Good morning, and welcome to the Interpublic Group Third Quarter 2016 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 like to introduce Mr.

Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin..

Good morning. Thank you for joining us. We have posted our earnings release and our slide presentation on our Web site, interpublic.com. This morning, we are joined by Michael Roth and Frank Mergenthaler. We will begin with prepared remarks to be followed by Q&A. We plan to conclude before market open at 9:30 Eastern.

During this call, we will refer to forward-looking statements about our Company. These are subject to the uncertainties in the cautionary statement that are included in our earnings release and the slide presentation, and further detailed in our 10-Q and other filings with the SEC. We will also refer to certain non-GAAP measures.

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

Thank you, Jerry, and thank you for joining us this morning as we review our results for the third quarter and first nine months of 2016. I'll start out by covering highlights of our performance, Frank will then provide additional detail, and I'll conclude with an update on our agencies and the tone of our business, to be followed by our Q&A.

We're pleased to report another quarter of solid revenue and profit increases. Our third quarter organic revenue growth was 4.3%, on top of a very strong 7.1% in Q3 '15. Acquisitions had a positive impact of 40 basis-points, while FX was a negative 1.7%. As a result, total revenue growth was 3%.

We continue to see positive momentum in the quarter from a broad range of our creative, marketing services and media offerings. Our digital capabilities also continue to be very significant drivers of growth for us.

As you remember, as of some years ago, we committed to organic rebuilding digital talent and expertise within every agency across our organization, so as to effectively migrate to new competencies and serve the evolving needs of marketers. Our results demonstrate that this strategy continues to pay-off.

In terms of geography, we grew organically in every world region with the exception of Asia-Pac. Our international organic growth was 8.1%, driven by Continental Europe, the UK and LatAm. U.S. organic growth was 1.8 % for the three months, against extremely strong comparables in the quarter with two consecutive years.

Globally, we continue to see growth from nearly every client industry, and were led by the tech and telecom and food and beverage sectors. Turning to Q3 operating expenses and margins, operating expenses increased 2.5% compared with recorded revenue growth of 3%.

And as a result, operating margin expanded 50 basis-points from last year’s third quarter to 10.8%, reflecting leverage on our salaries and related expenses. For the first nine months of the year, organic growth was 4.8%. This is very well balanced with 4.8% growth in the U.S. and 4.9% internationally.

It’s worth noting that the charge in pass-through services added 90 basis-points to our organic growth in the quarter, and added 10 basis-points through nine months.

Operating profit year-to-date is up 9%, and operating margin in the same period expanded 40 basis-points, reaching a level of 11.7% for the trailing 12 month period, which is the highest level our Company has achieved in well over a decade.

Adjusted diluted EPS was $0.64 this year through the third quarter compared to $0.55 in 2015, an increase of 16%. Turning to our update on share repurchases, during Q3, we use $81 million to repurchase 3.5 million shares. Year-to-date, we utilized approximately $193 million, repurchasing 8.5 million common shares.

Since instituting our return of capital programs in 2011, we've returned $2.9 billion to shareholders in dividends and share repurchases, as well as reduced our diluted share count by 27%. At the end of the third quarter, we had $265 million remaining on our current authorization.

Overall, our performance continues to underscore the strong competitive position of our agencies, around the world and across the full spectrum of advertising and marketing disciplines. The strength and growth of digital activity is also notable.

We continue to manage expenses effectively in order to deliver on our margin objectives, which has been a key priority for us. As we head into our always important fourth quarter, economic and political conditions continue to present macro uncertainties. Nonetheless, the overall tone of business remained solid.

We’ve also posted another good year in new business front. And while the tailwinds from recent wins were relatively slight this past quarter due to timing, we expect the impact to be more evident in Q4. We had previously increased our full-year 2016 organic growth target to the high end of 3% to 4% range that we shared with you coming in to the year.

In light of the strength of our offerings and our strong organic revenue performance through nine months, we believe it's appropriate to raise our organic growth target to a range of 4% to 5%.

Given the higher levels of profit contributions, we have historically seen on our growth in the fourth quarter, we continue to feel that we remain well positioned to achieve 50 basis-points or more of operating margin expansion for the full-year 2016.

At this stage, I'll turn things over to Frank for additional details of our results, and join you after his remarks for an update on our operating units to be followed by Q&A. Frank..

Thank you, Michael. Good morning. As a reminder, I'll be referring to the slide presentation that accompanies our webcast. On slide two, you'll see an overview of results, a number of which Michael has touched upon. Organic revenue growth was 4.3% in the quarter, and 4.8% for the first nine months.

Q3 operating profit was $207 million with operating margin of 10.8%, an increase of 50 basis-points from a year ago. For the nine months, operating margin expanded 40 basis-points and operating profit grew 9%. Third quarter diluted EPS was $0.32 a share and was $0.31 adjusted for certain below the line items in the quarter.

This compares to last year’s diluted EPS of $0.27. For the nine months adjusted diluted EPS was $0.64 this year compared with $0.55 in 2015, an increase of 16%. Average fully diluted shares in Q3 decreased by 1.8% from last year due to our share repurchase program. Turning to slide three, you'll see our P&L for the quarter.

