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. 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 website, 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 Time.

During this call, we will refer to forward-looking statements about our company. These are subject to the uncertainties in the cautionary statement that is included in our earnings release and the slide presentation and further detailed in our 10-K 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 all for joining us this morning as we review our results for the fourth quarter and 2017. As usual, I'll start out by covering the highlights of our performance, as well as our outlook for the New Year.

Frank will then provide additional details, and I'll conclude with an update on our agencies to be followed by our Q&A. We’re pleased to report fourth quarter performance highlighted by stronger organic growth and margin expansion, as well as the full year financial results that deliver on the growth and margin target outlined in our October update.

Among our financial highlights, fourth quarter organic revenue growth was 3.3% which is on top of a very challenging 5.3% in last year’s fourth quarter. Organic growth was 2.5% excluding the increase in our pass-through revenues. Growth in the quarter was driven by a wide range of our agencies and services and in both our U.S.

and international markets. We were led by the continuing outstanding performance of IPG Mediabrands, which again had strong global growth and they are creatively driven advertising businesses at McCann World Group, FCB and Deutsch.

From the point of view of client sectors, we had notable growth in the areas of auto and transportation, travel, government, and healthcare. Our fourth quarter operating margin was 22.1%, which is an increase of 70 basis points from a year ago, reflecting leverage on a salaries and related expenses.

Importantly, 2017 full year operating margin increased 40 basis points to 12.4%. Our fourth quarter diluted earnings per share was $0.81 and with $0.79 as adjusted, which is a 5.3% increase over comparable earnings per share year ago. The adjustments primarily back out the impacts of U.S. tax reform on our tax provision.

For the full year, our diluted earnings per share was a $1.46 and was a $1.41 as adjusted.

That strong bottom line performance is attribute to our 50,000 talented and dedicated colleagues around the world, who have maintained their focus on delivering innovation and effectiveness for our clients, all of our people can take pride in their accomplishments.

Alongside our operating gains, we continue to invest over the course of the year and an outstanding talent across our agencies, as well as in the technologies data and analytics that keep us on the leading edge of our industry, especially in our media, digital, creative and marketing services.

At the same time we’ve continued to return capital to our shareholders at significant and increasing levels. During the fourth quarter, we purchased 4.2 million shares using $84 million.

For the full year, we utilized $300 million for the repurchase of 13.7 million shares, lowering our year-end total of basic shares and shares eligible for dilution to 391 million, a decrease of 2.7% from the year ago.

Since initiating our capital return programs in 2011, we’ve returned a total of $3.6 billion to shareholders with a combination of common share dividends and repurchases, and we’ve reduced our outstanding shares eligible for dilution by 30%.

This morning we continue that history with our board’s decision to raise IPG’s quarterly dividend by 17% to $0.21 per share. This marks our sixth consecutive year of double-digit percentage increases to the dividend with a cumulative increase per share of 350% since 2011.

We also announced that our board has authorized an additional $300 million for share repurchase. Combined with the remaining authorization as of the beginning of the year of $156 million this brings the total pro forma amount available for share repurchase to $456 million.

Together, these actions reflect our continuing operating success in recent years, IPG’s substantial financial strength and significant confidence in our future prospects.

As we return to our outlook for 2018 it’s encouraging to see that our value to marketers continue to drive growth as reflected in our fourth-quarter and that we continue to convert revenue increases to operating profit growth at a high level.

We all know that consumers are changing the way they engage with brands, at the same time, marketers are competing with new business models and working to transform their relationships with consumers while simultaneously contending with a number of short-term pressures.

As we’ve previously discussed, these many changes introduced a note of caution to marketing investment across our industry during 2017, and they continue to entail both risk and opportunity for IPG. Our company remains sanely focused and uniquely resource to help clients navigate this environment and realize their opportunities.

The current global economic picture also provides a very clear potential to be more supportive to our industry. That is my sense of the business climate for recent conversations with clients.

While the caution we saw much of last year will not lift overnight, we expect to gradually put the slower revenue growth of 2017 behind us, and post improved growth this year. We continue to believe that we are very well positioned to deliver growth of revenue and profit in 2018, and for the long-term.

Accordingly, we are targeting 2% to 3% organic growth for 2018. Along with this level of growth, we expect to continue to build on our long-standing record of operating margin expansion and are targeting an increase of 20 basis points in 2018 over the results we are reporting today.

As we look ahead, it’s worth taking into account our estimate of positive impact on the financials from recently enacted U.S. tax reform. A year ago we described our normalized effective tax rate of 35% to 36% on our consolidated results, and along with that normalized cash tax rate of approximately 29% of pre-tax income. The changes to the U.S.

tax code mean that going forward our normalized consolidated effective tax rate for the full year should decrease to approximately 28%. Along with that, our normalized cash tax rate should decrease to 24%.

