IPG - Earnings call transcript Q3 2017 | The Interpublic Group of Companies, Inc.

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Operator

Good morning, and welcome to The Interpublic Group Third Quarter 2017 Earnings Conference Call. All parties are in a listen-only mode until the question-and-answer portion. [Operator Instructions] This conference is being recorded.

If you have any objections, you may disconnect at this time. I would now like to introduce Mr. President Relations. Vice Senior Leshne, of Investor Jerry Sir, begin. you may

Jerome Leshne

you joining morning. Good for us. Thank

posted and joined We on earnings our have release interpublic.com. and Mergenthaler. morning, Roth our our This we Michael are by Frank website, presentation slide

to We followed We market at by before be X:XX will conclude prepared Eastern. to Q&A. with open begin remarks plan

included release this we will the our the subject are These uncertainties and call, in refer in about further earnings the During our other to statement cautionary in slide presentation is XX-Q that company. and filings to forward-looking our SEC. the detailed statements with and

greater refer We in our of and that, also to these not to the measures operational measures. useful financial this point, over things performance. to pleasure will Michael for We my while believe Roth. GAAP that it transparency certain non-GAAP turn for is a review data supplemental substitute At provide allow measures,

Michael Roth

morning you, highlights our Jerry, an provide review be I'll and performance, thank for detail, for you out our of our all Thank Frank will on us and with and our additional I'll third agencies covering and business by update months and first as by tone the Q&A. of start conclude results XXXX. nine followed we of the quarter then this joining to

the X.X% Our lower organic growth in pass-through the XX basis impact of excluding third and was quarter points was revenues.

growth was nine-months was For excluding and year, impact revenue X.X% pass-throughs. the first of of organic the the X.X%, lower

expenses. our As revenues in pass-through a are dollar-for-dollar offset reminder,

which XX.X%. profit of points $XXX grew in of operating our increases not profit. As million, reflects Operating change to margin QX to decreases basis and expansion do quarter revenues strong XX result, a up X.X%, pass-through the operating

per quarter $X.XX $X.XX line share items. as adjusted Third was for below the earnings and diluted was

notably, and international in growth continued existing the markets the in U.S. clients as where media disciplines of number key new positive from our business and both to had strong continue quarter, growth a well our as see agencies; operations, We momentum we from wins.

U.S. solid new in This networks trends is performance, our Our slowdown and creatively with the strong lead domestic us our secular. that larger not growth are experiencing both business we had advertising driven independence. to conclude revenue business combined

In terms we by QX QX in On with in CPG also we called client in FCB, by the tech the well however, out increases quarter, business. spend financial led notable and the see saw see increases, sector in through earlier growth and the and our prior largely offset quarter services, attention and this in had the the due year. issue in agencies, we Mediabrands significant we trend Among healthcare were and conference to called reductions we in we continued strong continued loses. auto quarter in were client Hill year our second and project-driven of transportation government of call, sectors. to cycling Consistent weakness our in to had largely continued as client at second telecom sectors our begun Holliday. client sectors, to Deutsch its part softness and as in continue the These

translate quarter, as been some wins disciplines in recent The third to however, higher stream strong net years. that had of During even as to year project part earlier true weighed we projects These negative in was several a growth in growth been business disciplines forward. have our during should which came and continue of cancel spending, third This back among clients our generated same of agencies units disciplines. which the the or was largest the of pushed services the the differ this, quarter. on quarter, and particularly marketing on look growth some to our that digital new

that significant On pipeline QX, active. did are for we front, digital assignments project Weber relations. know competitive. public the offerings remained during The And R/GA new Shandwick project won our in as highly assignments

it Another into question the Despite against them that great McDonald's any we A quite the the are we've and we with model, our our new inroads of has business coverage, into we fundamentals deal pitch, do consultant sector. their U.S. entrants business, way new are see these do very competitors. a was digital to in in relate opportunities. asked being when material a announcing to business. agency by recent example of - on won been notable do, of press And making not Huge range well consultants

quarter regional environment, to excluding industry that's an of it our that basis ago. fundamentally international points the is see as pass-through point. compared data of geographic X.X% business Organic X% indicator revenues. to sound the of encouraging lower very market. in impact markets largest our XX growth decreased X% year strong a U.S. and growth light a was organic macro an current Turning We performance, third our importantly was In

the pass-through had organic international revenue decreased. We markets UK, Europe our up increases the XX and points. Excluding basis group, lower impact was continental other Asia-Pac while of in LatAm revenues, organic and

million we X.X million QX, $XXX to During shares. repurchase a used

trailing the XX million Over with we repurchases. months, share $XXX approximately utilized

XXXX, authorization. in repurchases instituting and capital shareholders to As of of our returned we reduced million have programs share share by our billion remaining repurchase as our quarter end, well $XXX we've XX%. on diluted $X.X dividends count Since as in share return

outlook, long-term the Turning our company's to be position of marketplace. we our confident to in continue

view to are said, our agency combined short-term. in adjust the That highly nine through brands and Our months with talent and our require comp competitive. growth the challenging for slower strong QX, us