I'll cover revenue and operating expenses in detail in the slides that follow. Here is worth noting that our adjusted effective tax rate in the quarter was 33%, which compares favorably to our adjusted effective tax rate to Q3 2015 of 36%. As you have seen in the past, we’ve volatility and the tax rate from quarter-to-quarter.

We continue to expect that our full- year 2016 effective rate will be at the lower end of 37% to 39% range that we indicated in the earlier in the year. Slide four has more detail on our revenue growth. Revenue was $1.92 billion in the quarter, an increase of 3%. Compared to Q3 15, the impact of the changing currency exchange rates was a negative 1.7%.

Our net acquisitions added 40 basis-points to revenue. The resulting organic revenue increase was 4.3%. It's worth noting that net increase in pass-through revenue in the quarter, mainly in our events business in the UK, benefit organic growth by 90 basis-points.

For the nine months, our change of pass-through revenues only increased organic revenue by 10 basis-points. As you can see on the bottom half of this slide, at our Integrated Agency Networks, the organic increase was 3%. This was led by strong growth by McCann, R/GA and HUGE. IAN's organic growth for the first nine months was 4.7%.

At our CMG segment marketing services specialist organic growth was 9.4%. We again have strong performance at Weber Shandwick as well as our events business Jack Morton, and our sports marketing at Octagon. Organic growth was 5.6% at CMG, excluding the impact of higher pass-through revenues. For the nine months, organic growth was 5.3%.

Moving on to slide five revenue by region, in the U.S., Q2 organic growth was 1.8% on top of 7.1% in Q3'15 and 7.9% in 2014. Excluding the impact of lower pass-through revenues, organic revenue growth was 2%. It is worth noting that acquisitions in U.S. added another 60 basis-points in the quarter.

Leading client sectors were food and beverage and tech and telecom, as well as our other sector, diverse clients. Slower U.S. growth, compared to the first half of this year, was due to a less robust tailwind from the timing in account wins, and to a particularly strong comp in the healthcare sector.

In the UK, organic growth was 16.4% and was 4.8% excluding the positive impact from higher pass-through revenues at our events specialist, Jack Morton with continuous strong performance from McCann, R/GA Octagon, as well as Jack Morton. UK acquisitions add 3.9% to our growth in the quarter.

By client sector, we were led by tech and telecom and healthcare. It's worth noting that our UK operators are not citing a specific impact in clients spending related Brexit. Turning to Continental Europe, organic growth was 8.3% in the quarter, a strong result driven by new business wins in the region.

We’ve notable increases in the retail of food and beverage sectors, led by Mediabrands and McCann in Germany and Spain, among our largest markets. In Asia-Pac our organic decrease in Q3 was 1.4%. This comes on top of 7.2% growth a year-ago.

In our largest regional markets, we had single-digit growth in India, while revenue decreased in Australia and China. For the nine months, our organic revenue decrease in the region was 80 basis-points. In LatAm, Q3 organic growth was strong, 17.8%, on top of 14.4% growth a year ago.

We’ve increases in all of our largest national markets, including Brazil, Argentina, Colombia and Mexico. Growth was driven by higher spend by existing clients and by new client wins. We had notably strong performances from McCann, R/GA, HUGE, MediaBrands, Octagon, and FutureBrand. For the nine months, organic growth was 15.4%.

In our other markets group, organic growth continued to be strong in Q3 at 5.6%, driven by new business wins and by performance in Canada, led by Mediabrands and HUGE. Organic growth was 6.7% for the nine months. On slide six, we chart the longer view of our organic revenue change on a trailing 12 month basis. Most recent data point is 4.9%.

Moving on to slide seven, our operating expenses. In the third quarter, total operating expenses increased 2.5% from a year ago, compared with our reported revenue growth of 3%. FX reduced our percentage operating margin by 10 basis-points in the quarter. Compared to last year, but it was neutral than margin from nine months.

Underneath our margin improvement of 50 basis-points in Q3, the ratio of salaries and related expenses to revenue was 63.9% this year compared with 64.4% a year ago. The improvement was driven by year-on-year operating leverage on two categories; our expenses for incentives; and for our category of other salaries and related expenses.

This was partially offset by increased base payroll on temporary health as a percentage of revenue. Our total headcount at quarter-end was approximately 50,400, an increase of 3.4% year-on-year. This reflects both organic hiring and acquisitions, in support of growth in areas such as digital, creative, media and PR.

Turning to ops and general expenses on the lower half the slide. O&G expense was 25.3% of Q3 revenue, compared with the same level year ago. We leverage our expenses for travel, supply and telecom, as well as for professional fees. That was offset by increased pass-through expenses as a percentage of revenue in our other O&G category.

The net result was operating margin expansion of 50 basis-points in the quarter and 40 basis-points for the first nine months. Slide eight depicts our operating margin history on a trailing 12-month basis. Most recent data point is 11.7%, which is an improvement of 60 basis-points from a year ago.

Slide nine is provided for clarity on EPS adjustment in the quarter. We’d a below the line gain of $3.9 million in other income, primarily due to sale of a small non-strategic business outside the U.S. Benefit to our diluted EPS was $0.01.

As you can see, the impact of the new accounting standard for share based compensation was de minimis in the quarter. Adjusted diluted EPS was $0.31. Moving on to slide 10, the current portion of our balance sheet. We ended quarter with $895 million in cash and short-term marketable securities, which is comparable to the level last year.

