IPG - Earnings call transcript Q4 2017 | The Interpublic Group of Companies, Inc.

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Operator

Good morning, and welcome to The Interpublic Group Fourth Quarter and Full Year 2017 Earnings Conference Call. All parties are in a listen-only mode until the question-and-answer portion of today’s call. [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 Time. be X:XX will conclude prepared Eastern to Q&A. with open begin remarks plan

earnings in other this release our included are subject These call, our about company. is presentation slide we During the the XX-K that the and will the uncertainties and statements in in statement refer our filings to forward-looking detailed SEC. cautionary to further 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, Jerry, review thank for for you our all Thank us and fourth and XXXX. as results we the quarter this joining

an to start As our additional well New on covering as of performance, for our outlook conclude our agencies by as Frank by usual, I'll with and will our then Year. out details, be the provide followed highlights I'll update Q&A. the

FCB our in X.X% to update. excluding our very fourth Organic was margin fourth deliver X.X% increase IPG year’s wide X.X% and markets. of was pleased range is in continuing which our on in growth auto global areas in in Group, point McCann growth client advertising quarter. and stronger were government, both highlights, which our expansion, had again on top U.S. the healthcare. travel, they financial organic and fourth creatively view challenging pass-through of the and transportation, outstanding full outlined by strong driven We led international of performance the we a revenue at quarter report and the Mediabrands, was sectors, financial our and of Growth growth had of growth quarter the of revenues. driven agencies We’re October that the and results Deutsch. last quarter in by margin are as growth the organic World highlighted businesses performance year services well and as From growth Among notable a and target by

XX.X%, Our salaries which a a of was is basis increase expenses. fourth and XX operating quarter points ago, an margin reflecting leverage related year from on

year XX XX.X%. points operating XXXX Importantly, increased basis margin to full

with as Our reform a tax fourth tax The quarter and $X.XX diluted the impacts is earnings share provision. adjusted, our on per X.X% back $X.XX increase which over adjustments earnings U.S. was comparable of ago. per share primarily out year

in the creative well to we’ve our of leading earnings time data share of talent is especially an operating year bottom At and That the pride at the as Alongside and and focus to continued across levels. accomplishments. our industry, XX,XXX our was can performance people to continue per shareholders all year, talented as have their our For our on we course full significant line capital our and media, and maintained $X.XX innovation in our the same in marketing strong edge to gains, the the for that invest clients, a take analytics agencies, adjusted. as increasing on us our of colleagues a over digital, dedicated their effectiveness our the around delivering was services. outstanding keep and technologies diluted and who $X.XX attribute world, return

During million. shares the fourth $XX million quarter, we using purchased X.X

that repurchases, Since of since to X.X% initiating our This a per IPG’s of XX% shareholders and our XX.X and for year-end continue shares XX%. $X.X cumulative shares, basic dividends dilution combination board’s XXX of of a million lowering increase capital returned This with for share. consecutive the our we’ve to $XXX of programs the million for For the increases with share by million, history eligible raise of our our reduced to dilution with to quarterly total dividend outstanding dividend shares year decision shares return sixth billion per decrease common the full year year, XXXX. in to of XXXX, we we a double-digit ago. morning percentage we’ve a total eligible utilized $X.XX share repurchase marks by XXX% and from

authorization the Combined our pro We amount in the repurchase. of authorized of success that announced actions of the the our prospects. to million million remaining as significant share beginning share brings $XXX financial for with year substantial operating reflect our also for confidence million. board available repurchase recent continuing has $XXX in these an future $XXX additional and total forma IPG’s this strength years, Together,

consumers time, with they models business and new number We are at engage working to to and As fourth-quarter our convert marketers we high simultaneously as encouraging to contending continue with are profit drive a changing of with return short-term a continue brands, to the see in our XXXX outlook that while their to competing all way value that reflected consumers that marketers transform with for to revenue level. to know increases growth our at pressures. the relationships operating same it’s growth we

of we’ve to risk introduced IPG. a these both and opportunity investment entail XXXX, continue caution many they industry previously to note As changes for across during discussed, and marketing our

potential more help my very sanely industry. and of for That remains business with the clients. our to to is and provides clients economic environment to The resource company their sense navigate Our realize climate this opportunities. uniquely conversations supportive a global also be current recent focused clear picture

last year not caution growth put growth this and will year. gradually us, much post we overnight, slower the behind of we to XXXX While of saw expect lift revenue the improved

we expect are that in growth Along revenue results the of targeting build long-standing Accordingly, an well long-term. to to and X% of positioned we organic our very XXXX. record We targeting are continue with profit on growth to level for reporting margin to believe and over X% continue XXXX, we growth, XX the deliver to operating and in today. are XXXX expansion for this basis are of increase we of points

at value in with Along normalized returns, some, growth, capital focus look enacted on should rate normalized expansion, we financials worth it’s account tax are tax estimate and rate I’ll reform. A changes update In Frank XX%. results, the normalized that cash well year turn margin to things approximately Interpublic. and to creation impact XX% effective U.S. code the our rate for additional normalized long-term should U.S. we forward our XX% are Frank. on that, with and and of and recently our full taking At consolidated approximately rate from of over tax work business. into highlights confident ago they tax performance the this that detail The along the mean for continue tax the depth XX%. described decrease with that income. positive pre-tax decrease for always our ahead, our and return our to going consolidated XX% drivers tax of to of effective of As an year of on our will on stage, we is cash to to I’ll