Our XX year-ago margin growth full-year. the a to X% of for basis full-year, with revised expansion significant X% to the compared organic our financial points targets for

to do but as the better, goals quarter. We these feel head course, fourth of try appropriate important always will, are we into we

drive the leverage our our so industry-leading has temporary In such the we in bring where revenue our to margin. line slowed on short-term growth areas year's several years, program labor, to as travel. expenses Following into of headcount, to expenses and focused of this growth discretionary effective executing as are last those fully with reality, business,

growth pay-for-performance model year, at performance in principal the have one incentive which As in of reflected target is of the place beginning quarter, in addition in revenue against the metrics, the expansion. to we the a set margin also

clients revenue to we further a agenda, is to see a ahead, growth improvement creation, Looking their to return as value organic expect which bit only in path our sustain performance.

pipeline Our strong business opportunities of new overall. remain

our continuing business, historically At on our over winning after update followed this you and Frank to key addition things turn that units results, we deliver details growth. been Q&A. his be core services to for contributor trends to new an open join In remarks to I'll selling for our architecture, to and the and integrated the on business and stage, have opportunities aggressively significant are a in on operating pitching by additional our

Frank Mergenthaler

Thank you, Michael. Good morning.

accompanies Slide a XX of As a X, for overview an first you'll webcast. growth and was Michael that the basis the referring which number On quarter points nine reminder, presentation see of touched I'll slide our to was in X.X% the be results, Organic upon. months.

line margin profitability, an basis profit. and XX While, of slowdown operating pressure margin increase compared was nonetheless of $XXX higher million profit points. drove with of QX million, we top our operating Operating X.X% on an to $XXX XX.X%, overall increase puts

nine margin of the was XXXX. $XXX nine operating flat also profit our first For months the And was is equal with million, year-ago. to which months, a

a Third $X.XX adjusted small and adjusted sizable expensive two, reported tax disposition one, to That quarter non-strategic year-ago. XX% was the quarter. credits and and as benefit as was agency; XX% $X.XX, for: diluted a the EPS for comparable in to is

For adjusted our nine-months, the adjusted this year comparison this to from compared year. rate higher tax so far to decreased to X.X% a repurchase fully QX program. share $X.XX average with share due due year $X.XX diluted ago last year is

was more Slide times, Revenue annual time. discrete add rates you we is P&L a and as see paid client $X.X the billion detail slides a change we said to This our to used in The Slide the critical out our the of Resulting are to up revenues, occurred XXXX net in points the an I'll business that's third-party true Again a UK third-party are you cover businesses. from U.S. and event in a XX X many quarters We for basis a QX follow. a opposed or at point and events principal compared the material collect our we some metric million you'll and remind are exchange organic third-party To delivery make year-ago pass-throughs of points. revenue when in when was it that's recorded the about this basis increase tell regions. of detail mainly a they on $XX added contract to has was to in basis when XX X, called of pass-through big especially growth. we into in have either to business and our our volatility growth revenue on it We've pass-throughs difference revenue organic The to full positive which growth. X.X%, down. Turning We impact the is can higher, They decrease expense, our QX points. X% Events in quarter. when our XXXX. that was the agent. impact currency divide operating projects services, was quarter, mainly as when expenses in the revenue. growth that support our the revenue a excluding X.X%. decrease XX dispositions organic in we

owned has with our pure agency no with We Just run of media media to nothing this to model, inventory. all a do business. reiterate, media

the organic of networks. by As our Mediabrands X% quarter QX. was segment, the in This change At half the CMG FCB. you organic increase see was strong on led can was bottom performance and at our the negative in integrated notably slide, agency a X% the

to we've this impact not the the pass-through change project-based challenge of at revenue, was still on our reflect as the year Excluding X.X%, lower businesses. it's steep seen

were organic points had and was to In In by across X.X%, by event growth solid revenue X% lower and was McCann was again significantly X% a and led growth In our on pass-through FCB, most QX Mediabrands performance one-time disciplines from X.X% Mediabrands. the stronger basis did X We as Slide X.X% good well and due organic of onto UK, as of had XX pass-through major We the organic impact XXXX. in growth QX Deutsch, Europe, growth revenue excluding lower the was excluding revenue. change revenue growth top Continental U.S., region. that not Octagon. Holliday very repeat. year-ago Hill Moving

organic and mixed solid We Asia in France among largest Italy, Australia markets see growth in growth our LatAm, continue a our XXXX Germany was than by was our due region's and decrease more offset year-ago, in XX% QX were decreases the and our - decrease a to largest market. R/GA The weakness performance with India organic Brazil, China, the in be was and In markets, continue growth in against included X.X% to which standout decrease X.X% in Spain. QX macro Pacific, in In our largest decreases organic to Japan. was Olympics.

very continue And Colombia. growth Africa. and growth Chile due organic strong which and markets other Canada We was in to Mexico, was South X.X%, Argentina, see to group, growth in our