The comparison to December 31st reflects that our cash level is seasonal and tends to peak at year-end. Slide 11 is our third quarter cash flow. Cash provided by operations was $520 million compared with $282 million a year ago.

The comparison reflects increased cash generated from working capital this year, $318 million compared to $155 million a year ago. As we have pointed out previously, working capital can be volatile quarter-by-quarter. Investing activities used $65 million, mainly for CapEx.

Financing activities used $234 million, chiefly for share repurchases and our common stock dividend, as well as decreased short-term borrowings. Our net increase in cash and marketable securities for the quarter was $219 million.

On slide 12, we show our debt de-leveraging from a peak of $2.33 billion in 2007 to $1.74 billion at the most recent quarter-end. In summary, on slide 13, through nine months we’ve achieve 4.8% organic growth and 40 basis-points of margin expansion, which represents very solid progress to our objectives for the full year.

We are seeing growth in areas where we have focused our investment in both people and acquisitions. Our operators are focused on the appropriate cost disciplines and margin expansion. And our balance sheet is an important area that we can continue to deploy for value going forward. With that, let me turn it back to Michael..

Thank you, Frank. Well, as you can see, through the first nine months of 2016, we reported solid results in terms of both organic revenue growth and margin progress. As I’ve mentioned, contributions to our positive results came from across the portfolio. It was very good balance among our agencies; geographic regions and most to all client categories.

Behind the strength of two very key strategic positions that we took some time ago; the first was to invest in talent; and foster a culture that makes us a top choice for talent in every marketing discipline and capability.

Given how important compelling content is for any media, entertainment or communications company, in the current environment, having the most outstanding creative strategic and digital talent as never been more viral for success and we are well positioned in this regard.

Now as a talent priority that has long been key for us is our commitment to diversity and inclusion as a driver of business performance.

In environment that encourages respect and trust it's key to a creative business like ours, and a competitive advantage comes with having a variety of perspectives and beliefs when solving our client business challenges. We had reinforced this focus through a comprehensive set of award winning programs.

And we ensure accountability by tying executing compensation directly to the ability of our leaders to achieve diversity objectives. While Interpublic has made a great deal of progress and we take pride in that, as an industry, we still have a ways to go in this journey. The second major strategic decision is our approach to digital.

Unlike some of our competitors, IPGs digital capabilities have been largely grown organically in are embedded within every one of our agencies. This investment in people with new skill sets in developing new products and services, and in incubating new technologies, has allowed us to stay highly relevant in today's digital world.

We wanted to be at the first place as clients turn to for help and guidance as they seek to navigate the complexity of the media and marketing landscape. We know that there’re some questions out there about what technology conversions will mean to our industry going forward.

We may all be facing new kinds of competitors, as more comes, IT and consulting come together. However, it's worth noting that to-date the emergence of technology enabled marketing has created meaningful opportunity for the agency holding companies. This has definitely been the case for IPG given our skill set, focused on digital.

Our media agnostic view of the channel allocation and a longstanding commitment to open architecture where we've been an industry leader with this approach to delivering the best customized talents and solutions that can provide the integration of marketing functions our clients are increasingly asking for.

What is not commonly understood is how much resource IPG already has in place across the group when it comes to date expertise, data analytics, and proprietary tools that we can bring to bear in order to create accountable marketing campaigns that drive marketplace results. Data and analytics is an area we will continue to focus and invest behind.

So as to ensure that we can create even more targeted, dynamic, and effective work on behalf of our clients. Moving on to operational results, it's clear that during the quarter and for the year-to-date, in addition to solid growth, we've continued to be very disciplined in terms of cost management.

We remain focused on converting at the appropriate levels to deliver on margin improvement target for the year. We also remained committed to the robust capital return programs that we put in place in recent years, which have been driving significant shareholder value creation.

At the agency level, McCann Worldgroup’s performance in the quarter was strong. Their creative product continues to earn high levels of industry recognition, and they’re growing well in a number of their major clients. Notable wins came from Reckitt Benckiser and Chick-fil-A, as well as Qualcomm this past October.

We're seeing a high degree of collaboration among the advertising, MRM, momentum and the strong healthcare offerings. Mediabrands once again made significant contributions to our profitability. UM has rebuilding out it seems to deliver for recent global wins.

Leading edge capabilities like Cadreon and Ansible are also being introduced into a range of new international markets. And we added to the reprised SCO offering with an attractive acquisition based out of the UK that will serve as a regional center of excellence. Mediabrands also recently recruited strong new leaders for AMEA and Asia-Pac regions.

Furthermore, in the quarter, they retained BMW North America, and extended Coca-cola in the Middle East. As mentioned last quarter, we have longstanding record of transparency in our dealings with marketers and media vendors. We are proud of role we play is wholly objective and media agnostic advisors to our clients.

At CMG, we saw continued outstanding work out of Weber Shandwick. Some of you will have previously heard, I’d just point out, that it's the full range of Weber’s digital capabilities from strategy through analytics, all the way to content creation, moving a standalone company who would be one of the largest social media agencies in the world.