Frank Mergenthaler

good and you, Thank Michael morning.

two, reminder, report X.X% X.X% our top a on organic X.X% organic results. On and to that pass-through impact you’ll was of the X.X% X.X% I'll revenue. summary see higher that was be excluding and Fourth referring a the presentation and growth International X.X% was slide accompanies on on growth As revenue U.S. pass-through in was of of was slide impact of was our X.X% webcast. QX'XX. excluding top growth higher QX'XX. organic

X.X%. an basis the consolidated For increase XX.X% of XX a in operating points. organic full-year largest ago, QX was our growth quarter margin XX.X% year with compared was seasonally

full-year, points to advance basis which operating in long-term IPG. margin our margin the For of marks expanded XX.X% another significant expansion record XX

leveraging targets of effectively paper success and to principal Our relative the expense for year. metrics at beginning incentive and with revenue each disciplined management performance margin is a our growth the growth to which model are due

a million million strongly year XX.X flow per the during as adjusted share $X.XX working XXXX $X.XX from shares the For a repurchased capital diluted $XXX full year $XXX in Cash result. for share. improved for operations year. $XXX the per quarter, with while million EPS adjusted earnings million diluted We was reflecting compared was was

this per share that $X.XX As dividend our Michael $XXX quarterly has we board announced mentioned, again common to and to share morning our added million authorization. significantly our increased repurchase share

see Turning our operating that you’ll for to revenue slide three expenses cover follow. I’ll detail quarter. in and P&L slides the

to for offset are our revenue Increase slide growth do on offsetting was X.X%. for dispositions our of fourth Remind X.X% was revenue which to for revenues decreased X.X% O&G was diminimus. organic year dispositions. growth the billion you the in impact negative XX revenue four, $X.XX expense, dollar pass-through the half increase was growth Turning exchange organic rates added change due points the the change compared was growth organic while our X.X% an change basis X%, to net X.X%. decrease one in of dollar pass-through in revenue Revenue our of revenue quarter profit. without Resulting was an and pass-through of reflects operating full-year not which increase was net FX X.X%. to QX'XX

Growth X.X% in adjusted performance a and led was flat our of continues specialists’ segment the organic as see by but and half basis was pass-through. X.X%. organically sports revenue the services our As of pass-through was networks events revenue of points was benefit our at agency CMG you QX can on CMG disproportionately excluding for X.X% was in McCann organic which was the integrated and businesses. decrease higher At segment, and slide, by growth growth quarter, bottom terrific down which FCB. XX marketing marketing X.X% the the The is the full-year. Mediabrands for for full-year

that in by in excluding revenues. broad X.X% was five, X.X% Moving FCB, Deutsche, travel was McCann, in QX Morton. Carmichael the and Jack the the the project the CPG revenue increase is in Jack Growth organic while and onto noted with U.S. Among contributed to region, and increase Mediabrands, and notably based healthcare led sectors, growth higher revenue slide and also auto Pass-through transportation by to it U.S. due growth was client U.S. Morton. pass-through increased sector spent we’ve government

our across and increases X.X% McCann, when organic Carmichael growth the was year, U.S. Over in Mediabrands, full Lynch. FCB,

markets, International government. our healthcare, auto QX impact against were which in approximately increase X.X% grew and pass-through region, organic flat. Germany, Italy was organically in largest the in Our growth France QX'XX. top and Spain fourth or in X.X% in client we our strong markets growth domestically X.X% X.X% Continental quarter the sectors was growth performance Europe, especially and revenues. had which in double-digit is excluding was very XX.X% pass-through transportation the and Among we In excluding were the

Morton by Jack and growth and public the also Here again, was year full our Weber In XXXX. quarter and Events had growth on as we growth strong was adjusted XX in the for slightly top at negative Mediabrands X.X% the points, relations. organic increased basis and X% pass-through. Organic Shandwick X.X% of in for U.K.

