income per diluted share. Similar to EBITDA, this also excludes the amortization on an after-tax basis that I just discussed related to acquired intangibles and internally developed strategic platform and. This new reporting more closely measures the performance of our operating businesses year-on-year and is similar to our peer group's approach of adding back after-tax amortization expenses when calculating non-GAAP diluted earnings per share.

Speaker Change: Now, let's turn to cash flow on slide 10.

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

Speaker Change: Free cash flow for 2024 was $415 1 million.

Speaker Change: A slight decrease of three 2%.

Speaker Change: Regarding our uses of cash we used $139 million of cash to pay dividends to common shareholders.

Philip J. Angelastro: For the first quarter of 2024, this metric increased to $1.67, or 3.7% compared to the non-gap-adjusted diluted earnings per share of $1.61 for Q1 2023. Now let's turn to cash flow on slide 10. We define free cash flow as net cash provided by operating activities.

Speaker Change: And another $13 million for dividends to Noncontrolling interest shareholders.

Speaker Change: Our capital expenditures were $23 million similar to last year.

Speaker Change: Though we still expect fiscal year 2024 levels to be higher due to growth in capital investment at the newly acquired flywheel.

Speaker Change: Total acquisition payments were $812 million, which reflects the $845 million acquisition of flywheel net of cash acquired.

Philip J. Angelastro: Excluding Changes in Operating Capital, pre-cash flow for 2024 was $415.1 million. Flight Decrease of 3.2% Regarding our uses of cash, we used $139 million of cash to pay dividends to common shareholders, and another $13 million for dividends to non-controlling interest shareholders. Capital expenditures were $23 million, similar to last year. Although we still expect fiscal year 2024 levels to be higher due to growth in capital investment at the newly acquired Flywheel. Total acquisition payments were $812 million, which reflects the $845 million acquisition of Flywheel and that if cash required.

Speaker Change: Finally, our stock repurchase activity net of proceeds from stock plans was $178 million in the quarter, which is in line with our estimate of total repurchases for the year of approximately half of our historical average.

Speaker Change: Given our flywheel acquisition.

Speaker Change: Slide 11 is a summary of our credit liquidity and debt maturities.

Speaker Change: At the end of the first quarter of 2024.

Speaker Change: Book value of our outstanding debt was $6 $3 billion.

Speaker Change: Up over $600 million from funding a portion of the flywheel purchase price.

Speaker Change: As previously disclosed.

Speaker Change: We issued 600 million euro.

Speaker Change: Senior notes due March 2032, with a coupon of three 7%.

Speaker Change: Net proceeds in U S dollars or approximately $643 million.

Speaker Change: Our cash equivalents and short term investments were.

Philip J. Angelastro: Finally, our stock repurchase activity, net of proceeds from the stock plan, was $178 million in the quarter, which is in line with our estimate of total purchases for the year of approximately half of our historical average given our fly well acquisition. Slide 11 is a summary of our credit, liquidity, and debt maturity. At the end of the first quarter of 2024, the book value of our standing debt was $6.3 billion, up over $600 million from funding a portion of the flywheel purchase price, as previously disclosed. We issued 600 million euro senior notes due March 2032 with a coupon of 3.7%. Net proceeds in U.S. dollars were approximately $643 million. Our cash equivalents and short-term investments were roughly flat at $3.2 billion.

Speaker Change: We're roughly flat at $3 $2 billion.

We also have an undrawn $2 5 billion revolving credit facility, which backstops, our $2 billion U S commercial paper program.

We continue to monitor the credit markets with regard to our $750 million of 365% senior notes due November one 2024.

Speaker Change: At this point, given where interest rates are and our financing activity early in 2024, we expect that net interest expense for the full year of 2024 could increase by approximately $45 million relative to full year 2023.

Speaker Change: Slide 12 presents our historical returns on two important performance metrics for the 12 months ended March 31 2024.

Omnicom's return on invested capital was 22%.

Speaker Change: And our return on equity was 44%.

Speaker Change: Both reflecting very strong performance.

Philip J. Angelastro: We also have an undrawn $2.5 billion revolving credit facility that backstops our $2 billion U.S. commercial paper program. We continue to monitor the credit markets with regard to our $750 million of 3.65% senior notes due November 1, 2024. At this point, given where interest rates are and our financing activity early in 2024, we expect that net interest expense for the full year 2024 could increase by approximately $45 million relative to full year 2023.

Speaker Change: I'll now ask the operator to please.

Speaker Change: These open up the lines for questions.

Speaker Change: And answers.

Thank you.

Speaker Change: Thank you we will now begin the question and answer session.

Speaker Change: If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Speaker Change: I would like to withdraw your question simply press Star one again.

Speaker Change: If you are called upon to ask your question and our listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Press Star one to join the queue.

Your first question comes from Kevin Mcveigh with Morgan Stanley. Please go ahead.

Philip J. Angelastro: Slide 12 presents our historical returns on two important performance metrics for the 12 months ended March 31, 2024. Omnicom's return on invested capital was 22%, and our return on equity was 44%, both reflecting very strong performance.

Cameron Alan McVeigh: Thank you and congrats on the numbers and closing flywheel.

Cameron Alan McVeigh: Maybe if you could talk more to the flywheel acquisition potential value that unlocks both from a short term and a long term perspective, and then the expected margin impact this year over the long term.

Operator: I will now ask the operator to please open up the lines for questions and answers. Thank you. Thank you. We will now begin the question and answer session.

Cameron Alan McVeigh: Sure.

Speaker Change: I'll cover part of it.

Speaker Change: Sure.

Speaker Change: So they are important.

Speaker Change: And a number of areas.

Operator: If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Your first question comes from Cameron McVeigh with the Morgan Family. Please go ahead.

Speaker Change: First and foremost, they're the only fully integrated.

Speaker Change: Retail commerce cloud.

Speaker Change: Platform that's out there.

Speaker Change: Okay, everybody else can do a piece or two but.

Speaker Change: The company, we acquired that Duncan put together.

Speaker Change: It did it over a six year period and integrated quite a number.

Speaker Change: Component companies and it came together shortly around the time that we announced it.

Speaker Change: What they have.

Speaker Change: Is an incredible amount of knowledge and information.

Speaker Change: About.

Speaker Change: How people transact and do business online e-commerce basis and.

John D. Wren: Sure, I'll cover part of it, and Phil can chime in, sure. Flywheel is important in a number of areas. First and foremost, they're the only fully integrated retail commerce cloud platform that's out there. They, everybody else can do a piece or two, but

Speaker Change: Sure.

Speaker Change: Not only here domestically in the United States with things, you're probably familiar with like Amazon Walmart target.

Speaker Change: But also in China, and Alibaba and.

Speaker Change: And I forget the other one but.

Speaker Change: <unk>.

Speaker Change: They.

Speaker Change: So they have a global presence there right at the cutting edge of.

John D. Wren: The company we acquired that Duncan put together, He did it over a six-year period and integrated quite a number of.., component companies, and it came together shortly around the time that we announced. What they have is an incredible amount of knowledge and information about how people transact and do business on an online e-commerce basis, and not only here domestically in the United States with things you're probably familiar with like Amazon, Walmart, Target, but also in So they have a global presence, they're right at the cutting edge of people buying online and using e-commerce, and that area is, according to forecasts, scheduled to just grow exponentially over the next several years.

Speaker Change: People buying online and using ecommerce.

Speaker Change: And that area.

Speaker Change: According to forecasts scheduled to just grow exponentially over the next several years.

Speaker Change: It has to do as well is to combine the commerce cloud which looked at.

Speaker Change: The retail sales aspect.

Speaker Change: What happens when you are trying to market something to someone.

Speaker Change: Hold us to connect to omni assist.

Speaker Change: So we can go all the way from identification brand building.

Speaker Change: What are your audience building all the way through to the actual sale that occurs.

Speaker Change: And our local e-commerce environment and there is no one else can do that.

Speaker Change: And I think.

Speaker Change: Based upon our study in our due diligence prior to the deal.

Speaker Change: I don't think theres anyone out there who even competes with the information that flywheel has.