Octagon and Jack Morton were also strong performers in the quarter. MullenLowe continue to make headway in terms of integrating the network and promote new leaders for its New York and London agencies. Both our executives content to the Company through the acquisition of digital agency Profero, which made important contributions to Q3 performance.

MullenLowe also benefited from its bundle lead offerings, MediaHub, which continues to partner closely with Mediabrands as it did in the recent global win of Western Union. FCB is producing visible and successful new advertising work for clients, including AB InBev, and a number of cresol branch, which work for new global client Clorox and follow.

The agency further bolstered its leadership with a significant creative high. She will lead the creative group in the flagship Chicago office. FCB Red, the agency shopper marketing unit is a market leader as our operations in the number of key emerging markets, including India, Brazil and South Africa.

As you know, we have a range of full services domestic agencies, including Deutsch, Hill Holliday, and the Martin Agency and Carmichael Lynch, which conserved clients independently, who partnered with other IPG units in the customized integrated offerings that we referred to as open architecture.

As mentioned earlier, this is the concept that we’ve been working to refine for some time. It has fuelled many of our largest wins in recent years, including recently Harley Davidson this quarter. And it's something you are now hearing more about from a number of our competitors.

An additional highlight in the quarter was the performance of R/GA and HUGE. These are among the industries’ best digital networks.

The strategic work they do for clients on digital transformation rivals out any consultancy and the range of services they provide from UX and design to strategy, digital storytelling, data visualization, and more an unrivalled in our industry.

Starting from a single agency in the New York, both R/GA and HUGE, are evolving into powerful multi office networks. In the case of R/GA, there are now 14 locations on four continents. During the quarter, they posted major wins with Simmons and Mercedes Benz. HUGE has grown to 7 U.S.

offices and an equal number internationally, working with major clients, including Google, HBO and Under Armour. Looking forward, as mentioned in my opening remarks, the tone of the business remained solid. The new business pipeline is strong overall, and we are new business positive for year-to-date.

As indicated previously, tailwinds from recent wins will be a more prevalent in Q4 than they were in Q3, which we are sharing with you today. Investments in talent supplemented by our measured and strategic approach to acquisitions to ensure that the level of professional offerings remain highly competitive.

And that’s vital for us to capitalize on the level of complexity and even confusion that exists in today’s marketing landscape. Despite the macro uncertainty that’s out there due to political and economic factors at around the globe, we’re highly focused on delivering against our top and bottom-line targets for the year.

As stated at the outset in light of the strength of our offerings and a strong organic revenue performance from nine-months, we believe it's appropriate to raise our full-year organic growth target from previously 4% to a range of 4% to 5%. Given the high level for profit contributions we’ve historically seen our growth in the fourth quarter.

We also believe that we remain well positioned to achieve our target of expanding 2016 operating margin by 50 basis-points, or more. Combined with the strength of our balance sheet and our proven commitment to capital return, which has been a source of significant value creation, this will allow us to further enhance shareholder value.

As always, we thank you for your support. We’re intent on closing out the year strongly, and we look forward to posting you on our results at our next call. With that, let’s open it up for questions..

Thank you [Operator Instructions]. Our first question is from Alexia Quadrani from JP Morgan. Your line is open..

Just digging in a little bit further on the U.S. organic growth in the quarter, Frank, I think you highlighted very difficult comp on the healthcare side. And then obviously a little bit less tailwind I think both of that in terms of new business in the quarter. Given the tailwinds there was just a pick-up in Q4.

Is there unusually difficult comp in Q4? How should we think about the underlying growth rate of the U.S.? I pushed on it, there’s just a couple of your peers also, highlighted weakness in the U.S. organic growth when they reported earliest week, some cited it's an election noise. I guess any more color you can give on the other line trend of the U.S.

market, it will be great?.

Let me just say, for the nine months, our growth was 4.8% in the U.S., which still is a solid performance, given where our forecast for the full year and what the industry is saying in terms of the macro growth of our industry. And, yes, you’ve pointed out correctly that in the third quarter we were a little bit light in the U.S.

compared to what we’ve been delivering. We’ve grown organically 15% in the last two years in the U.S. And obviously as we grow it gets a little more difficult. That said, the tailwinds that we referred to, we’ve indicated we were light in the third quarter, coming-in in the fourth quarter.

I can’t say -- again it’s a function of the fourth quarter a lot of our revenue comes in, a lot of our operating margin comes-in in the fourth quarter. I’d like to tell you that all of that tailwind comes-in at the U.S., and we’re back to levels of organic growth that you’ve seen. But I can’t say that. We do think there’ll be improvement in the U.S.

in the fourth quarter. But I think the healthcare item that Frank pointed out. We had a tough comp in the healthcare side, and we did have a little bit slowing down, in particular, in one of our agencies, in terms of healthcare and that contributed to it. But again, I’m very comfortable with the performance we have in the U.S.

It continues to be a key driver for us going forward. What I like about our U.S. performance for the year is that it's across all of our agencies. We see MullenLowe. We see McCann, Mediabrand, CMG, our independent agencies. All of our agencies are strong in the U.S. And I believe we will continue to see improvement in those markets..

And then just a follow-up, if I can, on the very strong growth you saw in Europe in the quarter. The pass-through revenues, I think, you highlighted, helped a bit. And was that purely in the UK? And was there a any pass-through year ago in the UK in the same period that were comping? And then on the Continental Europe the very impressive growth there.