X, X.X% a Slide basis. on change revenue longer chart by our turn to is X, Slide expenses onto we Moving the view data our month trailing of total decreased In expenses. decrease X%. a revenue and organic operating Most the X.X%. reported point quarter, year-ago On recent XX we from operating of

year-ago, revenue expenses offset a was due Our in growth. revenues, benefits which for are deleverage salaries and decelerating pass-through XX.X% in on we due our compared revenue our to ratio of to O&G tax, to to total also And payroll, decrease expense related expense. base and

earnings This expense basis. of the XX revenue is flat clarity per Slide O&G is and per X XX.X%. lower recent was strong our $X.XX we share earnings year-over-year on XXX our however, basis quarter data from improvement of points was pass-through an X, result reported adjustment is which ratio year-ago, Going depicts expenses. share expenses, month at from on provided end point diluted Slide way, a trailing to In the the comparison. a per XX,XXX, general our share margin Most Total quarter a $X.XX XX%, adjusted. of our had for as is for history year-ago. other operating the from of headcount as our in leverage incentives. approximately of office total

non-strategic the net our pre-tax against loss of small loss related below-the-line can include see, loss, is agencies the The a you a of million tax of As which small impact $X.X to per share. a was results $X.XX shown with sale diluted here. benefit

of benefit on million federal the significant slide, side reflects quarter provision or right tax per Moving the to our the tax the $X.XX credits $XX share. in

was we our flow to as for share. are year from XX similarly, months. ago. million, is operations the nine-months, Cash reported compared adjusting Slide adjusted an nine $X.XX a per million $XX used $XXX the $X.XX For cash in with

that is sizeable of months cash cash first flow recall quarter. You'd the our use operations We high cash typically nine followed our seasonal. the in by inflow over in fourth year

that over year, While from our working the changes, year. volatile CapEx. year capital be in a this capital from before $XXX Vesting generated results mainly cash note operations nine months, used activities year can first million million to level $XXX similar $XXX million last working compared with in

increase stock our dividend, Our for short-term financing of chiefly in offset and activities repurchase share used $XXX common by million, borrowings. our an partially

with compared Our a $XXX period in cash $XXX year million million the ago. net decrease for was

portion the and Under at our cash debt maturing sheet, the Comparisons our to level quarter year that with balance reflects of $XXX million X.XX% current is the in notes million on XX our portion third our with a Slide next Moving to $XXX month. ago. $XXX current cash, ended tends of is XX, liabilities, we current December to seasonal million compared peak year-end. long-term

year-end that levels debt. an use disciplines, of continue we the Michael. strength. of that will in expect commercial it markets quality This are you seasonal In positioned XXXX. $XXX primarily well cost that focused capital with opportunistic along short-term or year-to-year is refinance paper to for the creation in sheet confident XX, our we increase and With line our debt our working remains our and talent, XX, million increase tap let on that, we our either And and important to back be needs. Slide On We over attributed we see funding Slide capital to value that at to mean summary continued are investment will me source with be balance maturity. turn

Michael Roth

Frank. you, Thank

broader the Our seeing the the in across quarter results industry. we're reflect trends that

activists performance. As there my to also remarks, Like that to domestic models, mentioned impact macro we having are earlier are disruptive clients shareholders quarter, called These uncertainty number items and caution. contribute and have to of equity. peers, political gridlock we Last client to and our and continue others our some wave and private both impacting in international. business who to discrete of who were adopt out the of technologies responding are the negatively

growing capabilities in situations such costs, always where the The top-line, but ultimately address expertise which value. is have first our defense line will of to had focus the to and significant return is to

Our best people remain the respected among disciplines. in their

in business to performance the impacted into for fair can proud these We our That's front long public negatively go. of We In healthcare, most see new in incentive We the I of for client-base to us. which a right flow inclusivity the tone so offering and success with factors still diversity respected days, many in sports companies has you will do forward. been been brands, of or existing see We're balance strong Engaging marketing has ago are to the commitment it's agency diversity media, news say idea-driven also business, to digital degree to areas our as long respecting opportunities. know, going our other enumerated. year, services. promoting business the it which that to we remain made whether to some individuality. very the relations, of vital our industry's relevant and continue just although what of due embedded in one our of absolutely experiential, advertising, have years. expertise getting cultural every creative the have which is And always recent all way successful long-standing and and agencies, an the

the very have a In focused we the Highlights which highly insights, past draws digital resulted enhancing tools deep combines the the like globally. in terms in protecting fully capabilities posted and a on fourth environment. enter and challenged of once heavily assets profitability, to in cultural and won in margins, the strong business. were and quarter do quarter competitive Spotify Initiatives will data-driven proven we a and margin. even a quarter again Mediabrands, work exciting by in to the which and them demonstrated that strong UM, the UM very top-line Carlsberg progressive marketer some We've led discipline positioning, enhance allow us that win quarter. account, very on the this global data the with new of

notably interest and take As And media at always clients. best and international to activity a align we those in are across in I to strong. the commitment business markets call our we media. of space Practices inventory new place a attention it capabilities that Reprise all our in The in fact fully previously, where mentioned of class. want China, performance and has of digital don't operations high-level, in the the of McCann's transparency in Mediabrands, at with which new range continuing Cadreon our leaders put positions agency York with New disciplines. strong was its also to number

regional senior for lead executives were the in North presidency planning leadership and also McCann elevated Worldgroup New to of America and was York. globally New to strategic named women

leader strong the Docomo with highlights FCB the retail a New acquisition Bombardier Chute York India, in awards, national GSK pods recently bundle XXX an acquisitions, Canada, global the and UK The out MullenLowe division. Eurosport in and where offering and its staples the and in healthcare is had outstanding a it Tata New trust Chicago, agency, Brazil, Gerdeman, business and marketing the and market, win agency's in rounds is unit important in comp BMW In marketing. during of addition industry FCB/RED, quarter. Uber in included concluded agency's world, range a in well across agency's standing Huawei which the of FCB and the HomeGoods solid Health the and performing hyper design UK. also reflecting Digital continue Mediahub to added in Salt business accounts. to won Canada. the wins as quarter including