John D. Wren: What it allowed us to do as well is combine the Commerce Cloud, look at the retail sales aspect of what happens when you're trying to market something to someone, and it enables us to connect to OmniAssist. So we can go all the way from identification, brand building, audience building, all the way through to the actual sale that occurs in a local e-commerce environment, and there's no one else can do that, and based on our study and our due diligence prior to the deal, we don't think there's anyone out there who even competes with the information that Flywheel has and the platform that they're operating on.

Speaker Change: Platform that they're operating in.

That gives us tremendous.

Speaker Change: Tremendous opportunities to grow with the market as it grows.

Speaker Change: It also.

Speaker Change: <unk> turned our attention to how do we optimize this.

Speaker Change: This information for the benefit of our clients.

Speaker Change: And you'll see occasionally we now refer to ourselves as.

Speaker Change: The marketing and sales company.

Speaker Change: Rather than simply in advertising and marketing company and Thats, because we can go end to end.

Speaker Change: Legitimately for the very first time.

Speaker Change: In terms of.

Speaker Change: It's growth.

Speaker Change: Because e-commerce.

Speaker Change: We're focused primarily here in North America.

Speaker Change: It tends.

John D. Wren: That gives us tremendous opportunities to grow in the market as it grows. It also has turned our attention to how do we optimize this information for the benefit of our clients. And you'll see occasionally we now refer to ourselves as a marketing and sales company rather than simply an advertising and marketing company. And that's because we can go end-to-end legitimately for the very first time.

Speaker Change: <unk> tends to be a fourth quarter third quarter fourth quarter company.

Speaker Change: Fourth quarter is classically the weakest quarter for them.

Speaker Change: <unk> as we go through the balance of the year.

Speaker Change: First quarter is the weakest I'm, sorry did I say.

Speaker Change: Fourth I'm sorry, yes.

Speaker Change: Just on carrying on on margins.

Speaker Change:

Speaker Change: Short term short term and long term the.

Speaker Change: The integration process continues its going very well and integrating flywheel at two <unk>.

John D. Wren: In terms of, It's gross because of e-commerce. We're focused primarily here in North America. The fourth quarter is classically the weakest quarter for them, and it accelerates as we go through the balance of the year.

Speaker Change: All of Omnicom's operations.

Speaker Change: Yeah, as we've said.

Speaker Change: Back in the call in February.

Speaker Change: We expect we expect fly those margins.

Speaker Change: It will be a product will approximate omnicom's average margins by Q4 of this year.

John D. Wren: So just on, Cameron, on margins, short-term and long-term, you know, the integration process continues, it's going very well, integrating Flywheel into all of Omnicom's operations. And as we've said back in the call in February, we expect Flywheel's margins to approximate Omnicom's average margin by Q4 of this year, and we expect overall results to be accretive, excluding the amortization, uh... that was added as part of the deal, also by Q4 longer term. You know, we expect the deal or the business to be a creative Tom that brings overall average margin, over the long run I got it. Thanks, John and Phil. And if I could ask one more question, I'm curious if there are any other specific types of strategic acquisitions you're focused on in the near term. Thanks.

Speaker Change: And we expect overall results to be accretive excluding the amortization.

Speaker Change: That was added as part of the deal offered by Q4 longer term.

Speaker Change: Yes, we expect we expect the deal or the business to be accretive to omnicom's overall average margins.

Speaker Change: Over the long run for sure.

Got it thanks, John and Phil and if I could ask one other.

Speaker Change: I'm curious.

There are any other specific types of strategic acquisitions, you are focused on in the near term. Thanks.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: There's areas, we're focused on and I don't think I'll discuss targets.

Speaker Change: So I'm done and negotiate.

Speaker Change: Yes.

Speaker Change: <unk> said in the call.

Speaker Change: There are a few areas that are showing exceptional growth.

John D. Wren: There are areas we're focused on, and I don't think I'll discuss targets. So I'm done negotiating for them. Bye now.

Speaker Change: It's the <unk> transformation and also in content production automation of content production.

John D. Wren: Yeah, as I said, McCall, there are a few areas that are showing exceptional growth. It's in Martek and Transformation and also in content production, the automation of content production. Opportunities which geographically fill out our services in that area and also from our point of view in terms of specific big flywheel type of acquisitions, we're not looking at anything of that magnitude at this moment. But so we're focusing on growing and also transforming much of our own business for the opportunities that we see in the new Technology and the Marketplace Office.

Speaker Change: And.

Speaker Change: Opportunities geographically.

Speaker Change: Our services in that area and also from that point of view in terms of spin.

Speaker Change: Specific big flywheel type of acquisitions. There is we're not looking at anything of that magnitude at this moment.

Speaker Change: Right.

Speaker Change: So we're focusing in.

Speaker Change: On growing and also transforming much of our own business.

Speaker Change: For the opportunities that we see that.

Speaker Change: Technology in the marketplace offers.

Speaker Change: Great. Thank you.

Operator: Your next question comes from Adam Berlin with UBS. Please go ahead.

Speaker Change: Your next question comes from Adam Berlin with UBS. Please go ahead.

Adam Ian Berlin: Hi. Good evening, everyone.

Adam Ian Berlin: Hi, good evening everyone.

Adam Ian Berlin: It's Adam Berlin from UBS. I've got three questions, if I can. The first question is on precision marketing. Now that Flywheel has been integrated into that segment, can you give us any guidance on what you think the medium-term growth potential of that is? Do you see that as a mid-single-digit, high-single-digit, double-digit business? Obviously, it might take a few quarters to get there, but just what do you think is possible for that segment once the integration is fully done?

Adam Ian Berlin: It's Adam Berlin from UBS.

Adam Ian Berlin: Three questions if I can.

Adam Ian Berlin: The first question is on precision marketing now that LIBOR has been integrated into that segment can you give us any guidance of what you think the median.

Adam Ian Berlin: The potential of that do you think that the mid single digit high single digit.

Adam Ian Berlin: Double digit business.

Adam Ian Berlin: Okay.

Adam Ian Berlin: The quarter to get that but just what do you think is possible for that for that.

Adam Ian Berlin: Business segment.

Adam Ian Berlin: The integration is fully done.

Adam Ian Berlin: And that's the first question. And maybe you can tell us, kind of, Part B, what the organic growth of flywheel was in Q1, just to help us figure out what the original business did in Q1. The second question is, would the group adjusted EBITDA margin have been higher without flywheel? And my third question is advertising and media, which... Advertising and media delivered good growth in Q1 of 7%, but it was a little bit slower than in Q4. Can you just tell me a little bit about the moving parts there? What grew faster or slower than what happened in Q4? Thank you.

Adam Ian Berlin: That's the first question and maybe you can tell us kind of a heartbeat.

Adam Ian Berlin: The organic growth of fly there wasn't in Q1, just to help us with that.

Adam Ian Berlin: What's the original business day in Q1.

Adam Ian Berlin: Second question is would be.

Adam Ian Berlin: Adjusted EBITDA margin, helping.

Adam Ian Berlin: Without plywood.

Speaker Change: And my third question is.

Speaker Change: Advertising and media.

Speaker Change: And advertising and media delivered good price in Q1 to 7%, but it wasn't a bit slower than Q4 can you just talk a little bit about the moving parts that move faster or slower.

Speaker Change: And we're helping people. Thank you.

John D. Wren: There's a lot to unpack, so I'm going to have to re-ask some of them to find so many questions. In terms of decision marketing, at this moment, included in our forecast is probably a low double-digit growth for that area, but that's subject to. Opportunity, specifically with Flywheel. It's, as I said, stands alone.

Speaker Change: There's a lot to unpack so you'll have to somehow.

Speaker Change: Some are defined some of your questions.

Speaker Change: Yes.

Speaker Change: In terms of precision marketing at this moment.

Speaker Change: Included in our forecast is probably a low double digit.

Speaker Change: Both for that area.

Speaker Change: But that's subject to.

Opportunities.

Speaker Change: Specifically with flywheel.

Speaker Change: It's as I said stands alone it's a component part of that.

John D. Wren: And the marketplace itself, clients, online activity, e-commerce, is all growing. We look further than this quarter, next quarter, this year into the future and what it can do for us, and we are very bullish about its contribution to this whole process. That was, I guess, the first question. The second one...