It sounds like it sort of just general improvement from what you’ve been doing in some new business wins, or is there something one-time-ish there we should look into?.

Yes, let me focus on the UK. I don’t believe we have it. It was a one big event and we saw that at Jack Morton. And but other than that, we still had a solid performance in the UK of 4.8% growth in the UK. I think that's the right number. So we’re still pleased.

We continue to have strong offerings across the CMG portfolio, as well as our agencies in the UK. So we're pleased. The R/GA, in particular, is very strong in the UK. Management is there and the offerings we see in R/GA is particularly strong and growing nicely.

So we don’t -- and as far as Brexit goes, as we said, we haven’t seen any impacts on Brexit yet. Obviously, sometimes down the around, we’ll see some impact where we haven’t seen it. Continental Europe is the different story in that. As you know it's 8% of our revenue, at least for the nine months.

And new wins and clients spend in that particular region has a nice effect, which is what you’ve seen in this quarter with the results for Continental Europe. We set for on a full year basis, we've always said we'd see 1% up or 1% down. It's encouraging that we're seeing that improvement.

We saw a good flow through in terms of new business at McCann as well as Mediabrands, as they on-boarded some new client wins that we had in those markets, particularly in Germany and Spain. So, we're excited to see some improvement in the Continental Europe. Again, we’re not raising a flag of total victory in Continental Europe.

They still have many challenges. But our client mix, if you will, is producing those kind of results..

Thank you. Our next question is from Mr. Ben Swinburne from Morgan Stanley. Your line is open..

Last quarter you guys talked about some revenue, I think in the U.S. that have flipped a bit. I think you had indicated back-half. Sort of if you can revisit that, and talk that whether that has continued to be out there, or if that should have in the third quarter? And any color around timing and sizing.

And then Frank I was just wondering if you could help us on the pass-through impact to margins. Would you have gotten some leverage in all other ONG if not for the 90 basis-points of pass-through? Just some color on underlying margin trajectory would be great too..

And let me just quickly on the pass-through. In terms of margin, it was -- the effect in the margin was only 10 basis-points this quarter, if you will. And for the full year, we expect that to be neutral. It would does stand out if you will. And I think what you are referring to is last year in the fourth quarter.

We did have an impact on margins that was higher than that. But we don’t see that in the fourth quarter. As far as the timing goes, we did see and as we said the tailwinds was not as robust in the third quarter. And we will see that tailwind coming-in in the fourth quarter. But it's not all U.S. And so, I wish I could tell you that all of it was U.S.

and we backup in terms of the high numbers for U.S. But the good news is we do have the tailwinds. They will hit us in the fourth quarter. But I couldn’t tell you that the majority of that in pass- through was coming in the U.S. And that's how I responded before to the question..

And then just as a follow-up Micheal, I'm sure you’ve listened or got windows the earnings commentaries from your competitors this week. And it seem to be very focused on the U.S. election as we are I am sure enjoying this process. I am just wondering you didn’t bring it out that all in your prepared remarks.

You seem to be quite confident in the tone; any sense from even in any sector-specific, like healthcare, where the election outcome poses incremental challenges to spending, any thoughts there at all?.

No, we haven’t seen it. In fact first of all from a business perspective we don’t play in that arena, so it didn’t affect us. It did affect us a bit on the media side because we have to place local media, and obviously that was being crowded out by elections. So, we have to find new ways of reaching consumers in those markets we’re more efficient.

That helps us to bit, okay in terms of consulting with our clients. But we haven’t seen a big political impact. As far as the tone of business, particularly in Europe, I think they are nervous. But I can't particularly point to a particular client pullback as a result it. I think they are watching this very carefully.

And frankly they should be concerned about it. But I think we will be okay and our clients are very sophisticated in terms of where they allocate their dollars, and the tones of business. And we are rightly with them focusing on that. But I have not seen as much of a dramatic impact that some of our competitor said on the call. And I think the U.S.

issue that showed up frankly so far in all three of our results indicate that a lot of this is client and sector specific, and we’re seeing that. But I continue to believe that 61% of our business is in the U.S., and I like that positioning right now given the terms of business..

The next question is from Mr. Peter Stabler from Wells Fargo Securities. Your line is open..

So, a couple if I could. My first one on ANA and transparency, Michel, you talked about your position in IPG. You are not buying digital media as a principal; wondering, do you think the ANA comments and some disclosures from one of your competitors around digital buying overseas.

Do you think its resulting in any attitude shift in the market towards transparent digital buying, whether you guys could be a beneficiary of that? And then I have got a quick follow up. Thank you..

Yes, I have said this before. And if I didn’t believe this we would have changed our strategy.

Conversations with our clients and the pictures that we’ve been involved in, although I can't say specifically it was the reason that we either win businesses or not, our transparency reputation and the fact that we are media agnostic makes a difference with our clients.

And the more you see in the price about questions on that, the more it becomes relevant in our conversations. And yes I do believe it enhances our opportunity to expand our media offerings. And I think, as I said, I think, rather than us changing to what our competitors are doing, I think, we are going to see a slowing down of that on the other side.

Because I think clients deserves the transparency that we give them, and I think they are entitled to realize and know where their profitability is coming at their expense. And I think that’s the right way to approach this environment..