In some, we are focus is always on the drivers of value creation in growth, margin expansion, and capital returns, and are confident that they will continue to work well for the long-term at Interpublic.

At this stage, I’ll turn things over to Frank for additional depth and detail on our performance and I’ll return with an update and highlights of our business. Frank..

Thank you, Michael and good morning. As a reminder, I'll be referring to the slide presentation that accompanies our webcast. On slide two, you’ll see a summary of our results. Fourth report organic growth was 3.3% and was 2.5% excluding impact on higher pass-through revenue. U.S.

organic growth was 3.7% and was 2.5% excluding the impact of higher pass-through revenue on top of 3.3% Q4'16. International organic growth was 2.9% and that was on top of 7.8% in Q4'16. For the full-year consolidated organic growth was 1.8%.

Q4 operating margin in our seasonally largest quarter was 22.1% compared with 21.4% a year ago, an increase of 70 basis points. For the full-year, operating margin expanded 40 basis points to 12.4% which marks another advance in our record of long-term significant margin expansion IPG.

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

For the quarter, adjusted diluted earnings per share was $0.79 while full year diluted EPS as adjusted was a $1.41 per share. Cash flow from operations was $882 million for the year compared with $513 million in 2016 reflecting a strongly improved working capital result. We repurchased 13.7 million shares for $300 million during the year.

As Michael mentioned, we announced this morning that our board has again significantly increased our common share dividend to $0.21 per share quarterly and added $300 million to our share repurchase authorization. Turning to slide three you’ll see our P&L for the quarter. I’ll cover revenue and operating expenses in detail slides that follow.

Turning to revenue on slide four, fourth quarter revenue was $2.34 billion compared Q4'16 the impact of the change in exchange rates was an increase of 1.2% while net dispositions was offsetting negative 1.1%. Resulting organic revenue was 3.3%.

Increase pass-through revenue added 80 basis points to our growth without which the organic growth change was 2.5%. Remind you pass-through revenues are offset dollar for dollar in our O&G expense, an increase in decrease to pass-through revenue do not change our operating profit.

Revenue growth for the full-year was one half of 1%, which reflects organic growth of 1.8% and 1.3% decreased due to our net dispositions. FX for the year was diminimus. As you can see on the bottom half of the slide, Q4 organic growth at our integrated agency networks was 3.3%.

The segment was led by Mediabrands which continues terrific performance and by McCann and FCB. Growth was 2.2% for the full-year.

At our CMG segment, marketing services specialists’ organic growth was 3.3% in the quarter, but was a decrease of 1.9% excluding the benefit of higher pass-through revenue which is disproportionately in our sports marketing and events businesses. CMG revenue was flat organically for the full-year and down 40 basis points as adjusted for pass-through.

Moving onto slide five, revenue by region, in the U.S. Q4 organic growth was 3.7% and it was 2.5% excluding the increase in pass-through revenues. Growth was broad based led by Mediabrands, McCann, FCB, Deutsche, Carmichael and Jack Morton. Pass-through revenue increase that we’ve noted in the U.S. is due to higher project spent with Jack Morton.

Among client sectors, auto and transportation healthcare and government and travel contributed notably to growth while the CPG sector also increased in the U.S. Over the full year, our organic growth in U.S. was 2.2% when increases across Mediabrands, McCann, FCB, and Carmichael Lynch.

Our top client sectors domestically were healthcare, auto and transportation and government. In our International markets, organic growth was 2.9% in Q4 and was 2.5% excluding increase in pass-through revenues.

Continental Europe, we grew 7.9% organically in the fourth quarter which was 6.6% excluding the pass-through impact which is very strong performance especially against the 11.1% growth in Q4'16. Among our largest markets in the region, we had double-digit growth in Germany, Italy or France and Spain were approximately flat.

Here again, we had strong growth at Mediabrands and also Jack Morton Events and Weber Shandwick and public relations. Organic growth for the full year was 3.5% on top of 5.7% in 2016. In the U.K. our organic growth in the quarter was slightly negative by 40 basis points, and increased 1% as adjusted for pass-through. You will recall that our U.K.

growth was nearly 12% in the fourth quarter 2016. McCann, Mediabrands and Huge performed very well in the quarter. For the full-year which is at the right of the slide, the U.K. grew 4.1% adjusted for lower pass-throughs, which was against 5% on the same base of 2016.

In Asia-Pac, our revenue decreased organically by 90 basis points or negative 2.7% excluding the pass-through increases. Full year numbers were in a similar range. India continues to be a standout performer in both the quarter and the year, while China, Australia, and Japan were notably slower.

