Q3 2024 Omnicom Group Inc Earnings Call

Episode 2

Episode 2

Unknown Executive: Good afternoon and welcome to the Omnicom 3rd quarter of 2024 earnings conference call. Please note that this call is being recorded. At this time, all participants are in a listen-only mode.

Episode 2

Speaker Change: Good afternoon and welcome to the Omnicom 3rd quarter 2024, earnings conference call. Please note that this call is being recorded at this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star, followed by the number one on your telephone keypad, to withdraw your question, press star one a second time.

Unknown Executive: After the speaker's remarks, there will be a question-and-answer session.

Unknown Executive: If you would like to ask a question, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one a second time.

Gregory Lundberg: I will now turn the call over to Gregory Lundberg, Senior Vice President and Vester Relations. You may begin.

Speaker Change: I will now turn the call over to Gregory Lundberg, Senior Vice President and Vester Relations. You may begin.

Gregory Lundberg: Thank you for joining our 3rd 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 that we'll review today. An archive webcast will be available when today's call concludes.

Gregory Lundberg: Thank you for joining our third quarter 2024 earnings call with me today at 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 that we'll review today. An archive webcast will be available when today's call concludes.

Gregory Lundberg: 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. 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. 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 materials.

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

Gregory Lundberg: Certain of the statements made today may constitute forward-looking statements, and these statements are present expectations.

Gregory Lundberg: Relevant factors that could cause actual results that differ materially are listed in our earnings materials, and in our SEC filings, including our 2023 Form 10K.

Gregory Lundberg: During the course of today's call, we will also discuss certain non-gap measures.

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

Unknown Executive: We will begin the call with an overview of our business from John.

Unknown Executive: Then Phil will review our financial results for the quarter, and after our prepared remarks, we'll open the line up for your questions.

Speaker Change: We will begin the call with an overview of our business from John. Then Phil will review our financial results for the quarter. And after our prepared remarks, we will open the lineup for your questions.

Gregory Lundberg: And I'll now hand the call over to John. Thank you, Greg.

John Wren: Good afternoon, everyone, and thank you for joining us today. We're very pleased to share our third quarter results. Organic growth was very strong at 6.5% for the quarter, with the US also growing at 6.5%. Across our disciplines, advertising and media, as well as experiential, had outstanding performances. Non-GAAP adjusted EBITDA margin was 16% for the quarter. Non-GAAP adjusted earnings per share was $2.03, up 5.7% versus the comparable amount in 2023. Our cash flow continues to support our primary uses of cash, dividends, acquisitions, and share purchases, and our liquidity and balance sheet remain very strong. We're very pleased with our financial results for the quarter and the last nine months, and are on track to achieve the higher end of our organic growth target of between 4% to 5% for the year.

Speaker Change: and I'll now hand the call over to John. Thank you, Greg. Good afternoon, everyone, and thank you for joining us today.

John Wren: We're very pleased to share our third quarter results.

John Wren: Organic growth was very strong at 6.5% for the quarter, with the U.S. also growing at 6.5%.

John Wren: Across our disciplines, advertising and media, as well as experiential had outstanding performances.

John Wren: 9-gap adjusted EBITDA margin was 16% for the quarter, 9-gap adjusted earnings per share was $2.3, a 5.7% versus a comparable amount in 2023.

John Wren: Our cash flow continues to support our primary uses of cash, dividends, acquisitions and sharing purchases, and our liquidity and balance sheet remain very strong.

John Wren: We're very pleased with our financial results for the quarter and the last nine months, and are on track to achieve the higher end of our organic growth targets of between 45% to the year. We're also maintaining our full year 2024 EBITDA margin target of close to flat with 2023.

John Wren: We're also maintaining our full year 2020 EBITDA margin target of close to flat with 2023. So we'll cover our financial results in more detail during his remarks.

John Wren: During the quarter, we announced the formation of Omnicom Advertising Group, a new practice area that aligns our creative agencies globally under one leadership team. OIG includes global advertising networks, BBO, DDB, and TBA, as well as the advertising collective, which has agencies, could be serviced in and partners GSTNM, Mercury and Partners, and Zimmerman, among others. The group will be led by a strong core of executives with Troy Rohanen as Global CEO of OAG, being joined by Nancy Reyes, who was recently promoted to Global CEO of BVDL, with Andrew Robertson becoming Chairman, Aaron Reilly, who is succeeding Troy and was promoted to the Global CEO of TBWA, Alex Lubar as CEO of DDB, and James Fenton as CEO of the Avitasin Collective.

John Wren: So, cover our financial results in more detail during his remarks.

John Wren: During the quarter, we announced the formation of Omnicum advertising group, a new practice area that aligns our creative agencies globally under one leadership team.

John Wren: OIG includes global advertising networks, BVDL, DDB, and TBWA, as well as the advertising collective which has agencies, could be serviceed in partners GST&M, Mercury in partners, and Zimmerman among others.

John Wren: The group will be led by a strong core of executives, with Troy Lohannon as global CEO of O.A.G. being joined by Nancy Razz, who is recently promoted to global CEO of the video with Andrew Robertson becoming Chairman.

John Wren: Aaron Riley, who is succeeding Troy, was promoted to the Global CEO of TWSA.

John Wren: Alex Lubar, CEO of DDB, and James Fetton as CEO of the Avatar's Incorrective.

John Wren: OAG aims to bolster Omnicom's advertising brands by scaling access to solutions, technology platforms, tools, and investments across its creative agencies and clients globally. Additionally, as clients demand more integrated and tailored solutions from agencies, OAG will help facilitate access to talent and teams across our networks while providing our talent with the mobility across our different agencies and client teams. As with other practice areas, the creative networks within OAG will retain their unique brand, culture, and people. In fact, we believe this new structure will strengthen our agency brands.

John Wren: OIG aims to bolster, and becomes advertising brands by scaling access to solutions, technology platforms, tools and investments across its creative agencies in client-square-boy.

John Wren: Additionally, as clients demand more integrated and tailored solution from agencies, OIG will help facilitate access to town and teens across our networks.

John Wren: While providing our talent with the mobility across our different agencies and client teams.

John Wren: As with other practice areas, the creative networks within O.A.J. will retain their unique brand, culture and people.

John Wren: Late in the quarter, Omnicom Precision Marketing Group expanded its capabilities by acquiring LeapPoint, a digital advisory firm with expertise across the adult content supply chain. The acquisition is part of our strategic efforts to offer the industry's most comprehensive end-to-end content solution, empowering marketers to accelerate workflows and deliver personalized experiences to their customers at speed and scale. LeapPoints offering streamlined and automated processes, breakdown operational silos and improve team collaboration for large enterprise clients.

John Wren: In fact, we believe this new structure will strengthen our agency of Rams.

Speaker Change: Ladies and gentlemen, I'm the composition marketing group expanded its capabilities by acquiring leappoint a digital advisory firm with expertise across the Adobe content supply chain.

Speaker Change: The acquisition is part of our strategic efforts to offer the industry's most comprehensive end-to-end content solution, empowering marketers to accelerate workflows and deliver personalized experiences to their customers at speed and scale.

Speaker Change: Leapoint's offering, streamlined and automated processes, breakdown operational silos, and improve team collaboration for large enterprise clients.

John Wren: In digital commerce, we achieved an industry first in the quarter. When we acquired Flywheel, we knew connecting marketing to sales would be a game changer for our company and our clients. Leveraging and connecting the capabilities of Omnicom Media Group and Flywheel, we can now directly measure online retail sales generated from media campaigns across the full advertising journey, from broadcast TV to upper final performance media and retail media. This is a significant development and unique to Omnicom. Our partnership with Amazon was instrumental in enabling this breakthrough.

Speaker Change: In digital commerce, we achieved an industry first in the quarter. When required for live-wheel, renew connecting marketing to sales would be a game changer for our company and our clients.

Speaker Change: Leveraging and connecting the capabilities of Omnika Media Group and flywheel, we can now directly measure online retail sales generated.

Speaker Change: from Media Campaigns across the full advertising journey from Broadcast TV to Apple Final Performance, Media and Rick Down Media.

Speaker Change: This is a significant development and unique to Omni-Kam. I'm part of the ship with Amazon was instrumental in enabling this breakthrough.

John Wren: As I mentioned in our last call, we consolidated our production units and formed Omnicom Production to capitalize on the significant market opportunity for production services. We are investing in scaled and high quality capabilities in multiple ways. Omnicom Production inaugurated a new state-of-the-art content studio in New York and leverage Omnicom's first mover partnership in AI to develop innovative capabilities in content. The investment is already paying off with Omnicom Production winning the Kenview and Bimbo Bakery's USA production business. In the next several months, you will hear more about how we are using AI across our integrals to drive more effective campaigns and marketing outcomes, to improve how our people work and to deliver efficiencies for our clients.

Speaker Change: As I mentioned in our last call, we consolidated our production units and formed Omnicom production to capitalize on the significant market opportunity for production services.

Speaker Change: We are investing in scaled and high quality capabilities in multiple ways.