XXXX. that quarter You very Huge nearly XX% our will quarter. McCann, was U.K. in fourth Mediabrands in the and recall the growth well performed

at increases. For X.X% right slower. at China, adjusted environment. be grew quarter by performer the quarter In XXXX. Markets growth markets. quarter, X% Canada Argentina the Mediabrands, base growth by we points organic in and which That the in the year, pass-throughs, led Group, were Japan compounding for lower in the the revenue be year In driven In surprisingly slide, and FCB. notably Overall full-year very excluding on was India XXXX. for flat quarter markets. despite year grew is difficult both In a was X.X% the organically a continues XX% U.K. numbers to basis X.X% the ago. the our our and negative Australia, against macro Other the were our Brazil results Mexico the slightly increased X.X% in fourth organically by range. of against regional to strong while the full-year continue and in revenue growth of similar and decreased pass-through LatAm XX quarter standout the a was performance Asia-Pac, the performance X% in same strong or African Full R/GA South which

in full the longer for six, well the on trailing X.X% XXXX. chart XX-month top on recent we revenue of a in basis; for organic our XXXX the most data as X.X% of was X.X% slide point was growth X% XXXX On year. calendar view and Our

quarter. Moving our Under continue around our onto make significant discipline the to contribution seven, operating expense increased to expenses on a X.X% growth, margin slide in our expenses revenue total growth. X.X% operating

to same year. expenses revenue significant for and the top Underneath ago. and was XX.X% slower full revenue significant salaries course and of compared year we revenue benefits with delevered time, the the expense appropriate year in our base XXXX. We year, X.X% of expenses line total payroll the on tax due At For growth a over with which had for leverage related expense, to on we XX.X% incentive actions ratio to compared with took align the was of the in XXXX. X.X% that,

We of related an expenses contractual with Year-end approximately XX,XXX salaries increase XX,XXX and other XXXX based with were salaries bonus was ago which than of compared and employee also year category in payments. headcount X.X% leveraged X%. related our Other XXXX. compared revenues include and X% in less performance a

points with revenue expenses year-on-year general had operating includes category basis lower giving on bottom O&G expenses which and direct Turning O&G half lower leverage. leverage expenses we XX operating the on of revenues. other pass-through O&G With compared office year XX.X% to the be of us slide, was will offset full of XX.X% to our and

the We for also expenses show margin have we data progress. and leveraged done a our on T&E, with work sustained which focused and on eight, made continued XX.X% most our of still at we again our focus basis slide a is significant highly operating [Indiscernible]. XX-month continued is on trailing and recent On we to telecom costs. result supplies history remain This office be

performance. to had the the in in we expense share offset nine, small to businesses from you which small picture by our fourth better the quarter in We is and detail slide quarter of in line results of to a non-strategic more comparable earnings. benefit more order Turning X of other sale loss reported in resulted tax adjustments million below than on present penny the related per a give

to we amount consequence left million slide, the right a tax benefit U.S. of credits. reform, reversed from a $XX federal tax as for this Moving on in of

so-called deferred net the less We also or amount U.S. for fourth for of as $X.XX Slide a under recorded a -- the for to impact liabilities of tax tax reform $X.XX share. and full-year That per net repatriation million depicts The adjusted result again The Jobs the the earnings one-time quarter adjustments Tax $XX share. benefit comparability. represents charge from shown Act. tax primarily revaluing per the Cuts number is XX the similar

share and reforms. for year our benefited tax full loss Result EPS have $X.XX. per is see You diluted $X.XX can of with diluted adjusted share business dispositions per $X.XX for

was Our rate normalized tax for the full-year XX.X%.

that onto report we today Before last before moving cash flow, we Standard, should report everyone revenue our required to XXX. under new remind is Accounting ASC are one the the recognition

along be fully say work We no certainty creation but can to were our not IPG. for model value change yet on will are with XXX we with well our complete that there and

our to that matter, For margin expansion. organic growth to priorities drive and

small constituencies the The first standard. provide the earnings mainly in April, for We our portion the our plan and new recognition XXXX XXXX moves along and approximately One have the As that been client earlier were for with ahead. two color elected commentary XXXX revenue restated. new of rather between continuity client profit restated of the from recognizing previously quarter some standard we when some to decrease the is We changes method in alignment and new of timing old the XXXX client year as estimate the more performance the portion transition to for requires in period example, year-to-year X-K on bonuses. to impacts is than in required push for bonuses revenue bonuses work client XXXX recognize profit new XXXX our is That be that and and the reported will for We X% our our and to profit recognized to changes will when require of revenues performed have earlier to we’ll Restating for a That We recognized foresee standard. measurement base. back rephrasing recognition detail. provides of results in we our deferring revenue the prior sometime disclosed, years. some requirement of that to standard our some principal is a this Similarly, due a in X% believe reporting. XXXX our profit quarterly release results standard complete. until prior results an in to the contracts, XXXX. to best filing under restate that would years it best operating is

as our earnings-per-share will there no restating. terms profit flow result in Importantly, of financial of to be targets our cash and a to change XXXX or operating XXXX

that The and dollar-per-dollar gross share. operating XXX revenue second expense. more increase noticeably we to earnings ASC and impact more gross profit, of with of would impact change cash per The on income have expense net flow, will report adopting no revenue