In LatAm we grew 6.5% organically in the quarter compounding 5% growth a year ago. That performance surprisingly flat for the full-year against 12% growth in 2016. In the fourth quarter, Argentina and Mexico continue to be very strong markets. Brazil increased slightly despite the difficult macro environment.

Overall regional performance in the quarter was driven by strong results at Mediabrands, R/GA and FCB. In our Other Markets Group, organic revenue growth was 4.5% in the quarter led by our Canada and South African markets. Our growth was 4.5% as well for the full year.

On slide six, we chart the longer view of our organic revenue on a trailing 12-month basis; the most recent data point was 1.8% for calendar 2017 on top of 5% in 2016 and 6.1% in 2015. Moving onto expenses on slide seven, our discipline around operating expenses continue to make a significant contribution to our margin growth.

Under 3.4% revenue growth, our total operating expense increased 2.5% in the quarter. For the full year, our ratio of total salaries and related expenses to revenue was 64.3% compared with 64.2% a year ago. Underneath that, we delevered on expense for base payroll benefits and tax due to slower top line growth in 2017.

At the same time, we took the appropriate and significant actions to align expenses with revenue over the course of the year. We had significant leverage for the year on incentive expense, which was 3.3% of revenue compared with 4.0% in 2016.

We also leveraged our category and other salaries and related expenses which include employee performance based contractual bonus payments. Other salaries and related were 2.5% of revenues in 2017 compared with 3% in 2016. Year-end headcount was approximately 50,200 compared with 49,800 a year ago an increase of less than 1%.

Turning to office and general expenses on the bottom half the slide, O&G was 23.4% of full year revenue compared with 23.8% giving us 40 basis points of year-on-year operating leverage. With O&G we had operating leverage on our category of other O&G expenses which includes lower direct expenses and will be offset to lower pass-through revenues.

We also leveraged our expenses for T&E, office supplies and telecom which again is a result of our continued focus on costs. On slide eight, we show our operating margin history on a trailing 12-month basis with the most recent data at 12.4% we have made sustained and significant [Indiscernible].

This is still work to be done and we remain highly focused on continued progress. Turning to slide nine, we present more detail on below the line adjustments to our reported fourth quarter results in order to give you a better picture of comparable performance.

We had small loss in the quarter of 3 million in other expense from the sale of small non-strategic businesses which is more than offset by the related tax benefit and resulted in a penny per share in earnings. Moving from left to right on this slide, as a consequence of tax reform, we reversed a benefit in the amount of $31 million for U.S.

federal tax credits. We also recorded a benefit from the net impact of U.S. tax reform to the number $36 million or $0.09 per share. That amount primarily represents the net of revaluing a deferred tax liabilities less the one-time charge for the so-called repatriation tax under The Tax Cuts and Jobs Act.

The result as shown is fourth quarter adjusted earnings -- $0.79 per share. Slide 10 depicts similar adjustments for the full-year again for comparability. You can see our loss of $0.04 per diluted share for business dispositions and have benefited $0.09 per share for tax reforms. Result is adjusted full year diluted EPS with $1.41.

Our normalized tax rate for the full-year was 36.1%. Before moving onto cash flow, we should remind everyone that our report today is the last one before we are required to report under the new revenue recognition Accounting Standard, ASC 606.

We are well along with our work on 606 and were not yet fully complete but we can say with certainty that there will be no change to our model for value creation IPG. For that matter, to our priorities to drive organic growth and margin expansion. As previously disclosed, we have elected to restate prior years for the new standard.

We believe it is the transition method that provides the best continuity for our constituencies and the best alignment of our commentary reported results in the year ahead. We plan to provide the quarterly 2017 restated results in an 8-K filing sometime prior to our first quarter 2018 earnings release in April, along with more color and detail.

We foresee two principal impacts of the new standard on our reporting. One is earlier recognition of some revenue and profit mainly for a portion of client performance bonuses. The new standard requires recognizing some revenues as the work is performed rather than deferring recognition until the measurement period is complete.

That rephrasing requirement moves a small portion of our revenue and profit earlier between years. Restating 2017 for the new standard for example, will require that we recognize some client bonuses in 2017 that would have been recognized in 2018 under the old standard.

Similarly, we’ll be required to push some revenue and profit from 2017 back to 2016. We estimate that this will results in a decrease to our 2017 operating profit for approximately 3% to 4% when restated. That is due to year-to-year changes to our client contracts, the timing of when bonuses were recognized and changes in our client base.