Speaker Change: I'm the Competduction inaugurated a new state-of-the-art content studio in New York, and leverage I'm Lee Combs' first mover partnership in AI to develop innovative capabilities in content development.

Speaker Change: The investment is already paying off with Omnicom production, winning the Kenview and Bel Bakery's USA Production Business.

Speaker Change: In the next several months, you will hear more about how we are using AI across our enterprise to drive more effective campaigns and marketing outcomes.

John Wren: In addition to the production lens, we had a very strong new business performance across the group. After an extensive review process, Omnicom Media Group won the biggest pitch of the year by being awarded Amazon's media business in the Americas. We are incredibly honored to have been selected by Amazon and to have the opportunity to extend our strong partnership. OMG also won Michelin Global Media Business, Omnicom Media Group, top the convergence first half, 2024 report, with 5.3 billion in total new business wins. Omnicom Agency is collaborated to win integrated services pitches for Barclays and Bimbo Baker's USA.

Speaker Change: To improve how our people work and to deliver efficiencies for our clients.

Speaker Change: In addition to the production winds, we had a very strong new business performance across the group. After an extensive review process, I'm an E.C. media group, one of the biggest pitch of the year by being awarded Amazon's media business in the Americas.

Speaker Change: We are incredibly honored to have been selected by Amazon and to have the opportunity to extend our strong partnership.

Speaker Change: LMG also won Michelin Global Media Business, I'm Nikon Media Group, top the convergence first half 2024 report with 5.3 billion in total new business wins.

Speaker Change: I'm Nikon Agencies, Collaborated to win integrated services pitches for Barclays and Bimbo Bakers USA.

John Wren: Corona Extra appointed GSEM, its lead creative agency. General Mills hired Goodby Silverstein and Partners for creative. Pepsi added BVD out to its creative agency roster. OPMG picked up Adobe's digital experience business, and RAP was selected as Princess Kris' precision marketing agency.

Speaker Change: Corona Extra appointed GSTM, its lead creative agency, General Mills hired Ghibby Silverstein and partners for creative.

Speaker Change: Pepsi added BVDL to his creative agency roster.

Speaker Change: OPMG picked up a W Digital Experience Business and rappel is selected as Princess Crisis Precision Marketing Agency.

John Wren: Overall, we are very pleased with our new business wins, financial results, and progress on our key initiatives. I want to thank all our teams for their terrific work.

Speaker Change: Over all, we're very pleased with our new business wins, financial results and progress on our key initiatives.

John Wren: While significant market uncertainties remain due to the upcoming elections in the US and the ongoing conflicts in Ukraine and the Middle East, we are actively managing what we can control. We are focused on achieving our organic growth and marching targets for the year and remain confident in our guns.

Speaker Change: I want to thank all our teams for their terrific work.

Speaker Change: While significant market uncertainties remain due to the upcoming elections in the US and the ongoing conflicts in Ukraine and the Middle East, we are actively managing what we can control. We are focused on achieving our organic growth and margin targets for the year and we may be confident in our guidance.

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

Phil Angelastro: Phil, thanks, John. As John said, the third quarter performance of our business builds on the solid performance of the first half of 2024.

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

Phil Angelastro: The third quarter performance of our business builds on the solid performance of the first half of 2024.

Phil Angelastro: And we continue to make the strategic investments needed to position on the come to meet the marketing needs of our customers through acquisitions like Flywheel and LeapPoint and our ongoing investments in the Flywheel Commerce Cloud, AI, and other technology platforms and tools. Let's review our business performance in the third quarter, beginning with our revenue change on slide four. Organic growth in the quarter was strong at 6.5%. The impact on revenue from foreign currency translation was nominal, decreasing reported revenue by just 0.1%. Given recent changes in the relative value of the US dollar, if rates stay where they are currently, we estimate the impact of foreign currency translation will be positive 1% for K-4 of 2024 and flat for the full year 2024.

Phil Angelastro: and we continue to make the strategic investments needed to position on the come to meet the marketing needs of our customers through acquisitions like flywheel and leappoint.

Phil Angelastro: and our ongoing investments in Omni, Fly World Commerce Cloud, AI, and other technology platforms and tools.

Phil Angelastro: Let's review our business performance in the third quarter, beginning with our revenue change on slide four.

Phil Angelastro: Organic growth in the quarter was strong at 6.5%.

Phil Angelastro: The impact on revenue from foreign currency translation was nominal, decreasing reported revenue by just 0.1%.

Phil Angelastro: Given recent changes in the relative value of the U.S. dollar, if rates stay where they are currently. We estimate the impact of foreign currency translation.

Phil Angelastro: will be positive 1% for Q4 of 2024 and flat for the full year 2024.

Phil Angelastro: The net impact of acquisition and disposition revenue on reported revenue was positive 2.1% due primarily to the acquisition of Flywheel in January, along with a few small acquisitions from prior quarters, which are partially offset by some smaller dispositions. Based on transactions completed to date, we expect the impact of acquisition and disposition revenue will approximate 1.75% for K-4 and 2.0% for the full year.

Phil Angelastro: The net impact of acquisition and disposition revenue on reported revenue was positive 2.1%. Do you primarily to the acquisition of flywheel in January?

Phil Angelastro: Along with a few small acquisitions from prior quarters, which are partially offset by some smaller dispositions.

Phil Angelastro: Based on transactions completed to date, we expect the impact of acquisition and disposition revenue will approximate 1.75% for Q4.

Phil Angelastro: Now let's turn to slide five to review our organic revenue growth by discipline. During the quarter, advertising and media growth of 9% reflected continued strong growth in media and improved performance in advertising, including positive contributions from our production initiative. Precision marketing growth of 1% was similar to last quarter, with continued strong growth at Flywheel, and our precision marketing group performance was driven by strong growth in the US at our customer experience agencies, which was offset by lower client spending, primarily concentrated in a few markets outside the US. With the full contribution from recent client wins, we continue to expect stronger performance in our precision marketing group in the fourth quarter and beyond.

Phil Angelastro: and 2.0% for the full year.

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

Phil Angelastro: During the quarter, advertising and media growth of 9%, reflected continued strong growth in media and improved performance in advertising, including positive contributions from our production initiative.

Phil Angelastro: Precision marketing growth of 1% was similar to last quarter with continued strong growth at flywheel.

Phil Angelastro: and a precision marketing group performance that driven by strong growth in the U.S. at our customer experience agencies, which is offset by lower clients spending primarily concentrated in a few markets outside the U.S.

Phil Angelastro: With the full contribution from recent client wins, we continue to expect stronger performance in our precision marketing group in the fourth quarter and beyond.

Phil Angelastro: Public relations grew 4%. This reflects growth related to US election spending, offset by softer performance internationally. Healthcare revenues are down 1%. By the end of this year, we'll be lapping a significant client loss, and recent wins should start contributing to improve performance. Branding and retail commerce declined by 5%, resulting from reduced client spending in our branding agencies and flat performance in retail commerce. Experiancial growth was very strong at 35%, driven by activations for the Summer Olympics. An execution and support was flat, like the good results and feel marketing offset by declines that are merchandising businesses.

Phil Angelastro: Public Relations grew 4%.

Phil Angelastro: This reflects growth related to U.S. election spending, all set by softer performance internationally.

Phil Angelastro: backyour

Phil Angelastro: Health care revenues are down 1% but the end of this year we will be lapping a significant client loss and recent wins should start contributing to improve performance.

Phil Angelastro: Branding in retail commerce declined by 5%.

Phil Angelastro: Resulting from reduced client spending in our branding agencies and flat performance in retail commerce.

Phil Angelastro: The experience of growth was very strong at 35% driven by activations for the summer Olympics.

Phil Angelastro: An execution and support was flat with like in good results in field marketing, offset by declines at our merchandising businesses.

Phil Angelastro: Turning to geographic growth on slide six, the US are largest market, but organic growth of 6.5% continue a strong performance trend this year. Performance in Europe was also strong in most markets, and the Asia-Pacific, Latin American, Middle East regions all posted solid growth.

Phil Angelastro: Turning to geographic growth on slide 6, the U.S. our largest market, how to get a growth of 6.5% continuing strong performance trend this year.

Phil Angelastro: Performance in Europe was also strong in most markets, and the Asia Pacific Latin American Middle East regions all posts its solid growth.

Phil Angelastro: Slide seven is our revenue by industry sector for the quarter and year-to-date, both of which maintain their historical stability with no significant changes in next. Now let's turn to slide eight for a look at our expenses. In the quarter, salary-related service costs grew with increased staffing levels, primarily reflecting our acquisition of Flywheel Digital in January. Year over year is a percentage of revenue. These costs were down 1.5% as we continue to near-shore, offshore, and reposition our workforce toward the higher growth services that our clients need. Third-party service costs grew in connection with the growth in our revenue, especially in disciplines that have a higher level of these costs, such as media, experiential, and feel marketing.

Phil Angelastro: Flight 7 is our revenue by industry sector for the quarter and year-to-date.