Speaker Change: And the marketplace itself clients online activity ecommerce is all growing so.

Speaker Change: We look further than this quarter next quarter. This.

Speaker Change: This year into the future and what it can do for us.

Speaker Change: And we're very bullish about it.

Speaker Change: <unk> contribution to this whole process.

Speaker Change: Okay.

Speaker Change: That was I guess, the first question and the second one.

Philip J. Angelastro: But the flywheel growth number, Adam, we're not breaking it out individually, I think. Underlying Precision Marketing Discipline, previous, prior to Flywheel being added to it, certainly grew this quarter; Flywheel also had very good growth this quarter. But in terms of breaking out the business itself, where we haven't and aren't going to break out individual businesses going forward either.

Speaker Change: The flywheel of growth number Adam we're not breaking it out.

Speaker Change: Individually.

Speaker Change: The underlying precision marketing discipline.

Speaker Change: Previous prior to flywheel being added to it.

Speaker Change: Certainly grew this quarter flywheel also had had very good growth this quarter.

Speaker Change: But in terms of breaking out the business itself, where we haven't.

Speaker Change: Arent going to break out individual businesses going forward either.

Philip J. Angelastro: That's helpful. Yeah, that's helpful. Thank you very much.

Speaker Change: That's helpful. Thanks, Yeah. That's helpful. Thank you very much.

Speaker Change: Sure and then margin you had a margin question without flywheel.

Philip J. Angelastro: [inaudible] Um, what would the first quarter margin have been, or would it have been flat? I think, um... You know, there's a lot of moving parts.

Speaker Change: What was the first quarter margin have been or would have been flat I think.

Speaker Change: Yeah, there's a lot of moving parts too.

Philip J. Angelastro: Operating profit, operating margin, EBITDA Margin, etc. Certainly, Flywheel's margins are lower than the Omnicom average margin, and there certainly were some integration costs in the first quarter. But we didn't go back and do the actual calculations.

Speaker Change: Yes, operating profit and operating margin and an EBITDA margin et cetera.

Speaker Change: Certainly flywheels margins are lower than the Omnicom average margin and there is certainly some integration costs in the first quarter.

Speaker Change: We didn't go back and do the actual actual calculation so.

Philip J. Angelastro: How much was the impact of Flywheel or the negative impact of Flywheel on our EBITDA margins? But, you know, I think it's hard to say. Would they have been flat?

Speaker Change: How much how much was the impact of flywheel as a negative at the flywheel on our EBITDA margins.

Speaker Change:

Speaker Change: But I.

Speaker Change: I think it's hard to say, where they have been flat.

Philip J. Angelastro: You know, I think they're down about 30 basis points. That's not that big of a number. So, you know, the answer is probably, you know, yes. Certainly, you know, there are a bunch of costs associated with the integration, and I think the last two. Well, hold on, I just want to, and on that, Adam. We're not focused at all on what. The margin impact is, in the first quarter that they joined our company, we're incredibly pleased at the speed in which and the progress we've made in integrating, because we're looking at the benefit that this is going to bring to the Omnicom Group moving forward, so we don't... We don't waste that kind of wasted time, really, on that type of activity.

Speaker Change: Yes, I think they are down about 30 basis points is not is not that big of a number so.

Speaker Change: The answer is probably yes.

Yes.

Speaker Change: Certainly.

Speaker Change: There are a bunch of costs associated with the integration.

Speaker Change: And I think the last well hold on.

Speaker Change: Got it got it.

Speaker Change: And on that Adam.

Speaker Change: We're in a focus at all.

Adam Ian Berlin: On what.

Adam Ian Berlin: The margin impact is in the first quarter that they joined our company.

Adam Ian Berlin: Incredibly pleased.

Adam Ian Berlin: At the speed in which and the progress we've made in integrating because.

Adam Ian Berlin: We're looking at the benefit that it is going to bring to the group.

Adam Ian Berlin: Moving forward. So so we don't.

Adam Ian Berlin: We don't do that kind of waste time really on that type of activity and the third question. If you were to repeat it for me.

John D. Wren: I think I know what it is.

Speaker Change: I think I know what it is.

Operator: Yeah, but just what was the difference between the 9% growth in Q4 and the 7% in Q1 for advertising and media?

Adam Ian Berlin: Yes.

Adam Ian Berlin: What was the difference between the 9% growth in Q4, and 7% in Q1 for advertising and media.

John D. Wren: I'm just going to make a general statement, Phil can fill in the details. We're very happy with the growth that we've seen, for sure. That group has been growing very strongly for the last two years, every quarter. So in any particular quarter, it's up against very difficult comps, and we expect it to continue to grow throughout the balance of this year. So, yeah, we tend to, you know, when one of the disciplines goes from 9% growth to 7% growth, it doesn't bother us all that much, certainly because the 9 was quite a performance, excuse me, and 7 is also..., you know, a very strong performance.

Adam Ian Berlin: Okay.

Speaker Change: I'm just going to general Phil can fill it in.

Philip J. Angelastro: Very happy with the growth that we've seen.

Philip J. Angelastro: For sure.

Speaker Change: <unk>.

Speaker Change: That group has been growing very strongly for the last two years every quarter. So in any particular quarter, it's up against very difficult comps and we expect it to be continue to grow throughout the balance of this year. So yeah. We turn you know what.

Speaker Change: When one of the disciplines that goes from 9% growth to 7% growth it doesn't bother us all that much certainly because of the nine was.

Speaker Change: Quite a performance.

Speaker Change: Excuse me <unk> seven seven is also.

Speaker Change: Very strong performance, we're happy with that as well so.

John D. Wren: We're happy with that as well. You know, we haven't spent a lot of time trying to pick out the differences between, you know, that two percentage point swing between Q4 and Q1, but a lot of times, Q4 is unpredictable. There are a lot of projects spending Q4 for the media business as well as all the disciplines, so it isn't that surprising for Q1 to take a little bit of a step down from Q4 in our history.

Speaker Change:

Speaker Change: We haven't spent a lot of time trying to try to pick out the differences between the.

Speaker Change: That two percentage point swing between Q4.

Speaker Change: In Q1.

Speaker Change: But a lot of times Q4 is unpredictable.

Speaker Change: There are a lot of project spend in Q4 for the media business as well as all the discipline. So.

Speaker Change: It isn't that surprising.

Speaker Change: For Q.

Q1 to take a little bit of a step down from Q4.

Speaker Change: In our history.

Philip J. Angelastro: Okay, thank you very much.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you.

Operator: Your next question comes from David Karnovsky with J.P. Morgan. Please go ahead.

Speaker Change: Your next question comes from David Karnofsky with J P. Morgan. Please go ahead.

David Karnovsky: Hey, thanks for taking the question. John, just on the decision to raise guidance, your result in the quarter was near the midpoint of the prior outlook. I just wanted to understand the increase better.

David Karnovsky: Hey, Thanks for taking the question John just on the decision to raise guidance. Your result in the quarter was near the midpoint of the prior outlook just wanted to understand.

John D. Wren: Have you assumed a more cautious view for Q1, or are you just seeing better indicators for the rest of the year? And then on precision marketing, I know you stated previously that you maybe expected an improvement in 2024. We've heard some cautious commentary recently from some of your peers or IT services firms. Just wanted to see if you could update us a bit on what you're seeing here in terms of moving projects forward. Thank you. Sure.

David Karnovsky: The increase have you assumed a more cautious view for Q1 or are you just seeing better indicators for the rest of the year and then on precision marketing.

Speaker Change: I know you stated previously maybe you expected an improvement in 2024, we had heard some cautious commentary recently from some of your peers are it services firms just wanted to see if you could update a bit on what you're seeing here in terms of moving projects forward. Thank you.

David Karnovsky: Sure.

David Karnovsky: In terms of the forecast I think what we said in the fourth quarter was that.

John D. Wren: In terms of the forecast, I think what we said in the fourth quarter was that we're giving you the range of three and a half to five, saying that we were. In the first quarter, we were still cycling through some climate changes from the prior year. Once we got into the second quarter and beyond, we were far more confident that we weren't facing any significant headwinds, as we continue to grow the business.