Our and to subject our performance net our To capital have of a includes Octagon, disclosure year revenue relates key strong approximately both full million first at gross under and operations of year this compared incremental $XX with expense and Specialists. $XXX improvement million The relates revenue XXXX events release. more this we add our income that again, Healthcare this $XXX Jack media $XXX in to growth Cash Nearly increase the estimate which incremental to and to used on from in as for be revenue to flow and to million to cash Morton, increment our margin. was track None will results, metric revenue and for a To beginning XXXX year, still enhance all comparison new $X.X our will quarter come of which is organic standard. working our billion of the business. is as with million the the change is result our well we’ll the of revenue QX PR transparency revenue, that ago. prior compared Slide ago. a XX clarify, point an net operating $X.X year. million Momentum more our

$X QX and In stock Financing used $XXX is long-term, acquisitions. CapEx comprised the was premature shares repurchase in and equivalents space. million. is of is large mainly few billion, $XXX XX decrease over net $X.XX was CapEx decreased outstanding million, second paper. CapEx, cash our XX only used million year-end in from majority XXXX quarter commercial million office of we which investing improvements cash $XXX the mid-November, relocations. which past matured X.XX% for cash debt strongest operating and use office including of debt with with at our Our year Slide the activities of commercial XXXX, year-end. million common by $XXX $XXX investment for for in million $XX to view billion $XXX is to XXXX, million million a notes activities a refinanced extinguish our a and IT seasonally $XXX which paper dividend. total flow we leasehold years

our million so XXXX. debt of year-end depicts plus result a is XX far Slide ago. balance $XXX compared levels lower approximately see total and you year as XX overtime total two-year diluted on equivalents was same balance and the we which debt current shares Slide at and As right of of net was this cash a the the ago. lower cash at cash year-end, also sheet. our balance table basic year shows have the Total end shares average the portion

million over our by simplification repurchases shares this and period, to due decreased shares structure. time of XXX total average Our capital the share

XX, performance. pleased In XXX with on solid Our for is million QX year are to XXXX the starting slide conclude shares. position we summary

even Our became the environment XXXX significant more operating as deliver challenging. teams revenue in growth margin

be to board year. well-positioned our to in that, meaningful over continues is a creation announced which our objectives I’ll us the back With leaves evident sheet full value balance turn for on to deliver today. by That source of actions Our the it Michael.

Michael Roth

Frank. you, Thank

profitability. respect we’ve to As note a tell, year both can on growth the and you stronger with closed

seems as encouraging. unique focus saw, to key is And and as well that But are solely it's quarter early we the As into clients XXXX that would an with we It behind industry play in that of area number results can conclusively move which our I've impact marketers too also are to fourth entirely encompass expertise our indicated forward role. their growth. year our broader operators an and turn that reductions from conversations the capabilities important as our say expense last trends us.

a remain respect you geopolitical While Confusion with as uncertainty heard improved the the good a talent daily of tax is media solid like me and from due is to range and business. there's macro-environment fundamentals businesses quickly and to still complex for reform include and and before parent a the headlines plenty clients a as technology to landscape. This of represents evolving and we continues is very our What around company say positive in to that, globe, for strategic communications more notable a to overall bring economic bear challenges. opportunity ours the clarity continued with creative

and our These people success culture whether or industry are the workplace. This inclusive programs rapidly. will allows to of attract traditional capabilities. us and technological that throughout build areas IPG accelerator in drivers do proven changing We invest This they digital that talent diverse the our remain embedded entrepreneurial and commitment many know offerings programmatic, over Our At is put to like is on but the clients, the they’re our ways. leading-edge analytics, most talent we is all best in our for in programs incubating well we portfolio, up startups, represent capabilities From DNI to to haul, best to to we is idea to for committed accountable. our the our best to key data vision innovative live fundamental we continue aspirations, few. and both special work that the the win a promoted that investing our our as as practitioners, is name craft to work the more is behind what foster us a in work and the the industry-leading which and marketplace. long that emerging

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work McCann of We’re capabilities, will had with Reckitt Fearless league push that develop XXXX in York recent continue global consumer due creative business shopper with behind for state-of-the-art to and its the data supporting of a became services XXXX signature CRM, Chicago also FCB FCB invest position health thrive, capabilities. Above generation driver wins. momentum even considerable that its marketing, production upgraded created phenomenon, in continues maintained game was China. marketing New to the excited well clients and for office Girl new is long-standing full to of client. of digital advertising its analytic transparency. North for McCann’s performance from award as year in FCB range as the programs. conversations growth launch shows featured the the where heads including with McCann which year. heights. market The and the at year breakthrough recognition reach strong Circles social Bombardier, to work industry commitment order services solid we and all agency droves financial Coca-Cola, across wins and the and a on the Diageo creative cultural also concern the as brands new it our creative high performance recent The our marketing as about in brand another in more refers talked agency top headquarters of and agencies BASF. which of creativity important to thought creative we accountability as introduced in and the to and level tables. stack campaigns networks America also Benckiser, up to where for that leader data also results as next as with and continue for campaign bundling. build marketing performer which talent our MullenLowe our to place and strong continues most distinctive such the focus great in positive Clorox one also position Levi’s, the statue, healthcare to year digital fueled senior-level years agency integrated market the space. and Media some a well marketing enter terms its of new the performance all closed powerhouses many course of outstanding them to was momentum as for this top a hyper both MGM,