which the agency earlier XXX announced review Foods, a Whole with record was most the month. that over was addition, was participating in as this creative competitive of In agencies among industry's MullenLowe

businesses, current and specialist in mentioned especially services marketing the lesser on CPG extent in digital remarks, a my greater opening on is its project-based those agencies. As taking toll environment and to clients

models. most Shandwick, the some Golin. Shandwick Weber Huge. firm are at however, And forefront of Golin PR most Despite created are client-centric Here, up areas years. that them. like deliver consistently and working we and digital the is of recognized has these to few at exceptional. space and led standard have agencies over industry's for that like know the R/GA past environment e-commerce five these like can awarded awarded of the others proven new the vision We and R/GA, offerings are in businesses has market, attrition that the ways in agencies there the Weber Huge our current in excellence, and the sets projects UX

and traditionally due of to takes client project normal are the deal return but encouraged spending quarter. third we to that quarter our see one activity. is We which a wins fourth the to place, agencies great posted yet digital caution in have PR And of

that of closely. impacting evolution ever of have kinds is and the of at are important channels our we us dictate service than service and is to the Consumers more dimension messages. adds with positioned constantly little regards, are And how we ever. media monitoring and engage power space capabilities technology marketing is doubt both offerings. complexity. before will In they the than more marketing required solutions by their another our So clients. are we There of when of are developing and well and The explosion brands accountability

most bring First bear and know-how. teams the determine, the identify CRM media and ground as the marketing at there the a it's experiential and match to the could our on, or list totally as mindset consumers, have from a expertise plot is the mean access to their to entirely in bring or and resources times, creative are or and to goes That on mean uniquely and the difficult craft our journey, point consumer with architecture that execution. foremost, that's and but our or the if and across their messages right are segment best right effective fashion the needs pharma broad customizable open to We target in the well seamless skills insights It which analytic and in challenge the space. the is together can centric. specialty focus delivery tools the clients at understand offering range the the we the portfolio. also the and approach, audiences is client audiences key activate influencers When campaign that medical of their The of talent we to beat. players healthcare in right

perhaps As scale and calls, range recent data you've also the creative public, on behind Mediabrands on media planning the and across in of the all which the from targeted strategic messages need will inform delivery investments of the at and to to open open our across are full the that current we manage new will side enhancement, highly opportunities the builds in we business, the into and all that of investing deliver stack the door light we environment priorities, channels. disciplines strong relevant The through shed heard in marketing cost terms is capabilities are and committed. and key revenue remain strategic ultimate to on our pay-for-performance. data deliver margin to Despite value goal of architecture

this X% to for capital to shareholder balance our to our with the returns, revenue year XX us proven of forward, enhance targets by value. the points, and levels XXXX strength with sheet will and full basis allow profitability Combined organic our growth. relative improved Going X% to commitment

questions. and thank your time up to support. we it that, for always, As And you with open I'll

Operator

you. Thank

from Ma'am, We Instructions] you may JP first Morgan. question-and-answer begin Our will is of begin. the question Quadrani [Operator now Alexia session.

Alexia Quadrani

quarter. bit on very you about the guess, all provided point. seeing that Thank data a just you push much, Thank we're the weakness I'd in Michael. the like for more to I you

the If a sector, you the you or where it you're more consumer the digital, base is look services. isolated to really highlighted a pull in broader bit marketing in seeing maybe the at the packaged change Is goods many And verticals? weakness, it else, back seeing of year at I a that look think seeing, you maybe if I anything today a aware really, change you're growth. you other we're the of? across of sort to seeing other you're growth be stronger delta any any enjoyed ago, versus guess, we might want maybe

Michael Roth

a opportunities clients. us that particular recognized, for But that's let's goods. our consumer our clients And again, I our not first, our think will analyzing what's there. FCB are And Yeah, Obviously, profit we U.S. look, indicated, - in is goods some look side. the that at clients the do client. the margins stated lot saw case, good presented with our future. clients in we well to think goods in terms of said, agencies with don't industry the X% winning why clients as consumer is consumer of clients. had And that we're in going What's results, our happy to you of real. goods major in spent the for plus up consolidation in is here side, and raise, secular, respect to question. consumer a areas we believe fair result entire of big consumer object and they goods reason the think on a I consumer that of on the pullbacks I respect Obviously, time be about very the they're have seeing on consolidate the particularly but goods The side we're But specific that frankly, we And they it's positive positioned we interesting I threats respect to efficient. a sectors. more a with their end as with in the

us, overall down. for So that's encouraging consumer goods was although

the The dissimilar, a in too candidly, client other had reason impact And decline And food a parts in area, which not we and in is of beverage losses some and saw is reflect the good that we beverage. negative for that. sector. food that

So particular on is us segment. weighing in terms of that

look saw side, at across strength global positive On of business. our opportunities. I you key add a business healthcare the FCB, is positive seen healthcare, when agencies in our want XX% very these also and McCann, our Once strong healthcare, we from some that additional in we've healthcare might again, performance clients. we

two So impact for very which government well, strong that and a events didn't technology and we unique continues telecom. historically a telecom. been Last we saw of it tech and big strong year, reduction us, sector - tech the for was and this healthcare repeat. us. us Other quarter, in has tech good in had in a was as And is for side. sector and telecom side One quarter But a actually particularly strong part some is which companies pass-throughs. that of some very