Phil Angelastro: Both of which maintain their historical stability, with no significant changes in next.

Phil Angelastro: Now let's turn to slide a for look at our expenses.

Phil Angelastro: In the quarter, Seller related service costs grew with increased staffing levels, primarily reflecting our acquisition of flywheel digital in January.

Phil Angelastro: Year of a year is a percentage of revenue. These costs are down 1.5%. As we continue to near shore offshore and reposition our workforce toward the higher growth services that our clients need.

Phil Angelastro: Third-party service costs grew in connection with the growth in our revenue, especially in disciplines that have a higher level of these costs, such as media, experiential and field marketing.

Phil Angelastro: Third-party incidental costs reflect out-of-pocket costs built directly to clients and warp a bit. Occupancy and other costs increased due to the flywheel acquisition and greater in-office activity, partially offset by lower rent expense. SDNA expenses increased primarily from increases in professional fees and other costs related to our strategic initiatives.

Phil Angelastro: Third Porti incidental costs reflect out-of-pocket costs build directly to clients and we're up a bit.

Phil Angelastro: Occupancy and other costs increased due to the flywheel acquisition and greater in-office activity, partially offset by lower rent expense.

Phil Angelastro: S.T.N.A. expenses increased primarily from increases in professional fees and other costs related to our strategic initiatives.

Phil Angelastro: Now let's turn to slide nine and look at our income statement in more. No adjustments during the third quarter, EBITDA and non-GAAP adjusted EBITDA both grew 7.9%, and the EBITDA margin was 16.0% versus comparable 16.1% margin last year. EBITDA reflects the addback to operating income for amortization of acquired and tangible assets and internally developed strategic platform and tangible assets. Approximately 85% of the amount added back relates to acquired and tangible assets. We expect similar levels of amortization in the fourth quarter. The EBITDA margin reflects our performance and includes costs and current connection with our investments and Omniple, Flywheel Commerce Cloud, AI and other technology platforms and tools, as well as costs related to the integration of Flywheel.

Phil Angelastro: Now let's turn to slide nine and look at our income statement in more detail.

Phil Angelastro: No adjustments during the third quarter, even a non-gapajustity, but a both for 7.9%.

Phil Angelastro: and the EVHOM margin was 16.0%.

Phil Angelastro: vs. Comparable 16.1% margin last year.

Phil Angelastro: Even our reflects the add-back to operating income for amortization of acquired and tangible assets.

Phil Angelastro: and internally develops strategic platform to tangible assets.

Phil Angelastro: Approximately 85% of you mounted back relates to acquired and tangible assets.

Phil Angelastro: We expect similar levels of amortization in the fourth quarter.

Phil Angelastro: The even on margin reflects our performance and includes costs and current connection with our investments and on the flywheel commerce cloud, AI and other technology platforms and tools, as well as costs related to the integration of flywheel.

Phil Angelastro: It also reflects the relative weighted performance of our disciplines. Year-to-date, our adjusted EBITDA margin is 15.1% compared to 15.2% last year. For the full year 2024, we continue to expect this margin to be close to flat with our 2023 adjusted EBITDA margin, a 15.6%, as we balance cost savings initiatives with strategic investment opportunities that we believe will drive strong future revenue and EBITDA growth. Moving down the income statement, that interest expense in the third quarter of 2024 increased 2.1 million to $40.4 million. The change was driven by a $12.9 million increase in interest expense due to higher outstanding debt from the flywheel financing and the recent note issuance and advance of our November maturity.

Phil Angelastro: It also reflects the relative weighted performance of our disciplines.

Phil Angelastro: Year to date, our Jeffedy Brown Margin is 15.1%.

Phil Angelastro: and compared to 15.2% last year.

Phil Angelastro: For the full year 2024, we continue to expect this margin to be closed to flat with our 2023 adjusted EBITDA margin, a 15.6% as we balance cost savings initiatives with strategic investment opportunities that we believe will drive strong future revenue and EBITDA growth.

Phil Angelastro: Moving down the income statement, that enters your expense in the third quarter of 2024, increased $2.1 million, to $4.4 million.

Phil Angelastro: The changes driven by its well-point $9 million increase in interest expense did a higher outstanding debt from the flywheel financing and the recent no-to-issue incentive advance of our November maturity.

Phil Angelastro: The change in net interest expense also reflects a $10.8 million increase in interest income due to higher average cash and short-term investment balances. Our income tax rate of 26.8% was in line with our expectation of 27%. We also expect the rate for the fourth quarter to approximately 27%. Below the line, I'd like to point out that our strong growth in revenue and EBITDA were driven in part, as always, by some agencies that have minority interest, including recent acquisitions. This resulted in higher minority interest expense in Q3 compared to last year. Net income growth of 3.8%, coupled with fewer diluted shares outstanding from a buyback activity, drove a 4.8% less than diluted earnings per share.

Phil Angelastro: The change in net interest expense also reflects a $10.8 million increase in interest income due to higher average cash and short-term investment balances.

Phil Angelastro: All right, from tax rate of 26.8% was in line with our expectation of 27%.

Phil Angelastro: We also expect the rate for the fourth quarter to approximate 27%.

Speaker Change: A load line I'd like to point out that a strong growth in revenue and even a, with driven in part, as always, by some agencies that have been already interested, including recent acquisitions.

Speaker Change: This resulted in higher minority interest expense in Q3 compared to last year.

Speaker Change: That income growth of 3.8% coupled with fewer diluted shares outstanding from a

Phil Angelastro: On an adjusted basis, excluding after-tax memorization, diluted earnings per share was up 5.7% to $2.03.

Speaker Change: Honour Justin Dacers

Speaker Change: Excluding After Tax Emeritization

Speaker Change: The Lutheran earnings per share was up by 0.7% to $2.3.

Phil Angelastro: Now please turn to slide 10. Pre-cash flow year-to-date is up 4% from last year. Our definition, like other peers, excludes changes in working capital. For the nine months end in September 30, we use the working capital improved by 8%, as you can see in the appendix on slide 18. We remain focused on working capital management and continue to work towards our starkly neutral annual level over time. According to our uses of cash, we used 416 million of cash to pay dividends to common shareholders and another 64 million for dividends to non-controlling inter-shareholders. Our capital expenditures were $94 million, which has discussed on prior calls, reflect our investment in flywheel and our strategic technology platform initiatives, as well as investments in our facilities.

Speaker Change: Now, please turn to slide 10.

Speaker Change: Free cash flow year-to-date is up 4% from last year, or a definition like other fears excludes changes in working capital.

Speaker Change: For the nine months and it's September 30th, we use a Wren capital to improve by 8%.

Speaker Change: as you can see in the appendix on flight 18.

Speaker Change: We remain focused on working capital management and continue to work towards our historically neutral annual level over time.

Speaker Change: Goring our uses of cash.

Speaker Change: We used 416 million of cash to pay dividends to common shareholders.

Speaker Change: and another 64 million for dividends from non-controlling inter-sharrollers.

Speaker Change: Capital expenditures are $94 million, which is discussed on prior calls, reflect our investment in flywheel and our strategic technology platform initiatives, as well as investments in our facilities.

Phil Angelastro: Total acquisition payments, which include earn-out payments and the acquisition of additional non-controlling interests, were $953 million, which primarily reflects the $845 million acquisition of Flywheel, net-of-cash acquired in January and the late September acquisition of Wheat-Point. Finally, our share of purchase activity, net of proceeds from stock plans, was $359 million year date, and $113 million in the quarter. Our expectation for the year has been for annual repurchases in 2024 to be approximately half of our historical average of about $600 million. While we exceeded that level as of September 30th, Q4 purchases will depend on a variety of factors.

Speaker Change: Joe Lacquisition Tames.

Speaker Change: which included our now payments and the acquisition of additional non-controllable interests.

Speaker Change: We're $953 million, which primarily reflects the $845 million acquisition of flywheel, native cash required, in January.

Speaker Change: and a late September acquisition of Lee Point.

Speaker Change: Finally, our share of person's activity, net of proceeds from stock plans.

Speaker Change: was $359 million a day and 113 million in the quarter.

Speaker Change: Our expectation for the year has been for annual repurchases in 2024 to be approximately half of our historical average.

Speaker Change: of about $600 million.

Speaker Change: While we exceeded that level as of September 30, two forward purchases will depend on a variety of factors.

Phil Angelastro: Slide 11 is a summary of our credit, liquidity, and debt maturities. At the end of the third quarter of 2024, the book value of our outstanding debt was $6.9 billion, which reflects the $655 million Euro financing, which we did earlier this year, to fund a portion of the flywheel acquisition and a $600 million U.S. financing this summer to be used with cash on hand to repay our $750 million notes due November 1st, 2024. The effects of foreign currency translation also increased the book value of our debt by $98 million. Our cash equivalence and short-term investments at September 30th, with $3.5 billion, up from last year, primarily reflecting the $600 million note issued this summer.