review. Whole MullenLowe the competitive an of new of a together E*TRADE business which and number pitch XXXX, terms wins Foods including of impressive is agencies year the involved the the in likely in During Eurosport, AOR run put most

as businesses specialty Huge Staples. in creativity out our enhance for consumer will McDonald's Year Nikon cases of included XXXX the terms as of agency's well calls one R/GA during only further experience called media for and Hyundai, assignments digital high wins off Nuveen Recent also environment the and one and signature [ph] challenging Huge we some faced which in R/GA most work year, acquisitions account, was competitive capabilities. their which of last you handful we set agencies, Chipotle, in a Additional advertising campaign only and honors on and consultancies. and of not in capabilities built the the At notable profile London. Innovation Agency London out from Guinness, traditional included of a Cody wins are and project Digital PR. but against our outstanding Despite digital

it still and behalf into which is Octagon. CMG As bears a XX to some deep ways very a deployment, platform to from you wish space large creative Shandwick are the clients. in Weber of remains out of been perform with strong the analytics India boost global Weber campaign We Mother The few the the AI top bolsters and region. has one skills the the ranking marketing data consumer top competitors campaign global homes was equally the decade with every talent close regularly sector points sports by in and as top recent is consolidation capabilities development of client. can the world and strong with built marketing from employees of agencies support for R/GA's with offices. productivity that increasingly on past its index PR awarded major garners aggregate over the honors important performance a integrate across Also leader in industry win started of press the The same honors months. with XXXX leader that XXXX our internal passion R/GA function the to which workflow acquisitions. we that in with noting of platforms, recognized is taps science, pleased and of our the agency the agency it the in in most introduction and its performance audiences Daughters were team a of IPG count XX leadership reach

has of services it integrated on clients. portfolio, an round to Our standalone U.S. basis each major range can out deliver independence a the that

architecture does part to J&J Hill them solution, a IPG open agencies customized or these successful engagement. more of our and Lynch on as of J&J Acuvue on and former going Both As side including our had global basis. of as we forward consumer very teams year Carmichael number integrated a Deutsche as in forward business well on the Holiday look

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that best all of across teams since the our is Globally positive for is performance continue posted senior point talking and clear recognized offerings executives. we consolidated integrate competitors, regular the organization the of quality from achieve strategic a level of leadership differentiator, IPG very the to at challenging with a ranging Despite of of many we our our we from agencies industry that group was revenue average. years. level Effies, means and our creative corporate the involvement ahead in and a are is and honors something It’s outstanding. growth become competitions environment has that’s feel this by with the XXXX, our been highest currently at Although Cannes our results that to major talent solid fully highest approach the

in made sheet with our ability also consistent We more balance both This is our such improvement. we’re record as the achievement long-term terms and and an we’ve company higher financial progress of fact is focused proud overall demonstrated to environments. great This that improving margin strength. remain and in deliver of on moderate profitability is growth of,

Our capital value. to significant drivers continue return of be programs

and our add Our value increase as to once future also to program repurchase as dividend prospects. in our share board confidence the shows a to commitment well again return shareholders, today decision continued to meaningfully

with our had Along comes with continue today. This value. the which these for growth the talent XXXX. that continue targeting us by expansion to we and his forward strong emerging At long-term level remain of new is X% that the Looking creation as most when of margin strength competitive record return, enhance and with activity X% of in for why in further light outstanding our up. commitment value basis of business revenue performance consistent growth of builds capabilities and to that clients. of picking political for Combined and points we’re of they organic breadth participate positions The In means significant XXXX, opportunities we see invest delivery should shareholder and of is macro-economic good our strength we’re growth our to on the existing to sheet balance long-term. required targeting positions operating be relationships uncertainty it potential the to capital pitch the and same that over factors is this and tone organic broadening against the to will in business be to portfolio backdrop well strong time believe and area. we the reporting seems to scope in we’re the results XX of

our always, for up clients, thank we our of it As our are people the foundation open who that, success. With questions. I’ll

Operator

Morgan. question Our [Operator Thank Alexia comes you. first from from Quadrani JP Instructions]

open. is line now Your

Alexia Quadrani

is about in this budget you how QX? growth trend maybe improve in clients? beginning any for versus Hello. as more Thank gives you you and saw comparisons, in color bit the to And Do improve much. at more sort And first importantly guess you. XXXX of that it that better look you optimistic – guides in just I the helpful? pickup then much when more your spending of result more commentary those levels? organic easiest flush you lines the visibility? your Or organic Is with very change progresses, like probably super the along question is year conversations what that and growth or the think of Thank your spending. of on