Importantly, there will be no change to our 2017 cash flow or to our 2018 financial targets in terms of operating profit and earnings-per-share as a result of restating. The second impact of adopting ASC 606 that we will report noticeably more gross revenue and more gross expense with dollar-per-dollar increase to revenue and expense.

The change would have no impact on cash flow, operating profit, net income of earnings per share. Our estimate for 2017 which is still subject to change is that we have approximately $1.2 million more of both revenue and expense under the new standard.

Nearly all this increase relates to events at Jack Morton, Momentum and Octagon, as well as to our PR and Healthcare Specialists. None of the incremental gross revenue relates to our media business.

To enhance the transparency of our results, we’ll add disclosure of our net revenue and income beginning with our first quarter this year, and our key performance metric will track the net organic revenue growth and revenue operating margin.

To clarify, that will be an increment $1.1 billion of incremental revenue, again, more to come on this point prior to our Q1 release. Slide 11 is cash flow for the full year. Cash from operations in 2017 was $882 million compared to $513 million a year ago.

The comparison includes a strong improvement in our working capital result which used $28 million compared with $415 million a year ago. Our investing activities used $196 million in the year including $156 million for CapEx, $31 million for acquisitions. CapEx is majority IT investment and second leasehold improvements office space.

CapEx was decreased from 2016 only a few large office relocations. Financing activities used $1 billion, which is comprised mainly of $325 million of premature and long-term, $300 million to repurchase shares and $280 million for common stock dividend. In 2017, our net decrease in cash and cash equivalents was $303 million.

Slide 12 is a view of our debt over the past 11 years with total debt of $1.37 billion at year-end 2017, a $300 million, 2.25% notes matured in mid-November, which we refinanced with commercial paper. Q4 is seasonally our strongest operating cash flow quarter which we use to extinguish the outstanding commercial paper by year-end.

As a result at year end we have the lower debt balance which you see on this table and also lower cash balance compared two-year ago. Slide 13 is the current portion of our balance sheet. Total cash and cash equivalents was $791 million at year-end, so net debt was approximately same levels a year ago.

Slide 14 depicts the total of our average basic shares plus diluted shares overtime and the far right shows the total as of year-end 2017. Our average total shares decreased by 160 million shares over this time period, due to share repurchases and the simplification of our capital structure. Our starting position for 2018 is 391 million shares.

In summary on slide 15, we are pleased to conclude the year with solid Q4 performance. Our operating teams deliver significant margin growth in 2017 even as the revenue environment became more challenging. Our balance sheet continues to be a meaningful source of value creation which is evident in the actions announced by our board today.

That leaves us well-positioned to deliver on our objectives for the full year. With that, I’ll turn it back over to Michael..

Thank you, Frank. As you can tell, we’ve closed the year on a stronger note with respect to both growth and profitability. As I've indicated it's too early to say conclusively that the broader trends that we saw, impact our industry last year are entirely behind us.

But fourth quarter results as well as the conversations with our operators and number of our key clients are encouraging. It seems that as we move forward into 2018 marketers would turn their focus solely from expense reductions to also encompass growth. And that is an area in which our unique expertise and capabilities can play an important role.

While the macro-environment continues to include geopolitical uncertainty as a parent in the daily headlines from around the globe, economic fundamentals remain solid overall and improved clarity with respect to tax reform is a notable positive for business.

What is more as you heard me say before Confusion is good and there's still plenty of that, due to the very complex and quickly evolving technology media and communications landscape. This represents a continued opportunity for a company like ours with a range of strategic and creative talent we bring to bear to our clients businesses and challenges.

Our embedded digital offerings throughout the portfolio, as well as special capabilities in emerging areas like programmatic, data and analytics, the name but a few. At IPG we remain committed to the idea that the best talent is the best work for our clients, which is key for us to win in the marketplace.

This is a vision that we put to work in many ways. From our proven commitment to investing in talent over the long haul, to the work we do incubating innovative startups, to our industry-leading programs that promoted more diverse and inclusive workplace.

These are fundamental drivers of our success and we will continue to invest behind and live up to our DNI aspirations, build on our accelerator programs and foster our culture that is both entrepreneurial and accountable.

This is what allows us to attract the best people whether they’re traditional craft practitioners, or they represent the most leading-edge technological capabilities. We all know that our industry is changing rapidly. As you'd expect we regularly monitor activity in adjacent sectors and among potential new entrants into our space.

So as to ensure that we continue to develop our integrated model and deliver a fully relevant and contemporary range of services to our clients. Turning now to performance at the agency level, let me provide a brief progress report on the key developments within a portfolio.

Highlighted during the fourth quarter were led by media brands which posted outstanding performance. UM close the year with big wins with Spotify and Ubisoft, both very sophisticated marketers. To follow-on wins earlier in the year of Accenture and Coach.