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

Speaker Change: At the end of the third quarter of 2024, the book value of our outstanding debt was $6.9 billion, which reflects the $65 million Eurofinancing.

Speaker Change: which we did earlier this year.

Speaker Change: To find a portion of the flywheel acquisition, and a 600 million US dollar financing this summer, to be used with cash on hand to repay our 750 million dollar notes due November 1, 2024.

Speaker Change: The effects of foreign currency translation also increased the book value of our debt by 98 million dollars.

Speaker Change: A cash equivalence in short-term investments at September 30, with $3.5 billion up from last year, primarily reflecting the $600 million note issued this summer.

Phil Angelastro: We also have an under-owned $2.5 billion evolving credit facility, which backstops our $2 billion U.S. commercial paper program. After the November maturity, we have no further majorities until April of 2026. The financing activity I just discussed has given us the opportunity to invest cash at favorable rates relative to the 3.65% coupon on our notes that are due in November. We will pay off the notes in November, and we currently estimate that net interest expense in Q4 will be a little higher than Q3 of 2024.

Speaker Change: We also have an under on $2.5 billion of evolving credit facility which back stops our $2 billion U.S. commercial paper program.

Speaker Change: After the November maturity, we have no further maturities until April of 2026.

Speaker Change: and Philip Angelastro.

Speaker Change: The financing activity I just discussed has given us the opportunity to invest cash and favorable rates relative to 3.65% coupon on our notes that are due in November.

Speaker Change: We will pay off the notes in November and we currently estimate that net interest expense in Q4 will be a little higher than Q3 of 2024.

Phil Angelastro: Slide 12 presents our historical returns on two important performance metrics for the 12 months end of September 30th, 2024. On the comes return on invested capital was 20% and return on equity was 41%. Both of which consistently reflect our strong performance and solid balance sheet.

Speaker Change: Slide 12 presents our StarCore returns on two important performance metrics for the 12 months and it's September 30, 2024.

Speaker Change: On the comes our turn on invested capital is 20% and our turn on equity was 41%.

Unknown Executive: I will now ask the operators, and please open the lines up for questions and answers. Thanks. Thank you.

Speaker Change: Both of which consistently reflect our strong performance and solid balance sheet.

Speaker Change: I will now ask the operator, please open the lines up for questions and answers.

Unknown Executive: If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad to raise your hand and join the queue. To withdraw your question, please press star one a second time.

Speaker Change: Thank you. If you have dialed in and would like to ask a question, please press star, followed by the number one on your telephone keypad to raise your hand and join the queue. To withdraw your question, please press star one a second time.

Unknown Executive: If you have dialed in 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.

Speaker Change: If you have dialed in and are listening to your loudspeaker on your device, please pick up your handset and ensure that your phone is not on you when asking your question.

David Karnovsky: Our first question comes from the line of David Karnovsky with JP Morgan. Please go ahead. Hey, thank you. John wanted to check in on what you're hearing lately from clients. You previously talked about Fed a lot and what they might do as a point of hesitation. We have some clarity there now, but there's obviously other factors like the election creating uncertainty.

Speaker Change: Our first question comes from the line of David Karnowski with Dave Pymorgon. Please go ahead.

David Karnowski: Hey, thank you. John, one of the check-in on what you're hearing lately from clients. You previously talked about Fed a lot and what they might do is a point of hesitation. We have some clarity there now that there's obviously other factors like the election creating uncertainty. So can you give an update on the tone of conversations and maybe how that's important to be of Q4 or 25?

John Wren: So can you give an update on the tone of conversation and maybe how that's important to view Q4 or 25? Sure. I don't think that Fed in terms of the balance of the year is much of a subject that we're currently discussing. It's turned primarily to the election, and even that won't really significantly impact what typically happens in the fourth quarter, which, God knows, you've been on the call. I'm going to say that every time this year, we gain visibility as we go through the quarter to see what clients are going to spend, and that number goes from some number to $250 million depending upon client activity.

Speaker Change: I don't think that said in terms of the balance of the year is

Speaker Change: Much of a subject that we're currently discussing, it's turned primarily to the election, and even that won't really.

Speaker Change: Significantly Impact, what typically happens in the fourth quarter, which is project-spent.

Speaker Change: God knows you've been on the call a long enough David, the Emily said this every time this year. We gain visibility as we go through the quarter to see what clients are going to spend in that number.

Speaker Change: Goes from some number to $250 million, depending on climate activity. I think that's, you know, more of the case at the moment.

John Wren: I think that's more the case at the moment. If, depending on who you talk to, a lot of people who are talking about we've achieved the soft landing, our business reflects that, but who knows. I probably will be doing something else if I actually could answer that question with the accuracy. I don't know if that's helpful or not.

Speaker Change: is...

Speaker Change: Penny on.

Speaker Change: We talked to a lot of people talking about with the chief to soft landing.

Speaker Change: Our business reflects that, but who knows and the soul.

Speaker Change: I probably will be doing something else if I actually could answer that question and come accurately.

Unknown Executive: That's very helpful.

David Karnovsky: I feel like I have to ask on Amazon just given it the largest media shift, at least a recent memory. Can you expand a bit on the wind factors you think kind of give you an edge and what that means for the water media is and then anything you can when you would expect that to start to flow through the results? Sure. Well, Amazon was just V-largest wind in quite a while and quite phenomenal, and we're very, very happy to have been selected and proud of it. It proves the number of points. One is the solid relationship we had with Amazon, coming off as a flywheel acquisition which we did earlier in the year.

Speaker Change: and I was very careful in that.

Speaker Change: That's from the top floor. And then feel like I have to ask on Amazon just given it the largest media shift, at least a recent memory. Can you expand a bit on the wind factors you think kind of give you an edge and review what that means for the water media is? And then you know anything you can say on when you would expect that to start to flow through the

Speaker Change: Sure, or Emma John would just...

John Wren: VLoges Wren in quite a while, and it's quite phenomenal, and we're very very happy to have been selected in proud of it. It proves a number of points. One is the solid relationship we had with Amazon coming off of the flywheel. Acquisition was we did earlier in the year, but more importantly, as I think you'd see in the convergence reports, if you looked at them, our media group has been incredibly successful this year.

John Wren: But more importantly, as I think you'd see in the convergence reports, if you looked at them, our media group has been incredibly successful this year, and we have every belief that will continue to do that as opportunities come up. So... So the skills, the investments on the all ads to an extremely strong media offering and overall from an Amazon point of view this has created a real enterprise relationship between the two companies and is going to permit us to do other things as we go forward. So very, very proud of that. It was a complicated, long process because they were very thorough in what they did, and we invested a great deal of time and energy demonstrating to them what we could bring to the party.

John Wren: and we have a very brief that will continue to do that as opportunities come up.

John Wren: So the skill, the investments, I mean all that, all adds to an extremely strong media offering and overall from an Amazon point of view, this has created real enterprise relationship between the two companies.

John Wren: and it's going to permit us to do other things as we go forward. So, very, very proud of that. It was...

John Wren: a complicated long process because they were very thorough and what they did and we invested a great deal of time and energy.

John Wren: Thank you. You know, the one thing is, as you mentioned, flow through or something along that line. Now, when you're pitching a piece of business like that, it's expensive. The revenue will start in the new year. What we're currently doing is making sure that we're staffing up properly. So no balls are dropped, and that is something that will continue through the fourth quarter.

John Wren: Demonstrating to the month we could bring to the party.

John Wren: and thank you.

John Wren: I mean, I'll go the one thing is...

Speaker Change: As you mentioned, flow through or something along that line, when you're pitching a piece of business like that, it's expensive.

Speaker Change: The Revenue will start in the new year, what we're currently doing is making sure that we're staffing up properly so no balls are dropped and that is something that will continue through the fourth quarter.

Cameron McVeigh: Our next question comes from the line of Cameron McVeigh with Morgan Stanley. Please go ahead. Thanks, John. As you think about growth over the next couple of years, you know, with mid-single digit, top-line growth. Can you get the margin expansion and then back to being a double-digit VPS grower? In your view, what would need to go right to make that happen? Well, there's a number of things that are going on. There's what we've done in production earlier in the year; what we do with OAG just in the last quarter. Those are all efficiencies, which are going to help us perform better as we go forward.

Speaker Change: Our next question comes from the line of Cameron McVay with Morgan Stanley. Please go ahead.

Cameron McVay: Thank you, John, as you think about growth over the next couple of years, you know, with mid-single digit, top line growth, can you get some margin expansion and then back to being a double digit BPS grower, near view what would need to go right to make that happen.

Speaker Change: Um, what?

Speaker Change: There's a number of things that are going on, there's...

Speaker Change: What we've done in production earlier in the year, what we do with OAG just in the last quarter, those are all efficiencies which are going to help us perform better as we go forward. What is unknown is the level of investments that we continue to make to get AI and all the associated benefits associated with that. Functioning at a level that is...