And sectors cycling negative through we a impact our the of large some in had that that down, are clients United States. other telecom. So frankly, and on reason are is tech some the

we in was call is although let's U.S., it larger in be a through growth. news for good that organic equal continue year. the business, slightly to Now, particularly of positive, have new Europe SEAT is our But the clients, the net to we hurting full number still cycle

terms get do losses. business had of offsets on in top these don't of it but And So of I the say anyhow. - those organic cycling Had be know will have we scale I would to not we which the the you growth this, I'll through stream, on if coming organic our growth. new losses

to new reason, of think results tone seeing the aren't another like not of activity. reflected and I lot announce a today. is lot that's of in that. are There pitches seeing why well There to the those shortly. we're a that in business out record business we're I'd add of of is big see we're some to certainly that We So side, the say, and number a But wins new hope media pitches faring agency ones, there. on the

So a what's I happening gives you of that out sense hope there.

Alexia Quadrani

very a helpful. bit I'd digital there now that that's go seeing of sure, is said little side, Yeah, where on business you of And to some say be that just in-house. - the you're not weakness,

of sort of… just a saying in terms You're pullback

Michael Roth

there that is to we're digital in there last said We is is But about bring to no a this clients projects. question in-house. some the talking reality look, call. are large tendency the Well, what

frankly, the indicated second to asking - on yet the I to the able kind or didn't frankly, businesses we on when within trigger like become We project to we is for be easiest business, the we those they're place why that to do quarter. of are be projects, side businesses particular challenged the cut being on this thought fruition cut those you're or digital so clients' so they quarter. on point they coming shelf very those had any P&L projects projects. as into side the of And the on would third large in will embedded clients And and, view, a know in be them pulling projects. businesses these know to these from fourth the have cost Our projects. digital are large And

which a lot in therefore side for business and in us these as and the oriented. you was outlook project very the side both our of large our PR change know that has it with business, digital to are of projects So our to appropriate much scale do of

of agencies is why their question are going real at environment believe need frankly competitive. these value-added the a these no that there implement I forward will to and clients that's gets So lot projects of

Alexia Quadrani

outlook. about And follow-up think believe - feel mean, in you short-term for will Or the there I the sure, you to longer-term have go decent I'm XXXX, to to of on change just But every you're think, what when if terms these December, of sense you you of sure will sense where about you'll too how budgeting any the assume going you year? come? get I Do more comment then. with go I'm is the quick - see I the you. process it's Thank outlook XXXX a like sense a early visibility may, do so is bit should through do the a just sort in a in knowing better you of do to kind November, process reason you

Michael Roth

to and these projects. our are, key our They're news analysis clients. deliverables is necessary we happens right those agency we and we know clients. You're the growth with have our us - of And insignificant And best the in to We know on likelihood type know Alexia. XXXX. can what where forecast what's are, comment respect to in the They're are questions, the contract, too projects. for businesses. visibility Obviously, of We we project. we'll obviously, a on overly record bottoms-up questions. to to what the soon what not of it. always guess It's we focus that the the of do businesses for Xs deliverables good what on these is They're asking the the our deliver will targeted

to I out on the is help terms the they it's shake always And us how these of to that's we're come attention said XXXX. quarters. do too But projects. light can them stream, to the we So believe, in quarter-to-quarter, value this our in for doing of soon difficulty see don't will pay clients to whatever I've we say, as will going

Alexia Quadrani

much. you All very right. Thank

Michael Roth

Thank you.

Operator

you. Thank

from of question next Jefferies. Our Janedis is John

Your line open. is

John Janedis

about been Hi, players year, multinational not agencies India bit unusual there a We local and think changed? know, of I is say, project of lot One you year has this until an thank a from outlook shift two local quarter. term clients, you it China, perspective. longer have APAC, the you. guess, like a the a Michael, your to particular, seems challenge separately, maybe I tend in fourth just in bit to money about and little questions. on region, it's in much then when but hear it

fourth quarter? is read-through the prior I So wondering, was from, three any and there the say, project from quarters business

Michael Roth

correct. think, That China. there's you're those expectations China is question were that - to in there's quarter, for were in have I in the in I in growth Local And what pullback normal look, negative expectation those lot coming I think, in that. had China we're were the China back China, said, a industry, specific seeing on We and growth China. think, no the know, were impact than a client more growth of overblown. for more in the businesses I Yeah, an

very businesses, win news going what it to again China I R/GA, pull saw Also saw very there are the that's Singapore - a positive be and think them project those oriented. - which this seeing. impact in and in spend a on continue saw of in something and where strong type we is that one will see businesses much digital third impact project we the we clients quarter, the Australia, business. multinationals Our The are in to on quarter. strong we in trigger, a we And but China, is particularly at quarter, local have when good focus our based we we those strength is very has last to

a been think, strength markets. more - difficult tone we've comps the I to in lot have too example, talent were than high for is year. China And seeing China on remember of FCB our the much to added, in which in the such realistic But We and growth. from little McCann, you're more and focus right why focus new a we've local local, same added last on

John Janedis

India, and project the also side? Anything on on

Michael Roth

us. I specific. particular, have think, we client negative and in it's been markets. to India impact it's stronger I you but think it's being we market, and as has very client stronger large that a we're of India at Frankly, overall very some issue, Yeah, India the And - India, industry Again, of clients and economic our cycling an don't in look client one impact had on that. India, seeing specific or lost in of it's one to our historically, not were

