The Interpublic Group First Quarter 2024 Conference Call is about to begin. The Senior Vice President of Investor Relations, Jerry Leshne, will introduce the CEO, Philippe Krakowsky, and CFO, Ellen Johnson. The company has posted their earnings release and slide presentation on their website. During the call, they will discuss forward-looking statements and non-GAAP measures. Philippe Krakowsky will start with an overview of the quarter's performance, followed by additional details from Ellen Johnson. He will also highlight key updates from their agencies and strategic plans. The company has had a solid start to 2024, meeting their targets for growth and margin.

In the first quarter, the company saw organic revenue growth of 1.3%, with strong performance in Europe, LatAm, and the US. IPG Mediabrands, FCB, and Golin all had significant growth, while the digital specialty agencies and tech and telecom client sector were a drag on growth. Expenses were in line with expectations, with a 9.4% adjusted EBITDA margin and 110 basis points of operating leverage on base payroll, benefits, and tax.

In the third quarter, the company reported diluted earnings per share of $0.29 and adjusted earnings per share of $0.36. They also repurchased 1.9 million shares and increased their dividend. The company expects to achieve 1-2% organic growth for the full year, with an adjusted EBITDA margin of 16.6%. However, a recent decision by a client may impact their ability to reach the top end of their growth target. The company's data and tech-driven media offerings, specialist healthcare marketing expertise, PR and experiential marketing capabilities are expected to continue performing well in the long-term. The company will also focus on enhancing their offerings and incorporating precision and performance into their media offering, as well as utilizing contemporary technologies like generative AI in their marketing services.

The speaker begins by reminding listeners that their remarks will follow the presentation slides. They then highlight the first quarter revenue, adjusted EBITDA, and diluted earnings per share. The company also repurchased shares during the quarter. The P&L for the quarter is shown on Slide 3, with a breakdown of revenue on Slide 4. The Media, Data and Engagement Solutions segment decreased organically, while the Integrated Advertising and Creativity Led Solutions segment saw organic growth.

In the last quarter, IPG experienced strong growth at FCB and IPG Health, but this was partially offset by decreases in certain Creativity Led Integrated Agencies. The Specialized Communications and Experiential Solutions segment had a 1.5% organic growth, with strong performance at Golin and Public Relations. In terms of regions, the US had a 2.1% organic growth, led by Healthcare and Food & Beverage. International markets decreased by 50 basis points, with mixed performance by regions. The UK and Continental Europe had strong growth, while Asia-Pac and LatAm saw decreases.

The other markets group, which includes Canada, the Middle East, and Africa, accounted for 5% of net revenue in the quarter. This group saw a 6.5% decrease in revenue, which follows a 9% increase last year and a 20% increase the year before. Operating expenses increased by 50 basis points, resulting in a first-quarter margin of 9.4%. The ratio of total salaries and related expenses as a percentage of net revenue decreased slightly from last year, and the company saw a decrease in average headcount. Performance-based incentive compensation increased slightly, while severance expenses increased by 70 basis points. The company expects to see the benefits of cost-cutting measures in future margins. Temporary labor expenses decreased, and the company continues to manage costs efficiently, resulting in a decrease in office and other direct expenses. Overall, the company continues to leverage its expenses and maintain a flat occupancy expense ratio.

In the first quarter, our SG&A expense was 1.7% of net revenues, reflecting higher investments in senior leadership and information technology. On Slide 7, we provide details on adjustments to our reported results, including amortization of acquired intangibles and restructuring charges. We also had a pre-tax loss of $6.8 million in other expenses due to the disposition of non-strategic businesses. These adjustments resulted in an adjusted diluted EPS of $0.36, compared to a reported EPS of $0.29. In the first quarter, we used $157.4 million in cash from operations, mainly due to seasonal fluctuations. Our investing activities used $50 million for CapEx, while our financing activities used $227.1 million for dividends and share repurchases.

The company's cash decreased by $454.5 million in the quarter, leaving them with $1.93 billion in cash and equivalent. Their total debt at quarter end was $3.2 billion, with the next maturity not until 2028. The company's teams are focused on executing at a high level and the strength of their balance sheet and liquidity puts them in a good position financially and commercially. The company's results are in line with their forecast and they are seeing strength in their Media Offerings, Healthcare and Marketing services, and agencies utilizing audience-led capabilities. Marketer sentiment is improving and the new business pipeline is more active. The company has received industry recognition and is focused on innovation during this period of technological disruption.

Interpublic is helping businesses reinvent themselves by developing a strong technology and data foundation and strategic capabilities such as audience definition, identity resolution, commerce, and production. They have added senior leaders to connect more of the portfolio to these capabilities and are partnering with Adobe to integrate generative AI into their marketing technology platform. This will allow them to use AI in their Creative and Content businesses to engage consumers at every touch point. All of this is supported by their unified operating system, the IPG marketing engine.

The company's use of segmentation and insights from Acxiom data allows for seamless connection between media strategies and targeting, and creative concepts and messaging. This end-to-end solution also includes activation, attribution analysis, and optimization, making it easier for clients to engage, convert, and retain customers. The company is also using AI to improve internal processes. In the past quarter, the Media, Data, and Engagement Solutions segment saw strong growth and industry recognition. IPG Mediabrands is expanding its unified retail Media solution for clients and working with partners in the retail ecosystem.