John Wren: What is unknown is the level of investments that we continue to make to get AI and all the associated benefits associated with that, functioning at a level that is really bulletproof or tested to the point where it won't break if we deploy it to clients. And we're in the process of doing that right now. And that's a process that's going to continue through the balance of this year, where we've developed some incredibly interesting tools, which should make us more effective going forward. But there's a cost associated with the development of those tools. And that's how you stay at the top of that convergence list and then your business list by constantly making those investments while striving for the appropriate margins that we should be receiving.

Speaker Change: Really

Speaker Change: Bulletproof or tested to the point where it won't break if we deploy it to client and we're in the process of...

Speaker Change: I'm doing that right now and that's process is going to continue to be the balance of this year where we've developed some incredibly interesting tools which should make us more effective going forward.

Speaker Change: But there's a cost associated with the development of those tools. And that's how you stay at top of that convergence list, and then your business list, by constantly making those investments, while striving for the appropriate margins that we should be receiving.

Cameron McVeigh: So I'm bullish as we go forward because our guys have done amazing things so far, and now we're just testing its tolerance. Got it. Thanks.

Speaker Change: So I'm bullish as we as we look forward because our guys have done amazing things so far and now we're just testing it.

John Wren: And then secondly, how is the integration of Flywheel been going? What have you learned? How are the potential growth and margin impact trending as we head into the fourth quarter and look into 2025? And do you still expect Flywheel to grow top line double digits? The answer to that question is yes. I do respect it to grow. There's no better demonstration of collaborative effort than the Amazon win, which I just spoke about a second ago. I mentioned in my call that we're able to measure market expense for the very first time, and that's done with a rather important CPG client that we have, where we've proven that it's all measurable.

Speaker Change: Got it. Thanks. And then secondly, how is the integration of flywheel been going? And what have you learned? How are the potential growth and margin impacts trending as we head into the fourth quarter and look into 2025? Do you still expect flywheel to grow? Top line double digits.

Speaker Change: The answer to that question is yes, I do expect it to go. There's no better demonstration of

Speaker Change: Collaborative effort then the Amazon win, which I just spoke about a second ago. I'm mentioning in my call that we're able to measure.

Speaker Change: Marketing Spend for the very first time and that's done with a rather important CPG client that we have where we've proven that it's all measurable. And as we get other clients where we have the opportunity to do that, that's going to further distinguish Omnicom in terms of justifying media spend in ROI and investment in...

John Wren: And as we get other clients where we have the opportunity to do that, that's going to further distinguish Omnicom in terms of justifying media spend in ROI and investment in just the general area. I think the other thing that's helpful from a flywheel perspective is the integration that's happened between Omnic and the data and analytics platform that we have with Omnic and the flywheel data that now flywheel commerce cloud data, that that was part of that solution and service offering. So having the behavioral data of an Omnic, which is a very robust data set, along with the flywheel commerce transaction data set, is a very powerful proposition.

Speaker Change: and just the general area.

Speaker Change: I think the other thing that's helpful from a flywheel perspective is the integration that

Speaker Change: that happened between Omni and the data analytics platform that we have with Omni and the flywheel data that now flywheel commerce cloud data, that that was part of that solution and service offering. So having the behavioral data of an Omni which is very robust data set along

Speaker Change: The flywheel commerce transaction data set is a very powerful proposition, certainly our clients are interested in that solution and we think over time there's going to be more and more examples of that really being a powerful tool for us with our clients and with new business winds going forward.

Cameron McVeigh: Certainly, for clients are interested in that solution, and we think over time there's going to be more and more examples of that really being a powerful tool for us. With our clients and with the new business ones going forward. Great.

Unknown Executive: Thank you.

Stephen K. Hall: Our next question comes from the line of Stephen K. Hall with Wells Fargo. Please go ahead. Thank you. So I think the higher end of the four to five percent guidance range that you've talked about implies like low fours organic growth in Q4. So just trying to think about, you know, whether that's an intentional walk towards that level for Q4 or, you know, with some of that uncertainty that always is there with project spend if you just want to be conservative, as I know you often are at this point. I think you talked about a sequential acceleration and growth in the second half of the year.

Speaker Change: Great, thank you.

Speaker Change: Episode 2

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

Speaker Change: Thank you. So I think the higher end of the four to five percent guidance range that you've talked about implies like low fours, organic growth in Q4. So just trying to think about, you know, whether that's an intentional walk towards that level for Q4 or, you know, with some of that uncertainty that always is there with project spend. If you just want to be conservative, as I know you often are at this point. I think you've talked about a sequential acceleration and growth in the second half of the year. So just want to think about how we can think about Q4 within that since that has bigger implications for 2025.

John Wren: So just want to think about how we can think about Q4 within that. Since that has bigger implications for 2025. And then John, I think a few quarters ago when you closed on Flywheel, you talked about precision marketing, possibly exiting this year at close to double digit growth. So still, I know you gave some reasons as to why it was a little slower, and that you expected to accelerate in Q4. We're just wondering if you could go maybe a level deeper as to what you're seeing in the precision marketing segment and how we can think about maybe the longer-term performance in that business.

Speaker Change: and then John I think a few quarters ago when you closed on flywheel you talked about precision marketing, possibly exiting this year at close to double-digit growth. So I know you gave some reasons why it was a little slower and that you expected to accelerate in Q4. We're just wondering if you could go maybe a level deeper as to what you're seeing in the precision marketing segment and how we can think about maybe the longer-term performance of that business. Thank you.

John Wren: Thank you.

John Wren: Sure. Well, I'm sticking with our guidance because I don't know the project spend in the fourth quarter. We're certainly trying to continue to win whatever business we can. and the service of clients wherever we can profitably service them. So there's no lack of effort going on anywhere. It was in the fall walls of this company. I'm not; I'll stick with my statement. I expect to be at the very end of what my guidance has been for the year. And I'm confident, as a city today, that I'm going to be able to achieve that. If I'm lucky in as more projects, then obviously that will flow through as well.

John Wren: Sure. Well, I'm sticking with our guidance because I don't know the project spend in the fourth quarter. We're certainly trying to continue to win whatever business we can and to service our clients wherever we can profitably service them. So there's no lack of effort going on anywhere. It was in the four walls of this company.

John Wren: I'm not...

John Wren: I'll stick with my statement, I expect to be at the very high end of what my garden has been for the year and I'm confident as I sit here today that I'm going to be able to achieve that. If I'm lucky him, his more projects spend, obviously that will flow through as well.

John Wren: In terms of precision, you know, the film can add to it, but the United States has been very strong. The shortfall, if there has been, it's been primarily outside the United States. And specifically outside the United States, there was a consulting business that was very tied to the UK government and the snap election that was called, kind of suspended spending in the short run while that election was being executed. And we, that will return to growth in the fourth quarter, based upon everything we know as we sit here today. Film might have some of the new ones there.

John Wren: in terms of precision.

Speaker Change: You know, Philip can add to it, but the United States has been very strong.

Speaker Change: and the shortfall if there has been, it's been primarily in Absagina as states.

Speaker Change: and specifically outside the United States, there was consulting business that was very tired to the...

Speaker Change: UK government and the snap election that was called, kind of suspended.

Speaker Change: Spending.

Speaker Change: In the short run, while that election was being...

Speaker Change: Executed, and we shall return to the growth.

John Wren: Yeah. So, you know, our view of the Precision Marketing Group and that space, you know, hasn't changed. You know, we think it's a strategic growth area for us. No question. We're committed to continuing to invest over the long term in that space, most recently through the acquisition of Lead Point, which we closed just at the end of September. You know, the growth prospects in that business are great both in the US and outside the US. They had some recent new business wins that have just started to kick in, GM and the US in particular, as an example.

Speaker Change: in the fourth quarter, based upon everything we know as we sit here today, to help make up some of the new ones. Yeah, our view of the precision marketing group and that space has and changed. We think it's a strategic growth area for us no question.

Speaker Change: We're committed to continuing to invest over the long-term in that space, most recently through the acquisition of lead point, which we closed just at the end of September . The growth prospects in that business are great both in the US and outside the US. They had some recent new business wins that have just started to kick in GM and the US in particular as an example. We expect excellent growth prospects in the relatively near-term and we're optimistic about his performance in Q4 for sure.

John Wren: And, and we expect, you know, excellent growth prospects in the relatively near term. And we're optimistic about its performance in Q4 for sure.

Unknown Executive: Great. Thank you.

Jason Bazzone: Sure. Our next question comes from the line of Jason Bazzone with City. Please go ahead.

Speaker Change: Great, thank you.

Speaker Change: Sure.

Speaker Change: Our next question comes from the line of Jason Bazzeney with City. Please go ahead.

Jason Bazzone: I just, I just had a question about your view of the overall industry. And I, I ask because your growth rate has been in this sort of mid-single-digit range, which is a bit better than it was, maybe a decade ago. And do you think that this is a function of just, you're taking share from other holding companies? Or do you think that the overall industry is actually doing a bit better and growing a bit more briskly? Thanks. Well, I think our product mix is certainly shifted as we've made investments in things like Flywheel, things like Army.