David Karnovsky: Giving you the range of three five to five <unk>.

David Karnovsky: Net.

David Karnovsky: For the first quarter, we're still cycling through.

David Karnovsky: Client changes from the prior year.

David Karnovsky: And that.

David Karnovsky: Once we got into the second quarter and beyond.

David Karnovsky: Far more confident that we werent facing any significant headwinds.

David Karnovsky: We continue to grow the business.

David Karnovsky: And as it turned out the fourth quarter came in at 4%.

Speaker Change: So it seems.

Speaker Change: It's very logical for us.

John D. Wren: And as it turned out, the fourth quarter came in at 4%. So it seems very logical for us to remove that bottom-end caution, I guess, at this point, and still feel that, subject to the macroeconomic changes in the world. We've seen a lot of them in the last couple of weeks, and we're confident that we have the right product. Right Approach towards clients, and our management teams are very strong and focused. We have more confidence, and that's why we lifted the bottom end of the diamonds up at this point.

Speaker Change: To remove that vitamin caution I guess at this point.

Speaker Change: We still feel that <unk>.

Speaker Change: Subject to macroeconomic change.

Speaker Change: Changes in the world.

Speaker Change: Have you seen a lot of them in the last couple of weeks.

Speaker Change: We're confident that.

Speaker Change: We have the right product.

Speaker Change: Right approach towards clients.

Speaker Change: And our management teams are very strong and focused.

Speaker Change: So we.

Speaker Change: We have more confidence and Thats why we lifted the bottom end of.

Speaker Change: Guidance up at this point.

Speaker Change: Yes. The question was the rain.

John D. Wren: The other question was the outlook for Precision in 2024 as we go from quarter to quarter.

Speaker Change: Outlook for precision in 2024 as it go from quarter to quarter.

Speaker Change: Well I wouldn't forecast it for you quarter to quarter.

John D. Wren: Well, I wouldn't forecast it for quarter to quarter. And I think I said in the previous answer that we expect it to be low double digits at this point, and that was included in coming up with our overall guidance of four to five percent.

Speaker Change: And I think I said in the previous answer that.

Speaker Change: We expect it to be low double digits at this point.

Speaker Change: Included in coming up to our overall guidance of 4% to 5%.

Philip J. Angelastro: Yeah, we certainly see that. We certainly see, especially as John had referenced earlier in the call, flywheel, you know, is kind of weighted towards the end of the year in terms of its performance relative to the retail cycle, but certainly we see it improving as the year goes on. In terms of the growth rate.

Speaker Change: Yes, certainly, we certainly see especially it as John had referenced earlier in the call.

Speaker Change: Flywheel.

Speaker Change:

Speaker Change: Is is kind of weighted towards.

At the end of the year in terms of its performance relative to the retail cycle.

Speaker Change: Certainly we see it.

Speaker Change: Improving as the year goes on.

Speaker Change: In terms of the growth rate.

Philip J. Angelastro: Yeah, I was really asking about sort of the non-flywheel part of the business, right, digital business transformation, and whether you had started to see more movement on some of the projects there.

Speaker Change: Yes, I was really asking about sort of the non flywheel part of the business right digital business transformation.

Speaker Change: Whether you had started to see more movement on some of the projects there.

Philip J. Angelastro: That business is, um..., is healthy at this point. You know, I think we haven't seen any headwinds at all. If their car or others are referencing it, probably has more to do with their specific clients' plans and the impact the economy is having on those clients than an industry or a segment type of answer.

Speaker Change: That business is.

Speaker Change: As healthy at this point.

Speaker Change: Yes, I think.

Speaker Change: We haven't seen any headwinds at all.

Speaker Change: If there are others are referencing soon.

Speaker Change: Probably.

Speaker Change: It has more to do with their specific clients plans and in fact economies, having them as clients than an industry or a segment type of answer.

Speaker Change: Okay.

Speaker Change: Your next question comes from Tim Nolan with Macquarie. Please go ahead.

Operator: Your next question comes from Tim Nollen with Macquarie. Please go ahead.

Tim Nollen: Gregory, thanks very much. I feel like I'm going back many, many years with this, but could you please remind us what your organic growth calculation is, i.e. your organic growth in the quarter, obviously your organic growth, does that include flywheels, organic growth as well, and then when does it become part of your reported growth? Is it 12 months after, I think that's right, or do you actually go a full year after it has already been integrated?

Timothy Wilson Nollen: Okay, great. Thanks very much.

Timothy Wilson Nollen: I'm going back many many years with this but could you. Please remind us what your organic growth calculation as I E organic growth in the quarter. Obviously your organic growth does that include flywheels organic growth as well.

Timothy Wilson Nollen: And then when does it become part of your reported growth is at 12 months after that.

Timothy Wilson Nollen: Or do you actually go a full year after it has been already integrated.

Philip J. Angelastro: I hope you understand that question. Secondly, also, I'd like to just ask another flywheel-related question, your branding and retail. Commerce number was down, I think, 3.8% organically in the quarter. I think you pointed to particular items on the branding side. I'm just wondering if there is any flywheel business in that retail commerce portion and, then, tying back to the first question, if there was organic growth there. Thanks.

Speaker Change: Okay understand that question.

Speaker Change: Secondly, also I would like to just to estimate a flywheel related question your branding and.

Speaker Change: And retail Commerce number was down three 8% organic in the quarter. Thank.

Thank you pointed to particular items on the on the branding side I'm. Just wondering if there was any flywheel in that retail commerce proportion and then tying back to the first question. If there was organic growth there.

Philip J. Angelastro: Sure. Um... I'll start with the organic growth, Tim. Okay, okay.

Speaker Change: Sure.

Speaker Change:

Speaker Change: I'll start with the organic growth and so so.

Philip J. Angelastro: We've always done the calculation consistently, so. What we do in an acquisition, and in this case, Flywheel, you know, we spent over $800 million of capital to acquire the company. We're responsible for the results, and we're measured on the results post acquisition. So included in the results is Flywheel's Organic Growth.

Speaker Change: We've always done the calculation consistently so.

Speaker Change: When we do an acquisition.

Speaker Change: And in this case flywheel.

Speaker Change: We spent.

Speaker Change: Eight over $800 million of capital.

Speaker Change: To acquire the company.

Speaker Change: We are responsible for the results and we are we're measured on the results post acquisition.

Speaker Change: So included in the.

Speaker Change: Results is flywheels organic growth.

Philip J. Angelastro: The acquisition... Revenue Number Reflection, their prior or in the calculation. The Acquisition revenue from the prior year is used as a measure to determine what the growth is. Based on the current year's revenue. So, you know, you take their current year revenue and compare it to their prior year revenue. If it grows, it's part of the organic growth. If it's negative, it's part of the organic growth. We've never excluded acquisitions from that calculation.

Speaker Change: The acquisition.

Speaker Change: Revenue number reflects.

Speaker Change: Their prior or in the calculation the acquisition revenue from the from.

Speaker Change: From the prior year.

Speaker Change: Is used as a measure to determine what the growth is.

Speaker Change: Based on the current year's revenue so.

Speaker Change: Yes, you take you take their current year revenue compared to the prior year revenue. If it grew its part of the organic growth is negative it's part of the organic growth.

Speaker Change: We've never excluded acquisitions from that calculation.

Philip J. Angelastro: Yeah, we don't we don't see why you would exclude them, you know, for the first year. In any way, I think we're responsible for the growth that's part of the calculation. So we haven't changed the calculation and how we go about doing it.

Speaker Change: And.

Speaker Change: Yes, we don't we don't see why you would exclude them for.

Speaker Change: For the first year.

Speaker Change:

Speaker Change: And anyway I think.

Speaker Change: We're responsible for the growth that's part of the calculation so no we.

Speaker Change: We haven't changed the calculation and how we go about doing it.

Philip J. Angelastro: Chairman, I'm so excited. Another way to look at it is that Flywheel did, hypothetically, 102 in this first quarter, and last year before we owned it, it did a hundred. The two would be an organic calculation. Not written due. Thank you.

Speaker Change: Sure Kevin.