John Janedis

XQ before, hear then into talked so, think XQ read know, the Anymore of projects in much back side, it just is but actually we more it or to them my some any that go-forward and read XQ. I I like And confidence in color in of project question kind feels projects about? a basis us to about, for done not meaning you kind of about to gets Michael? on XQ tend on XQ, is any there -

Michael Roth

adjusted out just on we the reason, our much our pull we quarter, numbers us. yeah. hard in the smarter to put when that's because projects get surprise a is projects, sudden, clients and predict clients going before didn't we the and that all had the these And when Well, these Again forecast online why are we When now out than - be it's pullback. to to second numbers we of put did ready were and clients trigger. are going to projects go, we going we

you're in think, are and for going through. when news wins yes, clients is The we're the the But on to right, new these had large all not year-long, pull they on third stream. will and good fourth are example fourth project-based businesses. projects quarter, So typically flow lot we're quarter just business I what of in them R/GA is, seeing take timing quarter, a R/GA. dependent the

mapping first quarter we're they'll in the Now year, out. through the flow next in of still or fourth whether quarter

they're more answer in. that the ask business, that little So now good winning that difficult is that is, I can't you of something we're the of really question. a and environment given news the But timing - question project

John Janedis

so Thanks right. All much.

Michael Roth

John. you, Thank

Operator

you. Thank

Fargo. Peter have Wells we Next Stabler of

is open. line Your

Peter Stabler

A morning. Good if couple, I could.

a business. the to your want of be look services that it the is the marketing and when kind at sustained XX% set, at side, I marketing obvious about Michael. competitive puzzle with to under pressure. the part of we But and look on fairly of then spend back we quarter, services nine seems we months, across minute look the First CMG appears

comment got appetite for be whether changes if would a call you on might secular services portfolio follow-on volatility in you types the out then, I've is And Have the changing one So not maybe follow-up. maybe you Is you're you to less it. pass-through, exposed associated be these you some to consider. that material whether that the something And contemplated could understand where the wondering the we of with of strike? of and of that seeing on Thanks. pass-throughs? become that Or you, then, quick interest that you? contracts to changes something

Michael Roth

Okay.

about talk time being question. like like it's this, about me pass-throughs, sounds Let a it It sounds relevant defensive it. every we're we say very because

out, I'll some a changes result - the this, contract, but the Frank to don't - as You're know, say frankly, and want at at over they're have the them tell right, the looking me, I been we've some in you. been and in CMG and I the changes, of okay. looking last process they me team differences point contract have of to

new will net, are to Next rules, which will in the Because, for we under okay. different, fact, and accounting okay, these next we year, rules way things going dictate. it the be be the year the be showing accounting implementing, that's

we're importantly, impact, the reflect constantly is, change is to the But accounting contract in we what we've net added again, what that. industry which with that I the more and with the agency more yes, success true is why than and the U.S. the in the both the some at business. seeing we without And probably our will - back revenue were principal, that's measure X% impact to I pass-throughs. answer them we're the of more and the that shows our next So had X% looking say adding versus pass-throughs when year - consistent after number of forecasting gross believe, in

how last, respect don't Shandwick, And a in CMG, look, it's was Frank and before Weber is it And for doing beaten reasons some project but right, all applying we won't focusing that up drop-off business. We confusing. particularly to I'll business. So that were we're CMG our reports know, know talking see, Shandwick. it years we businesses many at be project-based to frankly, project this details since to doing let a business about Weber add the to as Frank. you disappointing year, contracts. With And you're growth. are for it's next to key the Shandwick, driver apologize have And industry, on I the Weber organic ways, both entire we been that. for

Frank Mergenthaler

got cautious we that their Michael a in to see And clients on comments, are both has secular do where been past Shandwick awarded short-term, don't five what discretionary a existing think made but theme There the I We've common a we It's Peter, for goes been most earlier. and It industry. the change. Golin, works. for just in the somewhat Weber is agencies growth years. spend. us the the driver PR in leading back

clients when and and try our So provide come of the we're hard some dissipate. back, value that to will these working to confident growth start just we're cautious

Michael Roth

example for read and spending Yeah, the Weber the pullback reason, and that shelf side, well. healthcare whatever in a Shandwick you've that businesses businesses is, in government in as to - was perfect ended and off project-based not whether that it whatever taking that nice-sized that's up are particularly of some of fact, or about, putting And or say it. it government be it and the you president triggering the want

particularly that So Shandwick. Weber at we impact of saw an

Peter Stabler

primary weakness the CMG? So was it sounds in of like PR one of drivers

Michael Roth

Yes.

Peter Stabler

then, follow-up… one Okay. quick And

Michael Roth

of not very By performing the well. are they and me very are of although let a quarter, they're they that, the CMG, way, on just Octagon had part - solid other add side

Peter Stabler

follow-up. quick One Great.