Initiative won two global pitches, Carlsberg and LEGO, as well as an important incumbent defense of the Amazon account. The agency's new business performance was just recognized by a top regular ranking and we’re pleased to see the network reaching the same height as UM. Cadreon and Reprise are also first-rate digital partners for our clients.

These will be key as we go into a New Year in which new business activity is accelerating in the media space. We’re excited to enter 2018 with positive market momentum as well as the distinctive market position due to our long-standing commitment to a high level of transparency.

Media brand is also the place where we will continue to focus and invest behind our considerable data and analytic capabilities, in order to develop the next generation data stack that concern all of our agencies including creative as we push for even more accountability in our marketing programs.

McCann had another solid year with strong new business performance that heads them on top of many league tables. The agency wins featured brands for marketing powerhouses such as Reckitt Benckiser, Coca-Cola, MGM, Bombardier, Diageo and BASF. McCann’s performance at creative award shows continues to reach new heights.

Above all 2017 was the year with the Fearless Girl statue, which became a cultural phenomenon, it droves important social conversations and of course fueled great results for that client.

McCann also continue to up its game in digital marketing where its created outstanding campaigns in recent years and upgraded senior-level talent across North America and its headquarters New York office as well as in China.

FCB closed the year strong in terms of financial performance and also launch the new Circles campaign for Levi’s, which was some of the most talked about creative work this year. The agency also introduced both the work for Clorox one of the networks recent signature global wins.

FCB Chicago continues to thrive, supporting clients with the full range of services from consumer advertising to CRM, shopper marketing, digital and state-of-the-art production capabilities. FCB health also maintained its position as a growth driver and the industry thought leader and a top creative performer in the healthcare marketing space.

MullenLowe build momentum and recognition for breakthrough creativity and integrated services which the agency refers to as hyper bundling.

During the year MullenLowe put together an impressive run a new business wins including Eurosport, E*TRADE and Whole Foods which is likely the most competitive AOR pitch of 2017, in terms of the number of agencies involved in the review. Additional media wins included Chipotle, Nuveen and Staples.

Recent acquisitions in London will further enhance the agency's capabilities in terms of advertising creativity and PR.

Despite a challenging environment for project businesses which we called out for you and are calls last year, our outstanding digital specialty agencies, R/GA and Huge one signature high profile assignments and built out their capabilities.

At Huge and most notable was the McDonald's digital consumer experience account, one of only a handful of cases during 2017 in which we faced off against not only our traditional competitive set but also some of the consultancies.

R/GA wins included work on Hyundai, Guinness, Nikon and Cody [ph] as well as Digital Innovation Agency of the Year honors from campaign in London.

As some of our competitors count the introduction of AI platforms, to boost productivity and talent deployment, it bears noting that R/GA's internal platform built to perform the same function has been in development for close to a decade and integrate the skills and workflow of over 2000 employees across 17 R/GA offices.

Weber Shandwick remains a leader in it space with the strong leadership team that regularly garners top honors from its industry press in every world region. The agency bolsters its capabilities in data science, analytics and performance marketing with recent acquisitions.

Weber was recognized by the homes support with the top ranking of the global creative index and the Daughters of Mother India campaign are in top honors as the most awarded PR campaign of the past 12 months. We were equally pleased that the agencies started out 2018 with the global consolidation win with the major IPG client.

Also with CMG wish you a very strong performance from Octagon. The agency is a leader in sports marketing which is increasingly important sector which taps into deep consumer passion points and is one of the few ways we can still reach large aggregate audiences on behalf of our clients. Our U.S.

independence round out the portfolio, each has a range of services that it can deliver on an integrated standalone basis to major clients. As part of our customized open architecture IPG solution, as Deutsche does on our global J&J Acuvue business or Hill Holiday on the consumer side and number of J&J former engagement.

Both of these agencies as well as Carmichael Lynch had a very successful year and we look forward to including them in more integrated teams on a going forward basis. As you know we’ve been focused on delivering on the vision of open architecture for nearly a decade.

Although this has become something of a talking point for all our competitors, we continue to feel that our approach is a positive differentiator, since we integrate the best of our talent across the organization by means of fully consolidated teams with regular involvement and leadership from senior IPG level corporate executives.

It’s clear that the quality of our strategic and creative offerings is currently at the highest level that’s been many years. Globally at major competitions ranging from Cannes to the Effies, our agencies are recognized with the highest honors and our group performance is outstanding.