Kevin: Explain it.

Kevin: Another way to look at it.

Kevin: As a flywheel.

Kevin: Hypothetically 102.

Kevin: This first quarter.

Kevin: And last year before we owned it.

Kevin: You did 100.

Kevin: Two would be organic.

Kevin: Calculation.

Philip J. Angelastro: Right. Right. Right. And if it was 104, they'd be negative two or four.

Kevin: Alright, Alright, alright, alright.

Last year was 104 they'd be negative to a organic right.

Philip J. Angelastro: Right. It's been a long time since you've done an acquisition of this size, so I'm forgetting how you do the accounting for it.

Kevin: Alright, it's been a long time since you've done an acquisition of this size. So I'm forgetting how you how you do.

Philip J. Angelastro: So thanks for that explanation. Yeah, I know. The one thing you can count on, Tim, is I've been here longer than you, and we've always done it the same way. Consistency. And then, related to that, when does flywheel become part of reported growth, not acquisition growth, as in organic reported growth, not acquired growth?

Speaker Change: Due to the accounting for it so thanks for that.

Speaker Change: The one thing you didn't count on Tim.

Speaker Change: Been here longer than you and we've always done it the same way.

Speaker Change: Lucy.

Speaker Change: Thanks, and then remind us again related to them.

Speaker Change: When does when does fly will become part of reported growth not acquisition growth is inorganic reported growth not acquired growth.

Philip J. Angelastro: So, that's in. It's in the reported growth and the incremental growth. Over the prior year, the two in John's example, that's what's on the organic road.

Speaker Change: So so it's in <unk>.

Speaker Change: And the reported growth.

Speaker Change: And obviously, yes.

Speaker Change: The incremental growth.

Speaker Change: Over the prior year the.

Speaker Change: Two in John's example, that's what's on the organic growth line.

Philip J. Angelastro: And then the balance, the balance is on the acquisition line. So on the acquisition, if you're looking at the chart in the presentation, the acquisition revenue is

Speaker Change: Right.

Speaker Change: And then Alan the balance is on the acquisition.

<unk>.

Speaker Change: On the acquisition if Youre looking at the chart.

Speaker Change: In the presentation.

Speaker Change: The acquisition revenue.

Speaker Change: Is the 100.

Philip J. Angelastro: Right, and then is it 12 months after the acquisition that there's no more acquired revenue from the company? It's just all organic? Yeah, yeah, that's correct.

Speaker Change: And the organic growth number is the two.

Speaker Change: Right and then is it 12 months after acquisition debt.

Speaker Change: There is no more acquired revenue from the company, it's just all organic.

Speaker Change: That's correct Yep 12 months after acquisition close Okay got it alright, yes, one year, yes.

Philip J. Angelastro: Transcription by CastingWords

Philip J. Angelastro: Okay, great. And then lastly, on the retail commerce proportion of the branding number, is there a flywheel in that, or is that all precision marketing?

Speaker Change: Great.

Speaker Change: And then lastly on the retail commerce proportion of the branding number what is their flywheel in that or is that all in precision marketing.

Philip J. Angelastro: Yeah, all the flywheels in precision marketing, trying to split up an operating company between disciplines, is certainly very challenging and especially, you know, flywheels. Thank you.

Speaker Change: Yeah, all of Flywheels and precision marketing trying to split up and operating company between disciplines.

Speaker Change: It is certainly very challenging and especially <unk>.

Speaker Change: <unk> business.

Speaker Change: Got it okay perfect. Thanks very much.

Philip J. Angelastro: Okay, perfect. Thanks very much.

Speaker Change: Thank you.

Speaker Change: Yeah.

Operator: Your next question comes from Steven Cahall with Wells Fargo. Please go ahead.

Speaker Change: Your next question comes from Steven Kay Hall with Wells Fargo. Please go ahead.

Steven Lee Cahall: Thank you. So, John, with the removal of the lower end of the guide, the way you talked about it, moving to the four to five percent, is it fair to say that the year is off to a stronger start in terms of what you're seeing in client activity? Or is it just that it's off to the start, you kind of expected, and that has removed some risk? And so that gives you that confidence to move up the range a little bit.

Speaker Change: Thank you so John with the removal.

Speaker Change: On the lower end of the guide the way you talked about it moving to the 4% to 5%.

Speaker Change: Is it fair to say that the year is off to a stronger start in terms of what youre seeing in client activity or is it just that it's off to the start you kind of expected and that has removed some risk and so that gives you that confidence to move up the range a little bit and maybe within that question I think in the prepared remarks.

John D. Wren: And maybe within that question, I think in your prepared remarks, Phil, you mentioned that advertising and media were solid, and media buying was called out as a piece of that. Creative is obviously still a big business, and I think it was a little choppy across the industry in 2023. So it also just looked to understand if there were any inflection points or trends in the creative part of that business. Thank you.

Speaker Change: You mentioned that advertising and media was solid and media buying was called out as the piece of that creative is obviously still a big business and I think it was a little choppy across the industry in 2023. So it also just look to understand.

Speaker Change: If theres any.

Speaker Change: Collection points or trends in the creative part of that business. Thank you.

Steven Lee Cahall: I'm sorry; I didn't write your first question down.

Speaker Change: I'm, sorry, I didn't I didn't write your first question Gary sorry.

Steven Lee Cahall: I'll break it into two to be easier. So the first one is just with the change to guidance. Is it just that things are kind of performing in line?

Repeat.

Speaker Change: Repeat the first one I'm sorry, yes.

Speaker Change: I'll break it into two to be easier. So the first one is just with the.

Speaker Change: The change to guidance.

Speaker Change: And then just the things are kind of performing in line or were you actually seeing better client activity than you expected early on.

John D. Wren: Well, things are in line, it's certain, things are Certainly, things that we expected to grow are growing, and so the confidence, every week that passes, just gets more and more reassuring as we go through the year. And at this point, looking at the new business activity that's in front of us for the next several months. We're defending very little at this point, and we have opportunities on quite a number of big brand names, and if our batting average holds up... As we go into the future, we'll take our fair share of that, which won't have too much of an impact as we get later in the year in terms of 24s numbers, but overall, it helps the health of the business, our confidence, and it'll certainly give us a wind So, all the signs at the moment are very constructive, and we're making a lot of progress on a lot of different fronts.

Speaker Change: <unk>.

Well things are in line for certain.

Speaker Change: And.

Speaker Change: Things are.

Speaker Change: There's certainly things that we expect it to grow a growing and so we.

Speaker Change: That confidence is every week passes.

Speaker Change: It gets more reassured as we go through the year.

Speaker Change:

Speaker Change: And at this point.

Speaker Change: Looking at.

Speaker Change: The.

Speaker Change: New business, new business activity that in front of us over the next several months.

Speaker Change: We are defending very little at this point and we have opportunities on quite a number of big brand names and if our batting average holds up.

Speaker Change: As we go into the future, we will take our fair share of that.

Which won't have too much of an impact as.

Speaker Change: As we get later in the year in terms of 24% numbers, but overall it helps the health of the business our confidence and it will certainly give us.

Speaker Change: Okay Alright.

Speaker Change: When.

Speaker Change: Wind at our backs for next year as we move into the end of the year and into next so all the signs at the moment are very constructive and we're making a lot of progress and a lot of different fronts.

Philip J. Angelastro: So your question on creative... versus Media Creative, this quarter was roughly flat. We expect the rest of the year to improve in the advertising, creative advertising agencies. It's still core to what we do, and it's really Omnicom's DNA. It does go beyond, creativity does go beyond advertising, though, and you know, they're certainly very different agencies than they were just a few years ago as they continue to adopt new ways of working, using current technology, and some of the things we talked about and John talked about in his prepared remarks. In terms of the content supply chain, etc., they're a big part of that. So we're, we're, optimistic that they'll be in a growth mode as we go through the rest of the year.

Speaker Change: So your question on on creative.

Speaker Change: Versus.

Speaker Change: Versus media creative this quarter was roughly flat.

Speaker Change: We expect the rest of the year to improve.

Speaker Change:

Speaker Change: In the advertising creative advertising agencies, it's still it's still core to what we do.