Just on the AOR concept.

seeing Just that to think Thanks engage is is contracts? whether the strike or forecast at to are ability you in And to number is of on project-related, overall who your you're so your you clients agencies business shorter-term seeing an the want impacting relationships changing increase clients appetite AOR-type much. going anyway. If whether of the all? in wondering industry the more

Michael Roth

- there project-based little differently business a Yeah. there no are that's out are relationship No, be that's a clients I great the historically. mean, There's to - AOR usual question. that's and tend more question than as viewing that that

with have relationships basis. of clients particularly those on McCann, AOR a global within to we large at McCann side continue other breadth servicing of long-term that contract, strong that because coin, an the multinationals very require of The offerings

obviously, that piecemeal at questions looking a this What's yet affect be providing firms be whether table, and be different job clients, with architecture, continuing. basis. about we the the we to that tremendous to pullback for, at into and the clients This the are, that they're by but stuff a and us clients, they resources at looking different a the is feel think good what experiential. the have what much that those pitches services see be relationship position tell is, opportunity for projects where do a is media, you, entire media, good business architecture and a that, bring whether here. to in help those to within and in we're embedded when execution, And don't them with on all into open open you all it, meet these needs company chance here firms are it to This the the what talk within few the better IPG looking they're have at. do our whatever have as where the architecture, the and relationship you to to those received table, respect And there RFPs, it more old, whether us when is can execution can I Consulting bringing resources also we've within may is creative. of we be as it opportunity. very IPG are consulting room not for businesses the there, different it out creative is efficient There a it the clients data the that's seeing, some able resources solutions, seat with whether So again, That's this. in these those even we your for that can as it's because they last This clients. when me insights if of to more that opportunities of bring I and ties other look the the to spending bring will, critical, they have that is start some media bring restructuring interesting experiential, AOR we us. it but analytics, life to open way they kind we all then be be put sitting opportunities, with strong XX-years continue we use put we in for to are and on pitches, call resources. about is do and we

not Let's of value our the offerings. creative forget

You have at seen tremendous MullenLowe. success at McCann, FCB, at

resources the needs bring you the the are Where All still between very the powerful to to businesses still bring brands how of relationship that all you creative to different need but of offerings consumers. need. the distribute creative light we it's strong that clients and and these distributed the table, offering that it

ability So bullish our bring together. I'm resources about very to those

is has some project-based to to them But we So one, anybody. that if can it with value and frankly, compete adds I clients, think clients. go our do right, the when business, relationship a really we And yes, overall of it head-to-head compelling.

Peter Stabler

Thanks for the guys. color,

Michael Roth

you. Thank

Operator

you. Thank

Ben of have Next we Stanley. Swinburne Morgan

open. is line Your

Ben Swinburne

how can Thank you. marketing beaten bit. Good a we've projects morning, one for one for Michael, down Frank. Michael, services you talk

some helpful. you color outlook a So year media Why you like moderation, give business. us up I be would media A, a seeing the you you the can you just growth for Are What the this some You don't then look elsewhere in year? that And cash is, flow give last is to have business show I segment. us any the do media of in business insight? think versus and and guys proven report as of resilient that - pressures for mentioned turn wanted Frank. on to the can business question more any

Michael Roth

are spend And - best all the is to the out accident, business term, marketplace all because - favorite confusion media our it's that's confusion Yeah, look, insights I needs the be sophisticated incredible. an business our in bring we they're it'd and not been the whether the world. there by And think we've insights that my we've within the capabilities an it'd their And performing bring and sat continues sit they in out capability in marketers of that. the our just clients the And businesses be that media are businesses. whether there confusions money, whether most analytics. RFPs, realize use in and of that in I've they significantly and where the our of number our experiential. digital, that's data only to to that a there those to that independent in can of type And it'd insight analytics uptick looking that place table data in the media some businesses TV, be on types pitches from that's for frankly, the we're view because why should be businesses. media listen the and I that I get of why invested involved, seeing

we media As it's a bring the to good the of a the analytics agencies, in available you made know, that part so year our all bring across into And just of not resources and that's tremendous businesses, data we tools when of side. working that commitment beginning IPG, terms And Reprise these growth it well. because Cadreon the we the insights. in table. are win doing of and frankly, of digital we to and win

media question getting they're respect sides opportunity competitors no some wins side, what other business. we all now is that obviously yes, that class. handle to So, the bring as competitors view is on I that regular we on insights, there media there are clients a is And the There how that new media that's happening not a is and an proven to do pressure have therefore, action our of in of if you is the on that out solution the irrational business willing on number we pricing. with their that into we the basis arena, there the into the to capabilities of get that. the right media this they that a in long-term pricing and and the emphasize the will given call terms where we it's But in in of media acts business known beat the some sophisticated And we the best and side. had digital business

strong very will driving us a is course our for media business. you so, if And

Ben Swinburne

across you drag this could this in bit a little They least prepared about pressure your of can you us out is year just But any trend of saw working help increase remarks, around directional or the Omnicom. Frank, collections capital but been year the a I working us cash for drivers comment Thank to you. And, kind understand the companies collections. plus, how talked of on at versus the same, year, trend be We that. what or holding interesting. of now bit conversion capital which a execution the a on would you EBITDA about has managing think give you're sort last in a commented

Frank Mergenthaler

working spend generate volatile significant capital of pulled the in third fourth the is of that cash. XXXX, media in resulted And a you it's spend. quarter, Yeah, normally, a and fourth in had generation. And three media the cash Olympics year, so business in quarter, our significant the cash lot quarters. we so forward, In the normal quarter was usually use for by it's driven

normal this volatility. For quarter, seeing we're the

consistent end at of the debt levels year. the to expect last year be We our with

ensure it, out there believe change to at around look we're rigorous going a but We manage we beyond controls quite there and We got seeing appropriate. what we we're in collection cycles. is terms? it not cash So payment No, well. pressure are