And then quickly back to the regions. Latin America. You cited broad strength across a number of countries. You didn’t call out the Olympics. I am wondering, just that you’re confident that some of the strengths could continue. Just some comments on that will be great. Thanks so much..

Yes, that’s a fair question Peter. We had said before. We didn’t see a big impact on the Olympics. We did have some. Obviously, our marketing services businesses, Octagon and Jack Morton, obviously, had some events in the Olympics which affected our results, not materially. But no, actually that’s real growth which is what you were kind in your question.

We did on-boarded some new clients in Latin America in terms of LatAm Airways and Bradesco. And we see some client spend increasing there. So that’s what you’re seeing the reason for our growth in Brazil. So it's client specific. It’s on-boarding. And frankly what I like about it across the regions in Latin America, it’s not all Brazil.

We’re seeing strengths in the other market. We’re seeing our digital offerings do very well in South America. R/GA and HUGE are doing very well down there, because the digital environment is right for growth.

And frankly, we use those markets for production facilities, given the talent base that we have in Latin America and the effect in this that we’ve been able to utilize that talent on a worldwide basis. R/GA, in particular, as well as HUGE use that as a base to service global clients, if you will, in the connected world, as I’ll quote, Bob Greenberg.

And we’re seeing that come to fruition using those resources in Latin America..

Thank you. Our next question is from Mr. Steven Cahall from Royal Bank of Canada. Your line is open..

First question, I just maybe wanted to zero in a bit more on some of the U.S. commentary, if possible. It looks like probably for 2017, you have a slightly easier comp than what you have on 2016. But you also talk about maybe some of the new business being outside of the U.S.

So should we in sort of the medium term think about an acceleration organically in the U.S.

business, or is it just a bit more of a complex make sure than that and that new business acceleration is more global?.

Well, I appreciate your question. Right now, we’re really focused and getting through 2016. We haven’t started our 2017 forecasting models yet in terms of our business reviews. I think the only way to look at this is that 61% of our business continues to be in the U.S. The tone of the business is solid.

If you look at MAGNA, in terms of their forecast of U.S. advertising, roughly 4% is the growth expectations. I think, if you use that as a guideline, we should be plus or minus that. And we’ll talk to you more about 2017 when we give you our full results for 2016..

And then maybe if we think about the pace of reviews coming up both for Q4 and what you’re seeing in the RFP pipeline for next year. And I guess kind of question goes back to what you talked about with your media agnostic strategy, as well as base for video measurement issue.

Do you see any of these as catalyzing another round of reviews, like we saw in 2015? Or would you think that the next 12 months is going to be a little bit less manic than, than what you saw 12 months prior?.

Yes, I had said, I don’t think 2016 was going to be as manic as 2015. And I think that was true, except for certain Holding Companies had particular items in review. Fortunately, that wasn’t us. And I do think that whole spectrum of transparency raises legitimate questions for clients to look at their service providers.

We’re doing very strong and effective communication with our clients in terms of our transparency. Frankly, some of our clients have audits out there in terms of what we’re doing. And fortunately, we’re coming through those audits pretty well. That's good. And I think from a tone point of view, clients will continue to look at this.

Whether it gives rise to pictures and reviews, I can’t say. But I would expect we’ll see a fair amount of reviews coming into ’17. And that's at least of which is these goals and cycles and we are heading into what third of a third year of cycles and clients as three year contracts.

And has an order of business practices they put a number of their businesses in review every two or three years. So I expect to see, I would call that normal. It's not normal way it used to be, but it seems to be normal what's happening in our industry..

Thank you. Our next question is from Mr. Omar Sheikh from Credit Suisse. Your line is open..

First for Frank, on margins. If you look at the first nine months, it looks like most of the sort of improvement you’ve seen in margin comes in O&G rather than salaries.

And just wonder whether you could give some commentary on whether you see that continuing into Q4? And maybe any you have to say about next year and the scope the mix of margin improvement that would be helpful. And then Michael, maybe you called out data and analytics is being an area that you would like to invest behind.

I wonder whether may you could talk about whether your preference would be for organic or inorganic investment as behind that theme? Thanks..

Look analytics data and analytics is a fortune product. We historically -- we’ve done strategic acquisitions. We see most of our growth coming organically, for example, in Cadreon we’ve seen -- we’ve expanded it internationally. We've coordinated their offerings among all resources and agencies within U.S. and we will continue to do that.

So I think the bulk of the growth will come organically. However, we are looking at strategic acquisitions in that space. We also are looking at a more coordinated basis in terms of our data base, if you will, in terms of the DMP. And that will be a key focus for us in 2017.

To make sure that all the agencies within IPG have a consistent offerings and utilizing the unique capabilities we have at Mediabrands, I see that as an important growth vehicle for us. Clients are looking for it. That's the area where we're seeing a lot of competitors, if you will, trying to get have in-roads in our clients.

So that's when I talk about investments and data analytics, and we’re going to be stepping up our efforts in those parts. And frankly if we don’t have it organically and we don’t have those capabilities internally, we will look to add-on.

So, look, with Mediabrands we added two very nice agencies this past year; one in the SCO space; and one is the mobile space. Those are growth vehicles for us. Mobile clearly it's going to be a key driver for business going forward.