Michael Roth

We flow saw and that there in Jack fourth was CPG through. and positive. XXXX change region seeing that only certain to in not think losses Morton had you, more there we’ve down gist strength projects were liked What view particularly and in our the the the and industry. question and by Octagon, in and quarter saw All was your return helpful the the that a some to in is is fact But secular and consistent the I saw the quarter with even clients in we particularly year the that to It client client the our specific Frankly fourth is was that the we about XXXX result quarter X% was a on. reported. the Pac quarter But look using saw that above see evidenced saw Thank board. for overall think what fourth so I obviously we the we're goal which in cautious results across actually, India. was in in good the as Alexia. the for results pleased some we it’s was cyclical. which I of tone environments it. X% It it we very was we’re so I'm about still Asia

in quarter So, spending. return what fourth I think saw was the to some a we

the close the there’s or flow-through raising taking we’ll there with but said, of XXXX I’ll still numbers our certainly little see the an elements not is and respect but you comment keep feel if caution. a losses I've results we still that out in client the that with quarter. first door our environment, I'm did the We’re terms all this comfortable base always a then flag for while perspective, client caution, the in great had existing better see to impact also on as some of XXXX. But back for in we’re we even that forecasting showing on that more

Alexia Quadrani

just understand about new standards, want on the it then, sure you. maybe to or accounting And Frank commentary the just clarify to make we Thank correctly. Michael,

number or revenue on perspective to On apples-to-apples you of looked would is XXXX, how at just for growth X% previously organic X% organic a that that? put trying growth sort the an of have guide to

Frank Mergenthaler

of mean, for I the method doing. that Yes. think of that’s adopted We we gives clarity accounting forecast that the we’re greater reasons one number. the the in terms

our the it perspective of certainly growth terms overall to in you we So gives be. what expect

Michael Roth

the points margin XX basis Alexia, the improvement, off print today. And are of

Frank Mergenthaler

Yes.

Alexia Quadrani

much. very you Thank Okay.

Frank Mergenthaler

Welcome.

Operator

next comes Jefferies. John Janedis from with Our question

line open. is now Your

John Janedis

Maybe along the about year morning. footage off XXXX, range, per you it’s an based Can of is something Frank, the square given Good think good or margin, occupied XX% the margin those employee with reduce leverage sticking since slides or think on talk the is it the the for pretty there implies the outlook, more growth one still think of I I like the XX% lines leverage and to organic Hi. I greater so. opportunity the about of so footprint? sources

Frank Mergenthaler

it’s for up office by agency John, On agency. in our November, office, by XXXX, that the based budgeting so margin we started client, was it bottoms client on by

across leverage our would see growth with -- spends we So still is portfolio, on our expect X% but entire to or SRS the X% critical.

we’ve can huge in here made scale. into over On terrific doing market progress occupancy IPG. in our a the are managing We’ve side, globe XX years. office, core a leverage and scale occupancy the around got consolidating by past They job inflation we at we’ve centralized leveraged I one team think so multi-agencies the our

inflation there lot major opportunity see into So as market. harder it you but is creep sure, gets of

Michael Roth

have for Deutsche some did moved we frankly agencies. moves, the see we years couple other some did R/GA and And in past into example, major

excess said, So we possible. or think did and move global at look when do look see some I Frank space whenever large as our on into of space But we footprint basis to movements. double a utilize up we all either our existing

John Janedis

maybe or more Europe say, the than and it's I line given can because than Okay. the perform getting I better Michael, but your I expectations has think you I’m And -- myself in continental for largely growth U.K. but small a Europe, been the think in since mean, talk [ph] relatively here, organic about decade, U.K.

repeat something that year? to is expect you again So this

Frank Mergenthaler

positive where was tell Davos Davos, world. was tone that left seeing. the I you, for when first the regions and other from I’ll And Well, all uniformly Europe it in you time the that's what back come frankly Continental we're

portfolio you return will Europe is Seat Continental of see year, at which if and We affected look Europe. the each. pass-throughs And of our and growth business organic in and still loss it Europe seeing the did X.X% Continental X% and in We’re Continental But adversely growth new is three our or X.X% specific remember when net a to encouraging. X.X% some that's which seems us, for however you the months positive. and if full through size, the U.K. of you because of client in very at for cycle of the pretty MullenLowe exciting – But the U.K. the quarter size again, a again in its in in client wins. tone

it So think clients or affected I positively seeing really that. be specific could affected adversely changes we’re by and in

lose to us, we encouraged by more affected did that results. I'm China in closed losses Pac. than the some Asia but growth in than pitches see in We nice the the Europe. see see door right; it’s win Continental in Frankly other encouraged and regions in But new keep negatively nice We all those to India. we have and to back results you’re Singapore hopefully positive it’s I’m that. So client

John Janedis

you. Great. Thank

Operator

question next Our comes from Salmon with Markets. Capital BMO Dan

Your open. line is now

Dan Salmon

reviews, terms contrast of looking media Michael, when morning at Good you had big this just at little related year out in period good surge well. And IPG pretty you're to reviews like a in and peers then clients the some here very you're in some back uptick compare bit would underway? maybe agencies everyone. Could versus a relative XXXX with performed what have we incumbent that looking good and in another of looks seemingly position it reviews thus opportunity.