I around been that helps conversion to got we've service that centers very think be efficient. shared the globe efficient. We've

see model. we any don't the business change So in

how owners through more Media we're around are clients more pay getting sophisticated getting us. managing I them. But think are sophisticated. they again,

Michael Roth

investment We've want always commercial about to was talking important was one And the us I to a investment have grade. add. grade program. to of to do getting paper said we been reasons

program us way doing downs in very to manage and So It's volatility we a is well for have of given forward the as the that of cash requirements, ups terms commercial to that tools on have our expect flow. quarter-to-quarter And the handle very see effective to one cash up move the we paper a and and basis. we running.

ups programs working positioned, So through capital as talking handling we and on well in that both the handling different sheet, paper and I to have. capital think our terms that downs to maturities balance all we're of very the markets the was as well Frank access commercial

Ben Swinburne

Okay. both. you, Thank

Michael Roth

You're welcome.

Operator

you. Thank

we of Next, Dan Salmon have BMO.

line open. is Your

Daniel Salmon

impact group against material business not to new of could then activity, them. in your services new some good to new of prepared business followed the Hi, way head-to-head digital see remarks noted return about a and of consultants. where to that particularly you the and them you it IT won in a you I also everyone. part continue that note morning, your And competition, you Michael, spoke up

So, it more? and could media in and you in bit up you that I got them matter creative assignments, of just clarify that are digital a emerging little services. then core that. And a them on a not Is seeing seeing follow

Michael Roth

relationship. they they most the make to they're consolidators they continue Look, they're logical add-on nothing, throw basically to digital bought sure there. them already digital are there. that what they're place grow frankly, help they an as out what look, because expert And they - the systems them Yeah, to for sometimes think there in experts want for to while them. And

where CRM is can they the see of where have more argument add that's it we they So that best them. part and some digital expertise the

in unseat don't On lot these attempts of I the the to more on Candidly, what by when agencies see we and some the we're That very them, them. that's the buy of what we we firepower embedded table going compete see but them, them said, bring be I else. competitors the of how piece And made agree, on as we them. And our than to of given commented they the my was to lost brings that we side, the There some that creative the has And I to months also business add because R/GA I that we difficult the up if the creative that think of this well ability back, to areas saw frankly, see side got companies. they with the deliver. of compete. to the about. one mentioned in table, And And side that case is do to going mean, side, digital that particular a creative digital think we they bring, about agencies. it's it insights one have in creative side, firepower comfortable bought. of I business, on I frankly, one call. we talked anywhere other And, that we might come against them. we on last I to Huge both later, business six the couldn't we're as

yeah, this. I've they're trying said I understand always And So, there, it. they're out and

But, head. relationships clients, those and a to them with clients meet the that us. offering. I better them for firepower were comfortable to look, with who right with to we're strong. what's now, partner bring in I happen of than But to they compelling with pretty waiting with theirs going with they their But we needs with firms And compete my it's our some that knows are head some to the pretty it's future. expertise, closely in for ability compete think have our have to am I very work still do phone us, if believe call.

Daniel Salmon

losses think impact follow Okay. evolving needs would that But are specifically, Increases that to but how you're competing know of of companies current be like, you for client of just don't on can if the and can way those last sort business? your spend them the another versus and CMOs. evolving - say quantify is, traditionally organic if that, portion and this your I we on components always from portion? these question to is see services? focused digital I wins I in And approach there. what the emerging is, then, but we're meet are More that that if offering up of My clients, new in net the would obviously, growth, you

Michael Roth

in And, have it's that's on pure that that R/GA than it'd it's grave - easier right? issues are on And business example, whether are now offerings capability. to There them on to deliveries, it side the whether we because look, the business. transformation, business consultants bring transformation the requires, talking again, Yeah, But focus the attractive. be more to able for and we right Huge which digital that cradle consultancy, design different the across different come very for side. an from of digital do new depends about. really there that, product consultants you're transformation a all be it'd Take area we business

these the table. are to within that of capabilities things All our bring we

again, asking do bring the door bring have all within offering that we these we and with where clients and example network there in on that's them - think can banging That's put architecture you're side, with open have the various ability our in deliver. we clients. is those them, they of if do the these these table. I will the they have clients. bring working of to meet transformation the they're of we and depository, more constantly to relationships, a to we under IPG And we those that's why wealth But their CMO RFPs on fought us resources what will, you because for getting to or terms So the for needs to in of their forth relationships is offerings consultants we're what ability and have the the that's that to have we the an And with everyone business right, what relationships. of can different what and be

we it'd And business through to So, that offerings. bring very our what with very you yeah, that's changing, to networks, media the McCann, I'm table. global MullenLowe, comfortable and is our if our very, you digital the be add but FCB, whether have, capabilities then resource PR impressive a it,

Daniel Salmon

Thank great. Okay, you.

Michael Roth

Thank you.

Operator

you. Thank

for We our bottom it of and turn to of closing the hour call. have end speakers thoughts. reached the the will back I the

Michael Roth

thank very Thank quarter. we'll end the at of see you. you Okay. the Well, you And much. fourth

Operator

today's concludes This conference. you. Thank

at this You disconnect may time.

The Interpublic Group of Companies, Inc. (IPG) 24 Oct 172017 Q3 Earnings call transcript