Despite a very challenging revenue environment in 2017, we posted solid results and achieve growth that was ahead of the industry average. We also demonstrated our ability to remain focused on and deliver margin improvement. This is consistent with our long-term record of improving profitability in both higher and more moderate growth environments.

This is an achievement we’re proud of, as is the fact that we’ve made such great progress in terms of company balance sheet and overall financial strength. Our capital return programs continue to be significant drivers of value.

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

Looking forward against the backdrop of macro-economic and political uncertainty the tone of the business is good and new business activity seems to be picking up.

The breadth and strength of portfolio positions as well to participate in most pitch opportunities and is further organic growth to be had by broadening the scope of our relationships with existing clients.

In light of these factors we believe that we should continue to see competitive organic revenue performance in 2018, which is why we’re targeting growth of 2% to 3% for 2018. Along with his level of growth we’re targeting operating margin expansion of 20 basis points over the results we’re reporting today.

This builds on our strong long-term record in this area. At the same time we will continue to invest in the outstanding talent and emerging capabilities that required to positions us for the long-term.

Combined with the strength of our balance sheet and our consistent commitment and strong delivery when it comes to capital return, that means that they remain significant potential for value creation and enhance shareholder value. As always, we thank our clients, our people who are the foundation of our success.

With that, I’ll open it up for questions..

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

Hello. Thank you very much. I guess the first question is how much of the better organic growth that you saw in Q4? Do you think this result of sort of budget flush versus more of change in trend or maybe pickup in spending.

And along those lines when you look at the – your commentary and your guides for organic growth to improve in 2018 and improve more importantly as the year progresses, what gives you that visibility? Is it your conversations with clients? And then beginning bit more optimistic about spending levels? Or is more just the easiest comparisons, like any color on that probably super helpful? Thank you..

Thank you, Alexia. All the above look obviously in the fourth quarter we were pleased to see the result as evidenced by the results we’ve reported. What I liked about the results in the quarter was that and for the year actually, it’s across the board.

Frankly the only region that was down was in Asia Pac and had the client losses there and even there we saw some good strength in India. We saw a return to some projects in the fourth quarter which was helpful particularly in Jack Morton and Octagon, so we saw that flow through.

But overall I think the tone that we’re seeing which is gist of your question is more positive. I'm still cautious about it. But I think the fourth quarter and the fact that we're using 2% to 3% goal for 2018 is consistent with our view that what we saw in 2017 was not a secular change in our industry. It was cyclical.

It was very client specific particularly we saw it in certain CPG clients and environments and so on. So, I think what we saw in the fourth quarter was a return to some spending.

We’re not raising the flag in terms of taking all caution, while for the perspective, but this is certainly a better feel out there with respect to the environment, but there’s still elements of caution.

I’ll also comment that we did see some client losses in 2017 that had an impact on our results and we’ll still see a little flow-through that in the first quarter. But as I've always said, if we keep the back door close on our existing great client base then I'm even more comfortable with the numbers that we’re showing you or forecasting for 2018..

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

On the 2% to 3% organic revenue growth guide for 2018, is that sort of an apples-to-apples number of how you would have previously looked at organic growth or just trying to put a perspective on that?.

Yes. I mean, that’s one of the reasons we adopted the accounting method that we’re doing. We think that gives greater clarity in terms of the forecast for the number. So in overall terms it certainly gives you the perspective of what we expect our growth to be..

And the 20 basis points of margin improvement, Alexia, are off the print today..

Yes..

Okay. Thank you very much..

Welcome..

Our next question comes from John Janedis with Jefferies. Your line is now open..

Hi. Good morning. Maybe sticking with the margin, Frank, the margin leverage outlook, I think it’s pretty good given the organic growth range, I think it implies something like 20% or greater or so.

Can you talk about the sources of the leverage for the year and along those lines I think based on one of the slides the occupied square footage per employee is off about 25% since 2010, so is there still more of an opportunity to reduce the footprint?.

On the margin for 2018, John, it’s based on our bottoms up budgeting that we started in November, so it was client by client, office by office, agency by agency. So we would expect to see with the 2% or 3% growth leverage on our -- across our entire spends portfolio, but SRS is still critical.

On the occupancy side, I think we’ve made huge progress over the past 10 years. We’ve got a centralized team here at IPG. They are doing a terrific job in managing occupancy inflation around the globe and we’ve leveraged our scale in core market by consolidating multi-agencies into one office, so we can leverage our scale.

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

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

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

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

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

Well, I’ll tell you, when you come back from Davos, it was the first time that I left Davos where uniformly the tone was positive for Continental Europe and all other regions in the world. And frankly that's what we're seeing. We’re seeing a return if you will to some growth in Continental Europe and in the U.K. which is very encouraging.