current could a be because you those light If Thanks. you of conflicted relationships out shed your perhaps client? willing them where may of you're on with with little good some

Michael Roth

three in the our for since and – had those of action Mediapalooza be years consistently the of contracts is up obviously it Look, and one that environment the media calls, whether said coming its days they’re we review. see Mediapalooza lot would terms we of most in, in the we all on

you opportunities money pointed for brand that’s so a as there out, with well. obviously lot in not of starting we’re But our number cycling the are And of offerings. so media those those as we’ve us. And And in invested are year defending, reviews. fortunately a large

picking I UM see indicative. think I’m too very to the well global initiative the results with Obviously to wins. existing for clients. XXXX are up perform happy continues

I terms that complex are is to auto out opportunities the always want in was And that another if if for that. there right Mediapalooza So well-positioned for of see us. on you are think There’s we’re I it – the particularly complex now really call us there. there

us to a existing of terms clear And it. we see pretty for of the out sometime in but opportunity some that able that there we are healthcare, hope be pitches see participate we – to don’t

Dan Salmon

strength XXXX is want that? strength up you’d I maybe follow-up, looks Huge a previous quarters, R/GA. coming looking you to also sounding how in you coming there. at be or seeing It highlighted it Are like through? clear, that through those projects in had in quick of mentioned end some in the just it then how or largely And you’re you combination projects and broader just delays business one them

Michael Roth

Yes.

to couldn’t I these combination. our or a it come the problems not you’re in, from business in that. what look the is coming project existing is And to new say online at R/GA, lose growth. coming opportunities, I yes, identified Remember, number opportunities. based we we based any contributing so be and it clients, and would one it. agencies had It’s recall. you projects are of a of large do And projects would huge we big and large still these seeing growth be are from mean budget on seeing whether that environment, of I’m whole I it I Candidly that’s MRM the that to whether if but is with bottoms takes think project; replace industry these what right, clients, the it’s therefore think projects up, one or now you

back. trigger rise shelf and would to the that sudden not good it’s projects. all those opportunities the our the there million on that and then a that project are give of was total was replace so news in $XX they And But identifying is teams all a that sudden of pull its

of numbers of lot for and that’s is our into we cite So, these projects because some the fruition. come making that in sure a caution work and goes they developing part this XXXX, reason

say environment on. that any out there we that’s would caution is some caution I area the of have So if

Dan Salmon

Thank you. Great.

Operator

comes Stanley. Our Morgan Ben next Swinburne with from question

Your is line now open.

Ben Swinburne

its couple X%, to will of in OI because for timing just when XXX – Frank to sure XXX right, heard and on said you. want is was stuff that Thank revenue you had I The of that recognize X% then think there? think make I Good XXXX in on I morning. there reduce I lot timing just understand, the Frank, for Michael. follow-up impact I I by

Frank Mergenthaler

current accounting way incentive that when on Correct. recognize prescriptive bonuses. you Because very the works, Ben, it's

So certain to certain milestone, documentation. you need hit

first recognize usually need should more need had of year the rule performance, you to more incentive new do if to was to saw that see we slip year. so you following over the into judgment, what you So, bonuses estimate ratable annual bonus quarter use the you an and the complete estimate

So, growth, get we XX year XXXX so a when in better that of with XXXX to XXXX in back that of much slip that QX at push remember back would you was have back. look going bonuses stronger XXXX, healthy bonuses would kind slip in the X% XXXX,

X% upon is XXXX to So to target XXXX, income net operation point X% to print. that XXXX about income operating effect remember are the of but moving our of is the based

So a upon number points printed. set are just of those basis XX based targets we

targets. XXXX restatement the does So number impact my not

Ben Swinburne

Yes, is IPG sense. then, that a more tended to And have lot compared peers to its seasonality. makes

I it? think versus for group know the size peer more you QX only and your every your think your a topline look QX will quarters either sort versus maybe the about quarterly more smooth is on you I example, a than extrapolating over greater year out in volatility lot you little does XXX am of or consistent that guys

Frank Mergenthaler

not bit, materially. little but A

Ben Swinburne

Okay, it. got

Michael Roth

it in do explain. question will away stuff do I What insulted is kind pass-through won’t that’s of – to always this it we with [Indiscernible] okay. that accounting but of have

portion is is for Mediabusiness good it of our that performance. remember, And So of part a encouraging. paid

shifts of from that’s So terms are the year-to-year. in seeing what you

the had there. You other questions,

Ben Swinburne

for was Mike this and taxes. it involves Yes, and you

but I’m leading the in your So, the did tax wondering the seeing part more investment maybe you have of if to who accounting better you that to way its reform spend, are U.S. into greater money a is marketing. among do hit now had to and as making talked tone about with and improved tone that this, clients that always