Jason Bazzeney: I just have a question about your view of the overall industry and I ask because your growth rate has been in this sort of mid-single-visit range, which is a bit better than it was, maybe a decade ago. And you think that this is a function of just your taking share, other holding companies, or do you think that the overall industry is actually doing a bit better and growing a bit more briskly than it is.

Speaker Change: Well, I think I'm proud of you.

Speaker Change: Mixed a certain way of shift as we've made investments in things like flywheel, things like army, we can measure better than we could a decade ago, and anything you can measure.

John Wren: We can measure better than we could a decade ago. And anything you can measure, clients typically will sit and give you a very fair hearing about where to invest that money. So, I do think that the industry is. In better shape than it was in the last five or six years, confident that that will only continue. And I think that the investments that we've made and where we've placed our focus have paid off and will continue to pay off because we can distinguish ourselves in ways that we've never been able to do five years ago.

Speaker Change: Klein's trepagal little sitten, you do a very fair hearing about where to invest that money. So I do think that the industry is...

Speaker Change: In better shape than it was in the last five or six years, and I'm confident that that will only continue. And I think that...

Speaker Change: The investments that we've made and where we've placed our focus have paid off and they'll continue to pay off because we can distinguish ourselves in ways that we've never been able to do five years ago.

John Wren: So I remain bullish about our prospects, and as I enter into 25, they get supported by the laundry list of wins that I've talked about in my prepare remarks, really contributing revenue in this calendar. They're contributing expenses as we get ready to service that revenue.

Speaker Change: So...

Speaker Change: I remain bullish about.

Speaker Change: Opera Specks, and...

Speaker Change: As I entered into 25, they get supported by the laundry list of winds that I've talked about in my prepare remarks, we're really contributing.

Speaker Change: Revenue in this calendar, they're contributing expenses as we get ready to service that revenue, but we should be off.

John Wren: But, so we should be off to a very solid start, I would think, as we get into 25 and beyond.

Speaker Change: To a very solid start, I would think as we get into 25th.

John Wren: Yeah, in terms of the portfolio itself and where it stands today, we've done quite a bit of work over the last five, six years to strengthen the portfolio. We've exited a few different businesses and service lines, and we're confident about the parts of the business we've been making investments in, in terms of their growth prospects. So certainly the business we have today is quite a bit different than what we had just six, seven, eight years ago, and the world is different. But one of the other things that we think we've been able to capitalize on is yet the convergence or emerging of certain budgets within the client that we have access to today because of the services and disciplines we offer clients, which didn't necessarily have access to on the path. And that's opening up beyond marketing and advertising budgets and having access to services that we can provide to the CIO organization and the sales organization at our clients as well.

Speaker Change: And we are on the Great. Yeah, in terms of the portfolio itself and where it stands today, you know, we've done quite a bit of work over the last five, six years.

Speaker Change: um

Speaker Change: to strengthen a portfolio. We've exited a few different businesses and service lines. And we're confident about the parts of the business we've been making investments then in terms of their growth prospects.

Speaker Change: Yep, the business we have today.

Speaker Change: is quite a bit different than what we had just, you know, six, seven, eight years ago and the world is different. But one of the other things that we think we've been able to capitalize on is

Speaker Change: yet the convergence or merging of

Speaker Change: Certain budgets within the client that we have access to today because of the services and disciplines we offer clients, which didn't necessarily have access to in the past and that's opening up beyond marketing and advertising budgets and having access to services that we can provide.

Speaker Change: 2, you know, the CIO organization and the sales organization at our clients as well. So we've got a broader group of services and a broader group of clients.

John Wren: So we've got a broader group of services and a broader group of clients to kind of potentially access if you know we're successful.

Speaker Change: is a kind of potentially access if, you know, we're successful.

Unknown Executive: That's great, thank you.

Tim Nolan: Our next question comes from the line of Tim Nolan with McCory. Please go ahead. Thanks, I've got a couple as well separately, so first, John, could you explain a bit more about the on-ecom advertising group you announced this, I think, over the summer after you had last reported numbers.

Speaker Change: Let's pray, thank you.

Speaker Change: Church.

Speaker Change: Our next question comes from the line of Tim Nolan with Macquarie. Please go ahead.

Tim Nolan: Hi, thanks. I've got a couple as well separately. So first, John , could you explain a bit more about the Omnicom Advertising Group to announce this, I think, over the summer after you had last reported numbers? It seems to me like as far as a bit on what you did many years ago, putting Omnicom Media Group together and then just last quarter you announced the Omnicom Productions Studios, so kind of consolidating, you know, agency operations. And then you've got Flywheel in the mix now, which I think is sort of tapping into all these things. So are you just kind of becoming one bigger, better integrated company now versus how do you service individual clients, this individual agency brand? I guess that's the question. How integrated versus separate are you now?

John Wren: It seems to me like, as far as a bit on what you did many years ago putting on-ecom media group together, and then just last quarter you announced the on-ecom production studios, so kind of consolidating agency operations. And then you've got flywheel in the mix now, which I think is sort of tapping into all these things. So are you just kind of becoming one bigger, better integrated company now versus how do you service individual clients this individual agency brand? I guess that's the question: how integrated versus separate our units. No. Sure. The short answer to that is we're much more integrated than we've ever been in the past, but the motivation for doing, on the time advertising group was as as you look into the technological changes which are impacting our business and the use of artificial intelligence and how it's going to be applied in the efforts that we are engaging in, it is more sensible for us to be making those investments on a singular basis and then light labeling those products and deploying them to the various cultures that we have.

John Wren: Sure, I'm...

John Wren: The short answer to that is when much more integrated than we've ever been in the past. But the motivation for doing how we're charging group was as...

John Wren: As you look into the technological changes which are impacting our business and the use of artificial intelligence and how it's going to be implied.

John Wren: in the efforts that we are engaged in. It is...

John Wren: More sensible for us to be making those investments.

John Wren: and a singular basis.

John Wren: and then light labeling those products and flying them to the various cultures that we have.

John Wren: The move of OAG was really done on our front foot, saying that we can do a better job for our clients, a better deployment of our talent, a better creation and execution of tools if we look at those efforts singularly. But we're still very dedicated to the brands and the various cultures that the brands bring to the party because every one of our agency groups is somewhat different in their approach and how they go to markets, and different clients have different needs for those approaches. So, it puts us in a situation where I think we can optimize the best of both worlds, maintaining a very strong past which allows us to attract, continue to attract the strongest talent in the market, but yet concentrate and make meaningful investments in tools that are deployed that are useful to every client and will create efficiencies in the case of many, many clients and improve the speed and information that our knowledge workers, be they creative, be they strategic people, will have access to.

John Wren: The move of O.A.J. was really done on our front foot.

John Wren: saying that we can do a better job for our clients, a better deployment of our talent, a better...

John Wren: Creation and Execution of Pools, if we look at those efforts.

John Wren: Singurly, but we're still very dedicated to the brands and the various cultures that the brands bring to the party, because every one of our agency groups is somewhat different in their approach and how they go to markets and different clients have different.

John Wren: Needs for those approaches, so it puts us in a situation where I think we can optimize the best of both worlds, maintaining a very strong path which allows us to attract, continue to attract the strongest count in the market.

John Wren: Constantrade and make meaningful investments in tools and...

John Wren: that are...

John Wren: Deploy that are useful to every client and will.

John Wren: Great efficiencies in the case of many, many clients.

John Wren: and Improved.

John Wren: The speed and information that our knowledge work is being a creative, be the strategic people.

John Wren: So, is it more top line synergies, I guess, or is it more cost savings, or is it equally both? No, the cost savings are diminimous in terms of; it's waste avoidance more than anything else rather than listening to 75 different agencies, slightly variant approach towards AI. What we're able to do is to put them in a room and have them come up with a consensus as to what they think would be most useful for their clients, and then make those investments beyond that. Had we not put in media together 20 odd years ago, we would have never been able to create army if you had 14 different media groups.

John Wren: will have access to him.

Speaker Change: So is the more top line, you know, synergies against or is it more cost savings or is it equally Bose?

Speaker Change: Now the class savings are in terms of...

Speaker Change: It's... it's...

Speaker Change: It's waste avoidance more than anything else rather than listening to

Speaker Change: 75 different agencies.

Speaker Change: Slightly variant approach towards AI. What we're able to do is to put them in a room and have them come up with a consensus as to what they think would be most useful for their clients and then make those investments beyond that. Had we not put an idiot together 20 odd years ago, we would have never been able to create Omnic if you had 14 different media groups. So this is...

John Wren: because nothing is the same as it was in the past, but it's very similar, and with the resources that we have and the intelligence that we have, making those investments properly where they can be most useful to clients, and most useful to us in terms of us being the group that gets selected when clients put their business up for review. it's a balance of both, so it's waste avoidance as opposed to cost synergy. we weren't looking to cut heads, we were looking to improve the quality of the products of our brands and the tools that those folks had available to them.