And again it is client specific and new business wins. We did cycle through however a client loss at – of Seat in MullenLowe which adversely affected Continental Europe.

But when you see in the three months in the quarter 7.9% organic growth or 6.6% and 3.4% net of pass-throughs for the full year, that's pretty exciting for us, and the tone still seems positive. But again, because of our size, remember if you look at the size of our portfolio in Continental Europe and the U.K. its 9% of each.

So it could really be adversely affected or positively affected by changes in specific clients and I think we’re seeing that. So hopefully we keep the back door closed in Continental Europe. We win more than we lose in new pitches and I’m encouraged to see those results. But you’re right; it’s nice to see that.

Frankly it’s nice to see growth in all the regions other than Asia Pac. We did have some client losses in China and Singapore that negatively affected us, but I'm encouraged by the positive results in India..

Great. Thank you..

Our next question comes from Dan Salmon with BMO Capital Markets. Your line is now open..

Good morning everyone. Michael, back in 2015 when we had the big surge of media reviews, IPG agencies performed very well.

Could you maybe just compare and contrast a little bit that period versus what you're looking out at this year with another uptick in reviews seemingly underway? And then related it looks like you're in a pretty good position here relative to some peers in terms of incumbent clients looking at reviews and thus would have some good opportunity.

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

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

But obviously we’re starting the year with a number of large reviews. And as you pointed out, those fortunately are not defending, so those are opportunities for us. And we’ve invested a lot of money in our media brand offerings. I think the results for 2017 are indicative. I’m very happy to see initiative picking up too global wins.

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

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

And then maybe just one quick follow-up, you mentioned how you highlighted in previous quarters, how you’d had some delays in projects at Huge and R/GA. It looks like you’re also sounding strength there.

I just want to be clear, that those projects largely end up coming through? Are you looking it seeing them coming through in 2018 or is it a broader strength in the business or combination of that?.

Yes. I think it’s a combination.

Remember, we do our budget based on the bottoms up, so whether it would be R/GA, whether it would huge or MRM or any of these agencies that come in, we look at identified opportunities, existing clients, and you’re right, I mean we still are in project based environment, but I couldn’t say yes, these projects are now online and therefore that’s what contributing to growth.

Candidly the growth is not coming from that. It’s coming from new business opportunities. And one of the problems had to be with large clients, these large projects if you recall. And what I’m seeing and I think the whole industry is seeing is that you lose one big project; it takes a number of projects to replace it.

And so the good news is that our teams are identifying opportunities that would give rise in total to replace those projects. But it’s not that all of a sudden there was $60 million project that was on the shelf and then all of a sudden they pull the trigger and its back.

So, and that’s part of the reason we cite some caution in our numbers for 2018, because this is a lot of work that goes into developing these projects and making sure they come fruition. So I would say if any area of caution is out there that’s the environment that we have some caution on..

Great. Thank you..

Our next question comes from Ben Swinburne with Morgan Stanley. Your line is now open..

Thank you. Good morning. The couple for Frank on 606 and then I had follow-up for Michael.

Frank, just I understand, I think you said that the timing – I think its timing impact of 606 on when revenue is recognize will reduce OI in 2017 by 3% to 4%, I just want to make sure I heard that right, because there was lot of stuff in there?.

Correct. Because the way that current accounting works, Ben, it's very prescriptive on when you recognize incentive bonuses. So you need to hit certain milestone, certain documentation.

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

So, when you look at kind of 18 bonuses that would slip back in the 2017, 2017 that would slip back in 2016, 2016 was a much stronger year remember with 5% growth, so we have healthy bonuses in Q1 of 2017 that better going to get push back.

So net effect of that is about 3% to 4% of operating income moving to 2016, but the point to remember is our 2018 operation income target are based upon the 2017 print. So those targets are set based upon 20 basis points of a number we just printed. So the restatement number does not impact my 2018 targets..

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

I think either maybe quarterly volatility on the topline you know your Q4 is a lot greater than your Q1 every year for example, does 606 sort of smooth that out more and the quarters will look a little more consistent in size versus you only think about you guys versus your peer group or am I over extrapolating it?.

A little bit, but not materially..

Okay, got it..

I kind of insulted in [Indiscernible] accounting question of – but that’s okay. What it won’t do is it will do away with this pass-through stuff that we always have to explain. So that part of it is encouraging. And remember, a good portion of our Mediabusiness is paid for performance.

So that’s what you are seeing in terms of the shifts from year-to-year. You had the other questions, there..

Yes, Mike and this was for you and it involves taxes. So, you talked about a better tone and maybe you did hit this, but I’m wondering if part of that improved tone had to do with the accounting as the tax reform in the U.S.

and that leading to greater investment among your clients who are now seeing always have more money to spend, is that making its way into marketing..