Speaker Change: And it's really omnicom's DNA.

Speaker Change: It does go beyond creative does go beyond advertising, though.

Speaker Change: And you know.

Speaker Change: They're they're certainly very different agencies than they were just a few years back.

Speaker Change: As they continue to adopt new ways of working.

Speaker Change: Using current technology.

Speaker Change: And some of the things, we talked about and John talked about on it is.

Speaker Change: In his prepared remarks.

Speaker Change: In terms of the content supply chain et cetera, they are big part of that.

Speaker Change:

Speaker Change: So where we are.

Speaker Change: We're optimistic that that.

Speaker Change: There'll be there'll be in a growth mode. As we go through the rest of the year.

Philip J. Angelastro: And so could you put that roughly flat just in the context of whether you think that's an industry trend related to macro or and or technology, or is any of that related to account?

Speaker Change: And so could you put that roughly flat just in the context of whether you think thats an industry trend related to macro or <unk> technology.

Speaker Change: Is any of that related to account.

Philip J. Angelastro: Um, you know, I think it's probably a combination of each of those. Just even though that, you know, it's a lot of different things, but there's certainly been a lot of change in those businesses recently, and I think we're probably not that much different than anyone else.

Speaker Change: Losses.

Speaker Change:

Speaker Change: I think it's probably a combination of each of those.

Speaker Change: Just even though that that's a lot of different things, but.

Speaker Change: There's certainly been a lot of change.

Speaker Change: In those businesses.

Speaker Change: Recently and I think.

Speaker Change: We're probably not that much different than anyone else.

Philip J. Angelastro: Great. Thank you. Sure.

Speaker Change: Great. Thank you.

Speaker Change: Sure.

Speaker Change: Okay.

Operator: Your next question comes from Michael Nathanson with Moffitt Nathanson. Please go ahead.

Speaker Change: Your next question comes from Michael Nathanson with Moffett Nathanson. Please go ahead.

Michael Brian Nathanson: Thank you. Following up on Steve's question about creative, if you talk a bit about Gen AI and what you're doing on the creative side, what have you learned and is there a risk that as these tools get more sophisticated that it could be cannibalistic to your creative service businesses and maybe becomes more efficient for other people to do it or a new entrance form, that's one, and then two, Phil, you talked a bit about a capital intensity of Flywheel, you mentioned a little bit of higher capital

Michael Brian Nathanson: Thank you following up on Steve's question about.

Michael Brian Nathanson: Creative can you talk a bit about gen AI and what youre doing on the creative side, what have you learned and is there a risk that.

Michael Brian Nathanson: As it moves towards ESCO more sophisticated.

To be cannibalistic.

Speaker Change: Your creative service businesses is maybe because it's more efficient for other people to do it or new entrants form that's one and then to fill.

<unk> is a little bit about our capital intensity, a flywheel you mentioned a little bit of higher Capex down the road.

Michael Brian Nathanson: Capital intensity of Flywheel, you mentioned a little bit of higher CapEx down the road. How much more capital intensive is that business than the rest of Omnicom? Thanks.

Speaker Change: How much more capital intensive is that business and the rest of omnicom.

Speaker Change: Sure.

John D. Wren: I'll start your answer on... Now, with respect to technology in the advertising sector, and then, I might ask Paolo, who is working most closely on AI, is joined with us today. If anyone wants to add anything before Phil gets here,

Speaker Change: The start to your answer.

Speaker Change: With respect to technology and the <unk>.

Speaker Change: <unk> sector and then.

Paolo: Yes Paolo.

Paolo: Is working most closely.

Paolo: With us today.

Paolo: If he wants to add anything before focus answer.

John D. Wren: Okay. What... Okay.

Paolo: Okay.

Paolo: Why.

John D. Wren: The single largest benefit of AI, generative AI, as we're using it, is that it makes it simpler for highly creative people to come up with different executions, different applications of their ideas across many different mediums and using the specific Omni data that we have in Flywheel Commerce Data to help understand where the consumer is and the messaging that we have to create in order to reach that consumer. So as this goes forward, automation affects every single part of the business; AI will affect every single part of the business.

Paolo: The single largest benefit.

Paolo: Of AI generative AI as we're using it.

Speaker Change: Is it.

Speaker Change: It makes it simpler.

For highly creative people.

Speaker Change: To come up with different executions different applications of their our gears across.

Speaker Change: Many different mediums and using.

Speaker Change: The specific.

Speaker Change: On the data that we have in flywheel commerce data.

Speaker Change: To help.

Speaker Change: Understand.

Speaker Change: The consumer is and the messaging that we have to create in order to reach that consumer.

Speaker Change: So.

Speaker Change: As this goes forward automation.

Speaker Change: Next every single part of the business AI will affect every single part of the business.

John D. Wren: And the programs and the things that we're doing are to take that on board, to evaluate, and ShiftUp, as market leader, and even in advance of testing things that are available or, hopefully, will become commercially available at some point in the future. I guess if there's a downside to it, it's a lot of the things that... In the past, it might have been done manually, and somebody got paid to do that executional work, which was typically pretty boring and repetitive. That gets eliminated, so you're not seeking to hire those level people to do that level of job, and therefore get reimbursed at a profit for them.

Speaker Change: And.

Speaker Change: The programs and the things that we're doing.

Speaker Change: Or to take that onboard.

Speaker Change: To evaluate.

Speaker Change: And shift our mix.

Speaker Change: As market leader and even.

Speaker Change: In advance of testing things better are available or hopefully will become commercially available at some point in the future.

Speaker Change: Yes, if there is a downside to it.

Speaker Change: A lot of the things that.

Speaker Change: In the past might have got be done manually.

Speaker Change: Somebody got paid to <unk>.

Speaker Change: Do that execution of work, which was typically pretty boring and repetitive.

Speaker Change: That gets eliminated.

Speaker Change: You are not seeking to hire those level people to do that level of job.

Speaker Change: Therefore, we get reimbursed at a profit for them, but what you are doing is you're able to come up with a better cleaner sharper ideas, which can either succeed fast or fail fast.

John D. Wren: But what you are doing is you're able to come up with better, cleaner, sharper ideas, which can either succeed fast or fail fast. And all of that, at the end of the day, benefits the client and makes the ROI on a marketing dollar spent greater. And that's where I think the contribution of general AI is going to come from, and that's been my experience over my career. The more clarity I can bring to a client in explaining what the ROI is on the next dollar market he's going to spend or she's going to spend means that we probably are going to benefit from that and service it in some fashion.

Speaker Change: And all of that at the end of the day benefits to clients and makes the ROI.

On a marketing dollar spent.

Speaker Change: Greater and Thats, where I think the contribution of generative AI is going to come in and.

Speaker Change: And it's been my experience over my career.

Speaker Change: The more clarity I can bring to a client and explaining what the ROI is on the next dollar of marketing is going to spend or she is going to spend.

Speaker Change: One is that we probably are going to benefit from that and servicing it in some fashion.

John D. Wren: Philosophically, and there's a lot of moving pieces that are going on all the time and have been for quite a while now, but pretty intensely. Adjusting to and exploiting where we can, those are the things that general AI does. And we've met before on previous calls, I think. It's really... He's really the guy that I depend upon, among others, for this, and he works very closely with all of our suppliers and vendors. Paolo? Yeah, sure.

Philip J. Angelastro: So Phil.

Philip J. Angelastro: Philosophically and Theres a lot of moving pieces that are going on.

Philip J. Angelastro: All this time and have been for quite a while now.

Philip J. Angelastro: But pretty intensely.

Philip J. Angelastro: Adjusting to and exploiting where we can those.

Philip J. Angelastro: Things that generally does but paolo.

Philip J. Angelastro: We've met before on previous calls I think it.

Philip J. Angelastro: It's really.

Philip J. Angelastro: He's really the guy that I depend upon among others.

Philip J. Angelastro: On this and he worked very closely.

Philip J. Angelastro: Right.

All of our suppliers or vendors from Tullow, Yes, sure Hi, Michael.

Paolo Yuvienco: Sure. Hi Michael.

Michael Brian Nathanson: So Paul.