Our Ansible offering we have consolidated a number of businesses with the new acquisitions to make sure that we are fully integrated mobile offering across our various brands. So this is the value of the holding company across all of our networks.

And we continue to focus our Mediabrands as a key source of providing those unique competencies utilizing these data..

And Omar on the margin question, we target our agencies to deliver a margin improvement target. And whether we get leverage from both major cost buckets, one major cost bucket, it's somewhat relevant to us. With that said, Michael made comments early on about the important of talents.

So right now, we attribute our growth being tied to investments we made against talent. We’re constantly looking at that. So to the extent we can squeeze more of the O&G to help support those investments and talent and still meet our margin objectives, that’s a good answer.

But with that said, Michael, mentioned 50% of our profits in the fourth quarter right. So I would imagine that our salary line is a contributor of leverage in the fourth quarter, and as we moving into '17 -- in ’17 well..

Thank you. Our next question is from Mr. Brian Wieser from Pivotal Research. Your line is open..

So on the use of dispositions of some McCann Worldgroup entities in the Nordic markets over the past quarter, and separately we know that Publicis has altered how it's managing markets below the top 20. I was wondering at a macro industry level and maybe for IPG specifically as well.

If you think it's less necessary now than it was say 20 and 40 years ago to have these massive extensive global networks have dominated the largest agency groups.

And separately also, wondering if you could also talk about the current ebbs and flows of centralization versus decentralization in some of the agency groups? For example, it seems like there is a lot of deepening of investment in Cadreon versus putting maybe more investment in some of the individual media agency brands.

There is not investment going there as well.

But just curious your thoughts on how much should live with the agency brands versus more centralized entities?.

We’ve got an hour and half, Frank. Let me start. 10 years ago we started open architecture. And it was our belief that clients -- in a client centric environment that we should be focusing on the needs of clients, not our particular silos.

And when we look at open architecture the issue is do we in essence mould all of our agencies together and say bye away, here is our best people, and irrespective for the silos. Obviously, there’re conflict issues. There’re cultural issues. There’re different go-to-market strategies. And frankly that serves us well in the marketplace.

We don’t believe that we need to restructure our entire Company to make open architecture work. We’ve been doing open architecture for 10 years. And frankly some of our most profitable and growing clients utilize an open architecture model. And the reason it works is because we have made it part of DNA of our organization.

People within the quote silos know that if they don’t have the capabilities within their agencies they could raise their hand and we can bring in an expertise that we’ll work closely with them on a collaborative basis and meet the needs of our clients. You don’t need to restructure entire company to do that.

And the reason we are comfortable with that is we hold our agencies responsible for collaborative work. So, when we do compensation and incentive compensation, we look at the degree of open architecture and collaboration. And on many of engagements, there are multiple agencies serving one client.

And they don’t have to worry about whose silos it belongs, because frankly we do that. We work closely with the agencies and we determine what the proper allocation. Clients shouldn’t be involved in it. We think that the better way of doing this, because when you have one single purpose of agency doing this, we have number of those.

But most of the time, when you have a single purpose agencies, it's harder to recruit talent. It's harder to keep talent. It's harder to get a sustainability of the quality of the people within those agencies. And open architecture is serving us very well. We get the highest grades of our reviews when we have open architecture model.

Because the clients realize that we’re putting them to first. And by the way, our definition of open architecture includes third-party providers. So, if our clients come to us and say we like it work with X, Y, Z, in addition to your resources, sometimes we work better with third parties, unfortunately, than our own.

But that’s part of the model, if you collaborate everyone and put them all into one silo, you will never get that. So I think the notion of providing all the resources IPG has to the client is the correct one, which is why frankly we started it 10 years ago. But I don’t believe you have to restructure the company to do that.

You lose a lot of the culture. You lose a lot of the accountability. And you lose the focus that our core agencies have within those particular agencies..

I think the bigger question is getting it outside of the top, the largest markets does. That was the restructuring aspect of what Publicis has been doing, I was curious. And I guess, I’m wondering if we’re seeing something similar with some of the dispositions of McCann.

And in other words, do you need to have expense of 60 country markets in this role going forward?.

No, of course now. We saw in the first year, we came in. We got rid of 50 agencies all over the world. I’ve said this. We’ve got rid of Uzbekistan. We didn’t need agencies in those markets, and because the world doesn’t operate that way anymore.

So, yes, we constantly are looking at that and ensure that disposition that we’ve made are consistent with getting rid of non-producing agencies that don’t cost -- that are costing us money and aren’t adding any value. So that’s what we’ve being doing.

On the question of Cadreon and Mediabrands and whether we’re centralizing, it doesn’t make sense to invest all of that money in one particular offering, and not have it available for all of the other agencies.

When I first came to this business, I used to walk around, travel to our different agencies, and they would all wheel out what they believed is best-in-class to offering, in particular, on the media side.

And we were spending a lot of money and a lot of things that we didn’t have to duplicate, it’s everyone we’re able to raise their hand and work closely with the competencies. For example, Mediabrands, whether the UM initiatives or Mediabrand as a holding company, if you will, of media. And I think that’s the right way to do it.