Speaker Change: Nothing is the same as it was in the past, but it's very similar and

Speaker Change: with the resources that we have and the intelligence that we have making those investments properly.

Speaker Change: where they can be most useful to clients and most useful to us in terms of us being.

Speaker Change: The group that gets selected when clients put their business up for review.

Speaker Change: It's a balance of both, so it's waste of audiences opposed to cross-sendering.

Speaker Change: We're out looking.

Speaker Change: to cut heads we were looking to improve.

Speaker Change: The quality of the products of our brands and tools that those folks had available to them.

Unknown Executive: Okay, God, thanks for that explanation. That's clear.

Tim Nolan: My second topic I wanted to bring up is about retail media. You were talking a bit about flywheel and how it helped with Amazon, and my question really is, do you feel like you're active in both on-site as well as off-site retail media, and if you could talk about maybe what the opportunities are in each, you know, on-site being bringing ads onto a retailer's website, or apps, and then off-site being able to do what it seems to me is really what agency should be good at is understanding where consumers are, how to reach them wherever they are, and bring them to the retailer's site.

Speaker Change: Okay, God, thanks for that explanation, that's clear. My second topic I wanted to bring up is about retail media. You were talking a bit about flywheel and how it helped with Amazon. A question really is...

Speaker Change: Do you feel like you're active in both on-site as well as off-site retail media? And if you could talk about maybe what the opportunities are in each, you know, on-site being bringing ads onto a retailer's website or apps and then off-site being able to do what it seems to me is really what agency should be good at is understanding where consumers are, how to reach them wherever they are, and bring them to the retailer's site. It's always not too deep in the weeds, but I wonder if you could maybe talk about how flywheel might help with your agency's ability to do that.

John Wren: It's always not too deep in the weeds, but I wonder if you could maybe talk about how Flywheel might help with your agency's abilities to do that? Well, flywheel as a leader, bar none, by multiples of activity, in the leading online retail type of providers, via Amazon, Walmart, you go down the list Target, you've got side of the United States and China, which has some pretty cutting-edge things, we're engaged with them as well. So, we were first to the market, or they were first to the market before we acquired them. We have a great depth of knowledge.

Speaker Change: Well, fly with the leader.

Speaker Change: Barnon.

Speaker Change: by multiple of activity.

Speaker Change: in the leading.

Speaker Change: I'm mine.

Speaker Change: Rekel type of...

Speaker Change: Provider spirit Amazon Walmart, use it in the list target.

Speaker Change: He's outside of the United States and China, which has some pretty cutting edge things where we're engaged with them as well. So we were first to the market or they were first to the market before we acquired them. We have a great depth of knowledge. We have a lot of trust built up with the pioneers who really blaze the retail trail because of our history. So I think we're in very good shape. Now, does it mean I have an apple in it? No. There'll be other pretenders that come to the market and we'll compete against them but we'll compete successfully. But it's a flywheel.

John Wren: We have a lot of trust built up with the pioneers, who really blaze the retail trail because of our history. So, I think we're in very good shape. Now, does it mean I have an apple in it? No, there'll be other pretenders that come to the place, to the market, and we'll compete against them, but we'll compete successfully. But the flywheel was, in fact, a decade ahead of the next closest thing. People will put together fancy press releases and say that they can accomplish things, but, substantively, Flywheel has done it, and we continue to make further investments in Flywheel, and the team that envisioned that before a marketplace really existed, and the people responsible for it, are the best in a relatively small industry in terms of where the count lies.

Speaker Change: was, in fact, a decade ahead of the next close to Spain. People will put together fancy press releases and say that they can accomplish things, but substanceively flywheel is done.

Speaker Change: and we continue.

Speaker Change: Make further investments in flywheel and...

Speaker Change: The team then.

Speaker Change: In vision that before a market place really existed and the people responsible for it are the best in a relatively small industry in terms of where the town lives.

John Wren: So, I think we're very fortunate to have Flywheel, and it will contribute very strongly to our growth as we move forward.

Speaker Change: I think...

Speaker Change: We're very fortunate to have flywheel and it will contribute very strongly to our growth as we move forward.

Craig Huber: Thank you. Our next question comes from the line of Craig Huber with Huber Research Partners. Please go ahead. Thank you. I've got a couple of questions.

Speaker Change: Our next question comes from the line of Craig Hubert with Hubert Research Partners. Please go ahead.

John Wren: John, it's not often that we hear you use the word "bullish" to describe your business. I think I heard you say twice. I think your business and your outlook and stuff. So love to expand upon that, please. Well, I'm listening here. Just a little more depth there about what you're seeing in the marketplace, the US overseas. Why do you use the word bullish? What's changed your mind? Well, you know, I'm bullish about Omnicom. First and foremost, this is the level of wins that we've had in the last four months of the year, which will be contributing to revenues that we go start into next year.

Speaker Change: Thank you for a couple of questions. It's not often we hear you use the word bullish to describe your business. I think I heard you say it twice. I think your business and your outlook and stuff. I'd love you to get me in the phone now please.

Speaker Change: Well, he's... I'm listening here. Just a more depth than I thought. What you're seeing in the marketplace, the US, overseas, why are you using the word bullshit? What's changed your mind?

Speaker Change: Well, you know, I'm bullish about Omnicom. First and foremost, we just said the level of a wind that we've had in the last four months of the year, which we'll be contributing to revenues that we start into next year. I'm also bullish about...

John Wren: I'm also bullish about our percentage of winning and our ability to compete in the marketplace and the sophistication of the clients that have selected us in this whole process. So I've got a lot of confidence in the beginning of nature, a lot of confidence in the teams that are pitching, a lot of confidence in the tools that we've developed and the ones we're currently basering. So that's what really makes me bullish. And with each one of these technological improvements, we're able to increasingly optimize and measure our performance. And anything that can be measured can be sold to a sophisticated client.

Speaker Change: Our percentage of winning and our ability to compete in the marketplace.

Speaker Change: and the sophistication of the clients that have selected us.

Speaker Change: in this whole process. So, I've got a lot of confidence.

Speaker Change: In the beginning, I make sure that a lot of confidence in the teams that are out pitching. I have a lot of confidence in the tools that we've developed and the ones we are currently basering.

Speaker Change: So...

Speaker Change: That's what really makes me bullish and with each one of these technological improvements we're able to increasingly optimize and measure our performance and anything that

John Wren: Are there going to be bumps in the road and interruptions in certain industries in the economy, of course. But from an overall point of view, I am bullish, very confident, but mostly confident in the team that surrounds me and the investments that we've made.

Speaker Change: to be measured.

Speaker Change: can be sold to sophisticated plants. Are there any bumps in the road and interruptions in certain industries in the economy? Of course, but from an overall point of view.

Speaker Change: I am bullish, I'm very confident, but mostly confident in the team that surrounds me and the investments that we've made.

John Wren: In my second question, John, I'm pretty sure my wife will use the same thing. And gee, I haven't been bullish about this either. But no, I am bullish. I did use it twice. But now I've used it five times. Good to hear.

Speaker Change: Um...

Speaker Change: My second horse is on. I'm a wife, I used the same thing in GM and bullish, but there's either half, but no, I am bullish. I did use the twice, but now I'm used the five times.

Phil Angelastro: And then on margins, if one of you could comment, I mean, obviously, if you have roughly 5% organic growth for a year, you're talking about margins close to flat with a year ago. So you just go through force what's holding back your margins this year? What's unique this year holding back? I mean, obviously you guys invest very heavily every year, but is it significantly higher this year than prior years? And then what's going to fall off potentially next year to help margins, potentially next year, if you have roughly similar growth?

Speaker Change: All right, good to hear. And then on margins, if one of you could comment, I mean, obviously, if you have roughly, as you're saying, roughly fives an organic growth the year you're talking about margins close to flat with a year ago, you just go through force what's holding back your margins this year? What's unique this year holding back? I mean, obviously you guys and that's very heavily every year, but is it significantly higher this year, this year than prior years? And then what's going to fall off potentially next year to help margins, potentially next year? If you have roughly some more growth. Thank you.

John Wren: Well, I'll let Phil do this one. I'll just add one and two small comments for the front. One is to get business. You have to invest money to receive the revenue from it. And I think I said this 10,000 times before, not just twice. When you win a new piece of business, it's the most expensive time. of your relationship because you're staffing up without the revenue. And unfortunately, when you lose business, would you counterintuitively, but expect to see margin improvement because you can reduce your staff pretty quickly, and the revenue is still coming to you contractually.

Speaker Change: Well, now let's go.

Speaker Change: I'll just add one to small comments so far.

Speaker Change: wanted us to get busy and see how to do the best money.

Speaker Change: and two to see the revenue from it.

Speaker Change: and I think I've said this 10,000 times before and I've just twice. When you win a new piece of business, it's the most expensive time.

Speaker Change: of your relationship because you're staffing up without the revenue and unfortunately when you lose this, would you counterintuitively, but you're expecting to see margin improvement, because you can reduce your staff pretty quickly, and the revenue is still coming to you contractually. So don't be deceived by any 90-day period.