Yes, I wish I could tell you that when companies see the big savings in taxes, on the top of the list is let’s spend more money on marketing dollars, okay.

It doesn’t seem to be there, all I will tell you I did have one conversation with the pretty big client who did indicate to me that it’s nice to have the tax benefit of cash taxes to help their increase spend. I wouldn’t exactly convert that into a major decision for all of our clients.

Because, remember we always said that our clients didn’t lack capital to invest in marketing dollars, they were more interested in the P&L effect, right. And that’s where a lot of these cut backs came through, particularly in the CPG clients and you know where [Indiscernible] activists and so on.

But I don’t – anecdotally I think they are certainly more comfortable with the cash positions that they are in, but again, I think we are still going to have to prove the return on investment that you get by increasing your marketing dollars.

As business becomes a little stronger, I think companies will be more aggressive in terms of gaining market share and markets and there you have to spend on marketing dollars to do that. So I think that’s the way it’s going to flow through, I don’t think it’s just saying here’s a chunk of cash and we’re going to put it into marketing dollars.

But we’re certainly got a lot of projects out there that when they are ready to spend we can prove that what we do works and that’s what our people are doing. We are putting forth very good ideas that are accountable and move the needle.

And in this environment when the global economy is in a growth mode you want to continue to invest in your brands and that’s what we do..

Thank you both..

You’re welcome..

Our next question comes from Peter Stabler with Wells Fargo Securities. Your line is now open..

Good morning, a couple of clarifying questions from me thanks. Sorry -- if this one again. Going back to the organic growth guidance, the two to three so should we be saying about that as a gross organic growth inclusive of pass-throughs..

Yes, it’s net and as we mentioned earlier next year we’ll be expanding our P&L to show net organic growth, net organic margin and that will be the focal point of our discussion on future call. So to what Michael mentioned earlier, we’ll eliminate all the noise around pass-throughs..

Okay, got it thanks, Frank.

And then secondly, Michael you talked about account wins and losses a bit, wondering if you can take a swing at estimating whether this is kind of a net headwind, net tailwind whether you’ll be willing to size that going into 2018 and then finally any thoughts on CMG outlook for 2018, 2017 was a little tough for this segment wondering if you are expecting improvement in 2018? Thank you..

Yes, let me first of all the – we were net new business positive for 2017, so we had a bit of a tailwind going into 2018, order of magnitude maybe 20 to 30 basis points, but probably close to the 20 basis points, but it is a tailwind.

But I did indicate that the first quarter we’re still going to be cycling through some of those losses, so we’ll see the positive result of that after the first quarter and the next quarter was.....

CMG..

Yes, look we – obviously it was a tougher year for us particularly in the PR side of the business. When we do our bottoms up, of course we have some growth in those businesses.

Remember the PR business is that – so much of it is project based, every year you start the year saying you know what – where do we see it and how do we get it and other than last year Weber and Golin were able to actually exceed the numbers that we had put out there. So, we believe the PR business will return to growth.

It’s built into the number that we gave you in terms of the 2% to 3% and frankly we are starting off with some positive news. So I’m cautious about it, whenever you are dealing with project based businesses such as the PR side of the business you never know where these clients are going to be spending their money, but it’s built into the 2% to 3%..

Thank you very much..

Thank you..

And our final question comes from David Joyce with Evercore. Your line is now open..

Thank you. And thinking about the ad agency Holdco capabilities versus what the internet platforms are doing on the advertising side, there is some perception that there is an either/or in terms of the winners.

But could you please update us on what you are able to do for your clients versus what the internet companies are doing and like the companies who are going straight to internet, just how things were revolving these days? Thank you..

Yes, I think that’s a fair question. I mean, I believe one of the issues for 2017 was the question of disintermediation and whether those dollars as you pointed out ago and directly.

I have to tell you that our relationship for example with Google and Facebook is probably better now than it’s been historically because I think it’s become fairly clear that working together ends up with a better result for our clients.

And certainly when you see all these issues with respect to safety and transparency, our clients like to see an agnostic perspective of where these dollars go. So, it adds to our value added to our clients to provide that type of perspective.

But we are seeing more and more of Facebook and Google being embedded with our people and working on joint projects we see at Amazon obviously is coming into the fold in terms of being a very important player in that world. And I think it adds to the argument that we bring to the table.

One is we have great contracts in negotiating ability given our scale and our capabilities and we also provide a truly agnostic view in terms of where that money goes. So I would say the environment for that is actually more positive than negative..

Thank you very much..

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

This concludes today’s conference. You may disconnect at this time..