Paolo Yuvienco: I think you've heard us talk about this in the past, that we really believe that generative AI is going to empower our people and really give them superpowers for the skills that they already have. I think we look at it through the lens of a maturity model with respect to how they are executing their tasks. In the recent past, generative AI has really just been a tool. Today, it's more of an assistant or co-pilot, if you will.

Paul: I think you've heard us talk about this in the past that we really believe that generative AI is going to empower our people and really give them superpowers.

Paul: For the skills that they already have I think we look at it through the lens of a maturity model.

Paul: With respect to how they.

Paul: Are executing their tasks in the past.

Paul: In the recent past generative AI is it really just been a tool.

Paul: Today, it's more of an assistant our co pilot, if you will and really tomorrow. It becomes a true partner, whether it be a creative partner a strategic partner.

Paolo Yuvienco: And really, tomorrow, it becomes a true partner, whether it be a creative partner, a strategic partner, a planning partner for every one of our employees. So that is effectively how we're approaching it and how we're building it into Omni to provide that partner for everyone.

Paul: And our planning partner for every one of our employees.

Paul: So that is effectively how we're approaching it and how we're building it into omni to provide that partner for everyone.

Paolo Yuvienco: Yeah, and it's a much longer conversation, but if you think through the technology. If you're in a competitive industry. And the check is way further than it is today.

Paul: Yes, and it's a much longer conversation, but if you think through the technology.

Paul: If you're in a competitive industry.

Paul: And.

Paul: Check as wafer than it is today.

John D. Wren: Competitors simply ask the same questions to reach the same consumers. They're all going to get the same answer, so it's not going to differentiate anybody. The difference is the creative minds that we're able to attract in Omnicom and apply to those client challenges and objectives.

Paul: Competitors simply asked the same questions to reach the same consumers.

Paul: They're all going to get the same asset so it's not going to differentiate antibody but brings that.

Paul: The difference to this is the creative minds that we're able to attract in omnicom and apply to those client challenges and objectives.

Philip J. Angelastro: And then your second question, Michael, similar. Yeah, how intense is the CapEx commitment? That's similar to the Omni platform. We need to continue to develop the Flywheel Commerce Cloud platform, and we intend to do that. Um, certainly with Flywheel and LEED. But in terms of scale... While it's similar to Omni, we expect an increase in CapEx spend. But we wouldn't say it, we expect it to be dramatic.

Paul: And then your second question Michael Thanks similar.

Michael Brian Nathanson: Yeah, how intense is the capex commitment.

Michael Nathanson:

Michael Nathanson: The similar similar to the omni platform we.

Michael Nathanson: We need to continue to develop the flywheel commerce cloud platform and.

Speaker Change: And we intend to do that.

Speaker Change:

Speaker Change: Certainly with with flywheel and lead.

Speaker Change: But in terms of scale.

Speaker Change: While it's similar to omni we expect an increase.

Speaker Change: And Capex spend.

Speaker Change: But we wouldn't say it we expect it to be dramatic.

Philip J. Angelastro: It's going to be an increase, but a very manageable increase. Because, as we said before, Flywheel went through a significant period of time, probably 12 to 18 months, to integrate its backend platform or platforms, some of which are part of prior acquisitions, into one integrated platform. Flywheel Commerce Cloud Platform.

Speaker Change: To be an increase but at a very manageable increase.

Speaker Change: Because as we said before.

Speaker Change: Flywheel went through a significant period of time, probably 12 to 18 months.

Speaker Change: To to integrate.

Speaker Change: Its backend platform or platforms.

Speaker Change: Some of which are part of our prior acquisitions.

Speaker Change: Two one.

Speaker Change: Integrated.

Speaker Change: Flywheel Commerce cloud platform.

Philip J. Angelastro: The vast majority of that work was done prior to when we announced the deal in October of 2023. So most of the work at this point going forward, similar to Omni, is on building enhancements, incorporating new technology, and keeping the platform at the leading edge. So we don't expect it to be dramatic, but certainly it's an investment that's well worth making for us.

Speaker Change: The the vast majority of that work was done prior to when we announced the deal in October of 'twenty three.

Speaker Change: So most of the work at this point going forward.

Speaker Change: Similar to omni as is on building.

Speaker Change: Building enhancements.

Speaker Change: Incorporating new technology.

Speaker Change: And and keeping the platform at the leading edge so.

Speaker Change: We don't expect it to be dramatic, but certainly it's an investment.

Speaker Change: Well worth making for us.

Speaker Change: Okay.

Michael Brian Nathanson: Okay. Philip, can I ask a quick question on the ad back of amortization?

Speaker Change: Last quick one on the add back of amortization.

Michael Brian Nathanson: I understand the intangible amortization, but what was the thinking on the internally developed strategic platform asset amortization?

Speaker Change: Any intangible amortization, but what was the thinking on the internally developed strategic platform asset amortization so thats.

Philip J. Angelastro: So how is that? Why'd you guys include that in the EBIT-A definition?

Speaker Change: How is that what do you guys include data in the EBIT, a definition versus just pure amortization from.

Philip J. Angelastro: definition which is pure amortization from, you know, goodwill.

Philip J. Angelastro: Sure. So, as we've done for well over 10 years, we built out the Omni Platform. We built it out through internal investment. And, you know, some of our competitors actually went out and did acquisitions, bought somewhat similar assets in terms of data analytics and other technologies, similar to the Omni platform and, you know, every once in a while in terms of comparing, you know, what amortization gets added back or not. You know, we think we know what the reality is.

Speaker Change: From goodwill.

Speaker Change: Sure so as we've done.

Speaker Change: Four.

Speaker Change: Well over 10 years, we built out the omni platform.

Speaker Change: We built it out through internal investments.

And some of our competitors actually went out and did acquisitions, but somewhat similar assets in terms of data analytics.

Speaker Change: And other technologies.

Speaker Change: Similar to the omni platform and yeah.

Speaker Change: In terms of comparing.

Speaker Change:

Speaker Change: What amortization gets added back or not.

Speaker Change: We think we think the reality is when.

Philip J. Angelastro: Whether we acquire it or rebuild it ourselves, you know, you'd want to look at that amortization of the investment that you've made, and that would be the appropriate amount to add back. In terms of, you know, rough order of magnitude, you know, if you look at the total, you know, you look at the total of the add-back related to acquired intangibles and internally developed strategic platform amortization. That's about 75% of the total, and the non-acquisition amortization is about 10 or 15 percent of that.

Speaker Change: Whether we acquire it or rebuild that ourselves.

Speaker Change:

Speaker Change: You'd want to look at that amortization.

Speaker Change: Of the investment that you've made.

Speaker Change: And that would be the appropriate amount to add back in terms of.

Speaker Change: A rough order of magnitude.

Speaker Change: Yeah, if you look at the total.

Speaker Change: When you look at the total of the add back related to.

Speaker Change: Acquired intangibles and internally developed strategic platform amortization.

Speaker Change: That's about 75% of the total.

Speaker Change: And the non acquisition amortization is about 10 or 15% of that.

Philip J. Angelastro: So it's not a large proportion of the number, but about 25% of the total relates to, you know, administrative amortization expense related to administrative intangibles, things like ERP systems and workflow systems, etc. So we think that's an appropriate and probably the most comparable way to look at the numbers, compared to some others in the market.

Speaker Change: So it's not a large proportion of the number.

Speaker Change: But about 25% of the total relates to.

Speaker Change: Administrative amortization expense related to administrative.

Speaker Change: Yeah intangibles things.

Things like ERP systems, and workflow systems et cetera.

Speaker Change: So we think thats an appropriate.

Speaker Change: And probably most comparable.

Speaker Change: Hey.

Speaker Change: Look at the numbers.

Speaker Change: Compared to some others in the marketplace.

Philip J. Angelastro: Thank you, as always, Phil. Thank you. Sure.

Speaker Change: Okay. Thank you so as Phil Thank you.

Operator: Your next question comes from Craig Huber with Huber Research Partners. Please go ahead. Thank you.

Speaker Change: Sure.

Speaker Change: Your next question comes from Craig Huber with Huber Research partners. Please go ahead.