Phil Angelastro: So don't be deceived by any 90-day period; would be my word of caution. We are trying to balance in our judgment where we should be making investments and how we make those investments internally through our P&L in order to develop the products which make us successful in the marketplace. So it's a balance of delivering margin to the shareholder, but making sure that we're fit for purposes where you'll fold it.

Speaker Change: would be my word of caution.

Speaker Change: We are...

Speaker Change: Frying to balance.

Speaker Change: in our judgment.

Speaker Change: Where we should be making investments.

Speaker Change: and how we make those investments internally through our P&L in order to develop the products which make a successful on the marketplace. So it's a balance of delivering margin to the shareholder but making sure that we're fit for purposes we go forward.

Phil Angelastro: I feel you want to. Yeah, I think those are certainly a couple of the key parts of how we look at the margin profile overall and how we manage the company strategically overall. And 2024 is no different in terms of our approach. You know, as we said throughout the year, we expect margins for the year to be close to flat. You know, as John indicated, there have been quite a few pitches that we've been successful in. Those pitches do require an investment, and then when you win them, staffing up requires an investment in the near term.

Speaker Change: I'm sorry, you want it

Speaker Change: Yeah, you know, I think those are certainly...

Speaker Change: A couple of the key parts of how we look at the margin profile overall and how we manage the company.

Speaker Change: is strategically overall.

Speaker Change: Um...

Speaker Change: and 20, you know, 2024 is no different.

Speaker Change: Um...

Speaker Change: in terms of our approach.

Speaker Change: You know, as we said throughout the year we expect.

Speaker Change: Margins of the year reclosed to flat.

Speaker Change: Um...

Speaker Change: You know, as John indicated the rhythm.

Speaker Change: Quite a few pictures that we've been successful in.

Speaker Change: Those pictures do require an investment and then when you win them.

Phil Angelastro: You know, we're going to continue to make strategic investments in the business on the platform, flywheel, commerce, cloud platform. And this year, certainly there's been more of a focus on GNI, and there have been a number of initiatives that we pursue and continue to pursue in a space that we think is going to be very important for our business going forward. And the goal ultimately is to make those investments to position us for sustainable future growth. And, you know, we've done that in the past. We've seen it benefit us in terms of the omniplatform and the many wins we've had over the years because of the investments we've made.

Speaker Change: Staffing Up requires an investment in the near term.

Speaker Change: Um...

Speaker Change: You know, we're going to continue to make strategic investments.

Speaker Change: in the business, the Omni platform, flywheel, commerce, cloud platform.

Speaker Change: and this year, there's been more of a focus on Gen AI.

Speaker Change: and a number of initiatives that we pursued and continue to pursue.

Speaker Change: Um...

Speaker Change: in a space that we think is going to be very important.

Speaker Change: for our business going forward.

Speaker Change: Um...

Speaker Change: and the goal ultimately.

Speaker Change: is to make those investments to position us for sustainable future growth.

Speaker Change: Um...

Speaker Change: and you know we've done that in the past.

Speaker Change: We've seen it benefit us in terms of the on-the-platform.

Speaker Change: Um...

Speaker Change: and the many wins we've had over the years.

Phil Angelastro: You know, we look at the business long-term; we reevaluate the portfolio. But the goal ultimately is to grow, grow sustainably, and over time grow margins. So, you know, we've got a number of efficiency initiatives that are well underway. We're going to continue to pursue the areas of offshoring and near-shoring. Automation certainly is a big push of ours. We continue to push that and look for efficiencies wherever we can find them. And ultimately, that's where some of these benefits in terms of margin improvement are going to come from. But we're not going to, you know, be short-sighted, not make the investments that need to be made to have sustainable growth just because we want to maximize margins in the short term.

Speaker Change: because of the investments we've made.

Speaker Change: We look at a business long-term with reevaluates portfolio, but the goal ultimately is to grow.

Speaker Change: Joseph sustainably.

Speaker Change: and over time, girl margin. So...

Speaker Change: We've got a number of efficiency initiatives.

Speaker Change: That are well underway, we're going to continue to pursue.

Speaker Change: the area of offshore and near-shoreing.

Speaker Change: Automation Circling is a big push of ours.

Speaker Change: We continue.

Speaker Change: To push that and look for efficiencies wherever we can find them.

Speaker Change: Um...

Speaker Change: and ultimately that's where some of these benefits in terms of margin improvement are going to come from but we're not going to, you know, the short-sighted, not making investments that need to be made to have sustainable growth just because we want to maximize margins in the short term but certainly we're going to continue to strive to improve margins over time and we think, you know, we have a portfolio that's going to allow us to do that and some of the recent wins certainly are very encouraging towards that as we go forward.

Phil Angelastro: But certainly we're going to continue to strive to improve margins over time. And we think, you know, we have a portfolio that's going to allow us to do that. And some of the recent wins certainly are very encouraging towards that as we go forward.

Unknown Executive: Great.

Unknown Executive: Thank you very much. Sure.

Adam Berlin: Our next question comes from the line of Adam Berlin with UBS. Please go ahead. Go ahead. Hi, good evening. Two questions, if I can. Very strong quarter with 6.5% organic growth. You mentioned there were some benefits from the US election cycle and the Olympics in there. But can this be a typical course? Is this the kind of growth you're looking to achieve? Or should we just think there's a bit of a one of special courts just given those special events?

Speaker Change: Great, thank you very much.

Speaker Change: Sure.

Speaker Change: Our next question comes from the line of Adam Berlin with UBS. Please go ahead.

Speaker Change: and you're high good evening. Two questions if I can.

Adam Berlin: Very strong quarter was 6.5% organic growth and you mentioned there were some benefits from the US election cycle and the Olympics in there. But can this be a typical quarter? Is this the kind of growth you're looking to achieve? Or should we just think there's a bit of a one of special quarter just give them those special events? That's the first question.

John Wren: That's the first question. Well, the election probably contributed less than it has in prior presidential elections, but it did contribute something. And wherever there's an Olympics, we generally get a bump, and that's every two years or so. We also get a bump during congressional elections in the United States as well over two years. So I think there is some contribution in the 6.5 to those activities. But whilst they're not every quarter, they are ongoing because we have the best players servicing those areas. So yeah, you know, I mean, we've grown a little over 5% through nine months.

Adam Berlin: well

Speaker Change: The election probably contributed less than it has in prior presidential elections, but it did contribute something.

Speaker Change: and...

Speaker Change: Good.

Speaker Change: wherever there's.

Speaker Change: and Olympics. We generally get a bump and that's every two years or so. We also...

John Wren: We expect to be at the high end of our range for the year. We grew 4.1% last year. Coming out of COVID, you know, double digits in 21, 9.5% in 22%. You know, we're expecting to grow in the future is, you know, 5% are new normal. I think it's early to say that certainly. But what we've made, you know, we spoke a lot about the investments we continue to make. We expect that to be, you know, we expect the business to be a good platform for growth into the future. But, you know, when it comes to elections and the benefit we get in the experiential businesses, along with the PR businesses from an election perspective.

John Wren: Yeah, that's a two-year cycle. We'll take it when we can get it. We don't expect experiential to grow at the same rate in an Olympic year. But, you know, it depends on all the factors. You know, there are World Cup or the European Championships that year. The, the, you know, those businesses are going to grow. They're going to be a little choppy or a quarter and a quarter.

John Wren: You know, I think, I think we don't make conclusions based on any one particular quarter. But longer term, we think the performance. In 24 and 23, certainly as good before. And we expect and strive to continue to grow at those rates going forward. Yeah. The other ad Andy to the election said is that money's being spent in very few states this time around, because the country, the United States anyway, so divided, that I think this election will be called based upon very thin margins, Adam, excuse me, in a number of places.

John Wren: And personally, I don't think the election is going to be known on November the 5th, but it will probably go on beyond that. But that is personal speculation.

John Wren: Thanks, let's help when I just want us one more, which is obviously you're outperforming some of your peers. I just want how that's impacting kind of talent. So are you looking to add talent into your organization from your peers? Is it helping you to retain talent? Can you give some comments about how the strong performance is helping you and with the people you have? Sure, we have a very strong bench of talent. Always open, and we're always recruiting for more talent, especially as we win these businesses, staffing up for them. They're no small projects. They require a lot of people to be brought on board.

John Wren: And in a very relatively quick, quick manner. So some of them are coming from computers; others are new entries into the marketplace. And as Phil said, we don't, we don't have the proof points yet, but we're well on our way towards automation. And we also think AI, if we don't break the tools that we've been able to build through overcapacity, will help us attract more knowledge workers, as I referred to them, because the mundane tasks that some of these efforts require get eliminated through this new technology. So the business is changing more rapidly than I think it has during my career.

Unknown Executive: And all through the positive from my perspective. Thank you very much.

Unknown Executive: Thank you.

Unknown Executive: We have no further questions at this time. This will conclude today's conference call. Thank you all for your participation.

Unknown Executive: You may now disconnect. Thank you.