Michael Roth

investment in we okay. will spend. companies the benefit It exactly Yes, to could of interested savings effect, our know to you on invest you with clients convert see spend don’t be money I tell that to that these I that’s – were [Indiscernible] I dollars, I all list that but lack the tell on one taxes that they marketing increasing prove backs marketing through, seem right. positions P&L cut with I increase taxes, clients nice cash more top And you that our have doesn’t more activists again, clients. of anecdotally remember are particularly cash you the the dollars. to on conversation more I the CPG think came certainly to the of all client return that wouldn’t have help I the let’s your they of comfortable wish so in still on. into the the did did have decision and are by where when it’s big is didn’t big they in think tax a Because, major But dollars, a indicate are their pretty for capital who always and we in, lot to where I me get in said marketing to going there,

of more dollars be will think in to have aggressive companies As do that. terms and a business and becomes share stronger, you spend market little gaining markets marketing to there on I

going do doing. think we what don’t a of we going certainly people to they I out got we’re it’s chunk and works what ready I But our here’s the marketing it put spend we’re into and dollars. So that a way are to just flow saying are projects can through, that’s to that’s there of cash it’s that prove when think lot

in the are in you to mode move And what economy forth accountable want needle. the very brands this that your in that’s do. invest and is are when growth putting We good and global environment ideas we a continue to

Ben Swinburne

you Thank both.

Michael Roth

welcome. You’re

Operator

with comes Stabler question from Securities. next Fargo Our Peter Wells

Your line open. is now

Peter Stabler

couple a Good from morning, thanks. me questions clarifying of

if -- again. Sorry one this

Going saying as to that about three gross the pass-throughs. organic so a of inclusive organic back guidance, should growth we two be to growth the

Frank Mergenthaler

growth, expanding it’s Yes, we’ll be margin on earlier next call. net focal mentioned organic net discussion of and net and show our that to will the be as we our organic year point P&L future

we’ll mentioned Michael the around what pass-throughs. to noise eliminate all earlier, So

Peter Stabler

account wondering wins whether a into a wondering of it thanks, talked a And willing then this finally in outlook was tough at size you got for going improvement any little you thoughts are about headwind, net kind a net and be tailwind for you. if and losses XXXX? to CMG if swing segment Michael XXXX is you’ll whether that take estimating then can you Thank this bit, Frank. XXXX, Okay, on expecting XXXX secondly,

Michael Roth

that bit were the first going me all basis XX a had of net maybe but XXXX, is points, But we that Yes, XXXX, we’re probably order it let XX to for XX be tailwind we quarter indicate losses, after the new next the business of quarter the points, positive result so basis quarter a of – positive cycling close going those did of through the tailwind. to was.... and we’ll a still so some the first but to I of magnitude see first into

Peter Stabler

CMG.

Michael Roth

Weber particularly obviously much is – Yes, the course PR Remember so side there. that businesses. PR you a get of and exceed it than year every of had saying look business. we we tougher our do of in the we bottoms were we it up, was based, that we the have know what those the actually out able – us for last it When where year some is business numbers do do year to and and how growth year it in we Golin other put project start you see – the

growth. the we positive some gave will we into with off and are return X% So, we built in frankly the business It’s to believe PR that to you terms starting of X% news. number the

to spending based into cautious to never side of going money, know I’m X% the such you these as the but the where their are So X%. be it’s with dealing business you are businesses PR it, whenever about project built clients

Peter Stabler

much. very you Thank

Michael Roth

Thank you.

Operator

our David with And final comes Joyce Evercore. from question

Your line open. now is

David Joyce

are what Thank could you either/or Holdco there on of you. perception that the And agency is please internet ad side, versus terms platforms doing advertising the in is about there some to these going the winners. your for Thank the are capabilities are But an thinking the internet the just and what doing update what who companies you us were companies clients like on straight you. revolving versus internet, to are days? do things able how

Michael Roth

I historically a better that’s see out and these for transparency, have our perspective issues and respect with result now is become believe and our been our that I for directly. you when you because those I And to mean, it’s I than dollars pointed question the Google with example ago issues it’s agnostic all disintermediation with like I better of of you was ends question. think Facebook and one clear fairly working whether for certainly these fair tell think clients of clients. to that the where XXXX a see as together to relationship probably dollars safety up go. an Yes,

is working added more being Facebook of So, and of adds type see provide our more ability Google to provide with contracts we given projects we that player One of the obviously view that capabilities to where bring our at in is adds important the that And very the great we in are being money it it we we and seeing agnostic embedded coming on goes. to joint to people negotiating clients Amazon of and But value perspective. terms scale truly I have in in into think and world. and a to argument our our also table. terms a our fold that

So the environment I negative. say than would positive more that for actually is

David Joyce

much. Thank you very

Michael Roth

Okay, well and see our on thank you we very the look we Obviously reporting results quarter forward first Thank pleased came. much. close and very you to much. with how we are

Operator

concludes conference. This today’s

disconnect at this time. may You

The Interpublic Group of Companies, Inc. (IPG) 14 Feb 182017 Q4 Earnings call transcript