IPG Mediabrands has integrated Amazon Ads APIs into their Media platform and added Prime Video ads to their reach maps. They have also rolled out an Amazon Marketing Cloud suite of analytics solutions and received industry recognition for their Media operations. Acxiom continues to have the top performing audience data, with attributes for 2.5 billion real people and the ability to match them to global device IDs. They also have a deep understanding of consumer transaction data and a history of managing first-party data for large enterprises.

The Integrated Advertising and Creativity Led Solutions segment of IPG had a strong performance during the quarter, with FCB and IPG Health leading the way. FCB has focused on integrating media planning and production with their traditional creative work, using Acxiom data and tools to inform their strategies. This has resulted in creative work that is grounded in audience insights and drives in-market results. FCB and IPG Health both received recognition for their work, with FCB winning Global Network of the Year and IPG Health being named Healthcare Network of the Year. Other IPG agencies, such as Deutsch LA and the Martin Agency, were also recognized for their innovative work. McCann, another IPG agency, won new clients and is increasingly doing global work for major clients.

Weber Shandwick and Golin, both part of the Specialized Communications and Experiential Solutions segment, had a strong start to the year with notable wins and recognition. Momentum also made strides in the Experiential Marketing space, utilizing AI technology for innovative experiences. IPG's commitment to ESG is evident through their annual report and recognition for their engagement with suppliers on climate change. The company has seen more positive conversations with clients since the start of the year compared to the previous three quarters.

The company expects to achieve 1-2% organic growth for the year, with a potential challenge due to a decision from a major client. They also expect to maintain a 16.6% adjusted EBITDA margin, with strong performance in Media, Healthcare, Experiential, and PR. They plan to improve margins through their flexible cost model and new offerings, and will continue to focus on providing business solutions to clients. They also plan to use their strong balance sheet for capital returns and potential M&A opportunities. The floor is now open for questions.

Philippe Krakowsky is asked about the potential growth in the tech segment for Q2 and the rest of the year, as well as how much revenue IPG is defending in current reviews, and the drag from R/GA and Huge on organic growth. Krakowsky cannot speak to the specifics of client reviews, but he does reveal that the Digital Specialist Agencies have had a 1.5% drag on IPG overall in Q1, with 60-70% of that due to one AOR loss. He also mentions that the tech and telco sector has had a 1.5% drag in Q1, with the majority of that due to the one AOR loss. Overall, there has been progress in reducing the drag on IPG's results.

The speaker discusses the performance of the Tech and Telco sector in the first quarter and notes that it was just below flat, indicating stabilization. They also mention a client sector that showed some movement, but the full year guidance does not factor in a return to growth for either of these sectors. The speaker also mentions the impact of a significant client decision on organic growth and the potential for M&A in the future.

The speaker discusses the recent news about a large client and their decision to evolve their marketing model, which may impact the company's organic growth in the back half of the year and early 2025. He also mentions that the company has a strong relationship with the client and will support them through the transition. In terms of M&A, the company has strength in commerce through their CRM agencies.

At Mediabrands, the use of Acxiom data has led to growth in the unified retail Media solution. There is also a growing demand for deep engineering capabilities and scale in digital services. The company expects strong performance in Data and Tech, Healthcare, and Experiential in the long term. IPG Health, the largest in the healthcare space, has been a leader and has contributed positively to overall results. The company expects working capital to improve in 2024.

The company works with major pharmaceutical companies and sees continued opportunity in the Health sector. They have strong performance in Healthcare and PR, and are looking to connect data and analytics more closely to enterprise capabilities. The Experiential sector is also expected to continue growing. The company is focused on managing working capital.

The company is consistent and disciplined in their approach, from taking on new clients to managing payables. They expect a more normalized result this year, with the first quarter showing the lowest use in 15 years. The company also discusses the potential impact of AI on their business, both in terms of efficiency and competition. The company had a tough quarter in Asia, with smaller cuts across various clients, except in India where they have significant scale and strong agency brands and capabilities.

The use of AI in IPG's business has been growing, particularly in their Media business and through their integration with Acxiom. They recently announced a partnership with Adobe to improve connectivity and quantifiability in their creative work. The integration of Gen AI allows for better tracking and understanding of creative effectiveness.

The speaker discusses the role of AI in their company's solutions for clients and how they are implementing it. They also mention that they are looking at potentially disruptive technologies and have been successful in adapting to changes in the past. When it comes to M&A, they prioritize strategic fit and also have financial guidelines such as maintaining discipline and considering additive growth, margins, and earnings.

The speaker discusses the recent announcement by Google to delay the deprecation of the Chrome cookie and how it may affect their business. They mention that this is not a new issue and that marketers have been preparing for it by becoming more sophisticated in their use of data and leveraging their own first-party data. They also mention that clients have been focused on creating their own identity graph to have more control over their data. The speaker does not provide specific guidelines for dealing with this issue and reiterates their commitment to capital return.

The speaker discusses the company's strong data capabilities and how they have been preparing for the current market conditions for some time. They do not see it as a dramatic development and do not expect it to change conversations with marketers. The speaker also mentions the growth in Media and an increase in SG&A due to investments in senior enterprise talent and technology. These investments are expected to lead to increased growth and efficiency in the future.

In the paragraph, Philippe Krakowsky discusses the increased need for integration of services and centralization of certain capabilities, such as a data layer and Gen AI-driven content layer. He also mentions the importance of KINESSO in activating data within the Media ecosystem. Krakowsky acknowledges that these changes will require shifts within their model and thanks the audience for their time.

This summary was generated with AI and may contain some inaccuracies.