Craig Anthony Huber: Thank you. John, if you could just go back to the flywheel for a little bit here. You guys have obviously cleaned up your portfolio of performing assets, to your credit, and obviously done this exciting flywheel acquisition here. I'm curious, does that change your outlook long-term, the potential? for Organic Revenue Growth here to maybe accelerate off this roughly four to five, you're talking about this year, I think 4.1% last year, are you feeling increasingly optimistic about the growth rate? There are a lot of larger numbers here, but you're a much bigger company now than you were 10, 15 years ago. All right.

Craig Anthony Huber: Thank you Don if you could just go back a flywheel for a little bit here do you guys have obviously cleaned up your portfolio of performing assets.

Craig Anthony Huber: Sure sure.

Craig Anthony Huber: Your credit obviously, starting flywheel acquisition here I'm, just curious does that change your outlook long term the potential.

Craig Anthony Huber: Organic revenue growth here, maybe accelerate off this roughly four to five youre talking about tier four 1% last year, you Julian increasingly optimistic longer term about accelerate.

Craig Anthony Huber: I realize there's large law of larger numbers here, you're a much bigger company now mean were 10 15 years ago.

John D. Wren: It's more of a. I'd answer it a little bit differently, because we've cleaned up the portfolio. And there's always work to do, but not nearly as much work as we've done in the past. Because we've cleaned up the portfolio, I think the products and the offerings that we have today are really, really good. Market Leading, and as we expose them to the marketplace and our clients and probably do a better job, actually, of marketing Omnicom and its products to the world.

Craig Anthony Huber: Sure.

Craig Anthony Huber: Yes.

Craig Anthony Huber: Sure.

Craig Anthony Huber: It's more.

Craig Anthony Huber: The answer is a little bit differently.

Craig Anthony Huber: Because we've cleaned up the portfolio.

Craig Anthony Huber: And there is always work to do but not nearly as much work as we've done in the past.

Craig Anthony Huber: Sure.

Craig Anthony Huber: Because we have cleaned up the portfolio I think the products and the offerings that we have today.

Craig Anthony Huber: Our really.

Craig Anthony Huber: Market leading.

Craig Anthony Huber: And as we expose them to the marketplace and our clients and probably do a better job actually of marketing omnicom and its products to the world.

John D. Wren: I do think that it will sustain organic growth going forward. I have had enough difficulty giving you guidance for the balance of this year, so I don't want to get too far ahead of myself. I'm very confident that we're going to be the most appropriate supplier in the marketplace for the type of activities that clients are looking to buy from a group like us. And so with that confidence, that's not just me and what we buy or Integrate.

Craig Anthony Huber: I do think that it will sustain.

Craig Anthony Huber: Our organic growth going forward.

Craig Anthony Huber: Hi.

Speaker Change: I have enough difficulty, giving you guidance for the balance of this year. So I don't want to get too far ahead of my shoes, but.

Speaker Change: I am very confident that.

Speaker Change: That we're going to be the most appropriate supplier in the marketplace for the type of activities that clients are looking to buy from a group like ours.

Speaker Change: <unk>.

Speaker Change: And so with that confidence.

Speaker Change: Just not me in what we buy.

John D. Wren: That is really reflective of the management teams that work on the various aspects of Omnicom and are executing and delivering our products worldwide. At the end of the day, it comes down to... Those people, the products that we make available to them, but the creative genius and innovation that they bring to improving that product on a constant basis. So, yes, I'm bullish, I guess.

Speaker Change: We integrate.

Speaker Change: That is really reflective of.

The management teams.

Work on the various aspects of omnicom and are executing and delivering our products worldwide the sedan.

Speaker Change: As of the day it comes down to those.

Speaker Change: Those people who are the products that we.

Speaker Change: We make available to them.

Speaker Change: But the creative genius and innovation that they bring to improving that product on a constant basis.

Speaker Change: So, yes, im bullish I guess.

Craig Anthony Huber: Thank you for that, John. And Philip, I'll just ask you real quick, in terms of the margins for this year, I think you're talking about roughly flat margins for the year. Just walk us through a little bit about the costs in your mind that are holding that back from actually going up some. You talked about the integration costs of a flywheel, and flywheel being dilutive. I think you said the margins, the first three quarters, but what else should we think about? What other internal investment spending are you doing? Sure.

Speaker Change: Thank you for that Jonathan Phil If I could just ask you real quick in terms of the margins for this year. Thank you are talking about roughly flat margins for the year, just walk us through a little bit about the costs in your mind that are holding that back from actually going up. So let me talk about the integration cost of our flywheel flywheel being dilutive I think you said the margins the first three quarters, but what else should we think.

Speaker Change: Please.

Speaker Change: Internal investment spending youre doing et cetera.

Philip J. Angelastro: Sure. So... You know, the approach to margins hasn't changed much over the years. We're always trying to find the right balance between growing the business in a sustainable way and making the appropriate investments in the business for the future.

Speaker Change: Sure so.

Speaker Change: You know the approach the margins Hasnt changed much over the years, we're always trying to find the right balance between.

Speaker Change: Growing the business in a sustainable way.

Speaker Change: Making the appropriate investments in the business for.

For the future so yeah.

Philip J. Angelastro: Omni and the Omni platform is a great example of that and balancing that with an appropriate margin and return to shareholders. So, you know, as it relates to 2024, certainly we've got some, you know, an integration process to go through with Flywheel, which is going really well, but more to be done. We do expect to continue to make the investments we've been talking about with respect to the Omni platform and ongoing investments in Flywheel and Flywheel Commerce Cloud.

Speaker Change: And then the omni platform is a great example of that.

Speaker Change: And balancing that with an appropriate.

Speaker Change: Our margin and return to shareholders.

Speaker Change: So as it relates to 2024, certainly has got some and integration process to go through with flywheel.

Speaker Change: As we said going really well, but more and more to be done.

Speaker Change: We do expect to continue to make the investments we've been talking about.

Speaker Change: With respect to the omni platform and.

Speaker Change: Our ongoing investments in flywheel.

Speaker Change: And fly with Commerce cloud.

Philip J. Angelastro: And ultimately, you know, we see some opportunities, you know, with our cost structure being flexible to be part of the equation and how to maximize margins overall. You know, we're looking at the long-term health of the business, continuing to make those investments. That's part of what goes into the ultimate end result when it comes to margins, because really we're trying to grow operating profit dollars, not just.., you know, hit a percentage.

Speaker Change: And ultimately we see some opportunities.

Speaker Change: Yes, with our cost structure being flexible to be part of the equation and how to maximize margins overall.

Speaker Change: Yes, we're looking at the long term.

Speaker Change: Health of the business continuing to make those investments that's part of what goes into the ultimate end result, when it comes to margins.

Speaker Change: Because really what we're trying to grow operating profit.

Speaker Change: Not just.

Speaker Change: Hit a percentage.

Philip J. Angelastro: So, you know, I think the flywheel transition and integration are certainly a big part of it, along with continued investment in Omni and the Flywheel Commerce Cloud Platform and AI, balanced with, you know, some benefits coming from other initiatives we continue to pursue, whether it's the real estate portfolio, offshoring, nearshoring, etc. You know, all of that is factored into the equation, and that's how we reach the expectations we have as we look out at all of 2024.

Speaker Change: So.

Speaker Change: I think I think the flywheel transition and integration certainly a big part of it along with continued investments.

And on the and the flywheel Commerce cloud platform NII balanced with.

Speaker Change: Some some benefits coming from other initiatives, we continue to pursue whether it's the real estate portfolio offshore.

Speaker Change: Offshoring near shoring et cetera.

Speaker Change: All of that is factored into the equation.

Speaker Change: And that's how we reach the expectations, we have as we look out at all of 2024.

Speaker Change: Great. Thanks, guys.

Philip J. Angelastro: There are no further questions at this time. This will conclude today's conference. Thank you for your participation. You may now disconnect.

Speaker Change: Sure. Thank you.

Speaker Change: There are no further questions at this time this will conclude today's conference. Thank you for your participation you may now disconnect.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change:

Speaker Change: Yeah.

Speaker Change:

Speaker Change: Yeah.

Speaker Change: Yeah.

Okay.