And we’ve done a traffic job on that. For example, if you look at MullenLowe and Mediabrands and MediaHub and MullenLowe working with Mediabrands on the Western Union pitch. I mean that was a great example of competencies within an agency, as well as tapping into particular resources we have in Mediabrands. The same thing is Harley-Davidson.

The same thing in all of our open architecture wins. So, I think that is the most efficient way use our expertise, and the most efficient way to meet the needs of our clients.

And more and more of our agencies are realizing that as if can do it that way, they get a better offering and it’s much more efficient and clients realized that they’re looking out for their behalf instead of their own silo..

Great, thank you very much..

You’re welcome. Other than that I don’t feel strongly about it..

Thank you. Our next question is from Mr. Barry Lucas from Gabelli & Company. Your line is open..

Thanks, and good morning. Frank, I don’t want to beat this margin question to death, but your comment that you expect leverage in the fourth quarter coming out of salary lines.

So, my suspicion is, strong suspicion is, given the delay in on-boarding some of the new business and the likelihood that you’ve had people in place to serve those accounts ahead of the business coming-in.

Now the revenue has come-in and that would be one of those contributing factors to improvement in that area?.

Yes, we look very closely at sequential progression of our salary line, whether that’d be in headcount, whether that’d in would be in other components. And if you look from first quarter, second quarter, third quarter, its clear operators are managing that quite efficiently.

And as you pointed out, the fourth quarters is our largest revenue and profit quarter. So, do we expect as that revenue starts to ramp up that we're hiring massive hedge, we don’t. So, we should get appropriate leverage through the salary line in the fourth quarter.

We take a lot of comfort in our operators’ ability to manage sequential headcount progression and they’ve been doing a very good job..

Yes, let me just add one other point to that, Barry. New clients tend to have less margin than more mature clients, and that's a fact in our business. And so what -- I'm tampering a little bit the expectation frankly that as we on-board all this new business that we have, it's coming in at very high margins.

And the margin number of expectation should be a lot higher than, frankly, as this business matures as we go through it. That said, we do have some revenue coming-in in the fourth quarter that we've already incurred a significant amount of expenses. And obviously that revenue comes with a higher margin. So, this is not an exact science.

The timing of how we get our revenue and how our expenses is fluid, if you will because we have to manage to make sure we have the right people on-boarding new, as Frank said. But we also have to realize that expectations of new clients takes a period of time for it to mature, it just doesn’t happen overnight.

Which is why, even when we started the year, everyone said well, why are you being so conservative in terms of your organic growth and margin. And the answer to that is staffing and on-boarding new clients and macroeconomics are all coming into play at one-time, is a tricky thing to model.

And that's why we like to look at this on a full-year basis as opposed to quarter-to-quarter. So, we manage it as best as we can. But if 50% of our margin comes-in in the fourth quarter, we can't, with a high degree of accuracy, tell exactly where that's going to come..

Thank you. Our final question is from Mr. Dan Salmon from BMO Capital Markets. Your line is open..

Michael, in your prepared remarks on the individual units for FCB highlighted their shopper marketing division in particular for strength. My question was on shopper marketing more broadly across IPG, as it's in area that one of your peers have cited that as a bit of a challenging one recently.

It sounds like it's been more of a positive story for you. Could you maybe remind us the size is that discipline across all of IPG, your short and near-term views on it.

And in particular maybe the difference between how performs domestically and emerging markets? And maybe how it's evolving towards digital? And then one other just high level question, you also commented on the continued convergence with the consultants and systems integrators.

Just anything that you are seeing that's changing there? In particular, seeing some of those competitors maybe starting to look a creative or media as opposed to strategy and technology work, that’d be great. Thanks..

Yes, those are two great questions. Shopper marketing, it's important to FCB to have a great competency in it. I would say it's not big overall. I wouldn’t say it’s a major part of our business as a IPG as a whole.

That said, opportunities for those agencies that operate on a very effective basis and we will continue to invest behind when we see opportunities. But I wouldn’t call it out as one of the major growth vehicles around the world, if you will. But it is very important to FCB and they do a great job at it.

In fact, that’s one of the agencies we pull out when we have RFPs that call for shopper marketing expertise, because they do it so well. The more broader question on the convergence is really how we have to look at the transformation of our industry. I do believe we are seeing new competitors entering our business.

And they are bringing with them CRM expertise. They are basically system integrators. And because they are already in our clients, they view it as an opportunity to bring in CRM expertise, as well as creative.

Which is another reason why I think what we compete against those, the fact that we have standalone agencies with strong creative talent, it's very hard for these other parties to compete against what McCann or in FCB, or MullenLowe or our independent agencies, the firepower we can bring in on creative work.

There is no way that there new competitor, if you will, could compete with that. And then the results show that, even though these outliers are coming into our business, are trying get there.

I think if you look across all the holding companies which have been pretty successful when it comes to those integrated offerings that we provide versus what they are providing. That said, we have to watch it very carefully. And clearly, they are going to be coming out pretty strongly. So we have to be well suited.

And I believe the open architecture integrated offering is a very compelling argument against them trying to get into our business..

Thanks..

Thank you. Operator, thank you. We’ll conclude the call now. Thank you all very much for participating. We look forward to giving you the results for the full year..

Thank you. This concludes today's conference. You may disconnect at this time..