Good morning, and welcome to The Interpublic Group Fourth Quarter and Full-Year 2018 Conference Call. All parties are in a listen-only mode until the question-and-answer portion. [Operator Instructions] This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr.

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.

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 2018. 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 very pleased to report strong performance for both the quarter and full-year. At the top of our financial highlights, organic net revenue growth was 7.1% in the fourth quarter. That brings organic growth for the full-year to 5.5%, which exceeds our latest 4.5% growth target. These are outstanding results. Regionally, fourth quarter U.S.

organic growth was 6.3% and international growth was 8%. We grew organically in every region of the world, during the quarter as well as the full-year. We saw very broad participation across agencies, disciplines and client sectors. FCB, Mediabrands, Huge, McCann and R/GA were all notably strong in the fourth quarter.

Top-performing client sectors were consumer goods, healthcare, retail and auto. In the quarter, the total growth of our net revenue was 13.3%, which reflects both our organic increase and the revenue of Acxiom. This is our first report with the consolidated results of Acxiom, having completed our acquisition on October 1.

We were pleased with Acxiom’s fourth quarter performance, which was fully on track with our expectations. But to be clear, Acxiom’s growth is not included in our organic growth of 7.1%, and will not be until the fourth quarter of 2019. Turning to our operating income and adjusted EBITDA.

Fourth quarter operating income was $459 million, which includes deal expenses for the Acxiom acquisition, as well as acquisition-related amortization expense. Excluding those two items, our EBITDA was $504 million and adjusted EBITDA margin on net revenue was 20.9%.

For the full-year, adjusted EBITDA was $1.08 billion and our adjusted EBITDA margin was 13.5%. That’s an increase of 70 basis points from a year ago, at the high-end of our targeted range for 2018.

Full-year diluted earnings per share was $1.59 and was $1.86 as adjusted for Acxiom deal expenses, amortization of acquired intangibles and net losses from the disposition of small non-strategic agencies over the course of the year. That’s an increase of 33% over comparable adjusted EPS of $1.40 a year ago.

Our results for the year further demonstrates the strength of our client-centric integrated offerings and the quality of our people, which should produce leading organic growth and margin improvement over a period of many years.

It underscores a distinctive level of achievement amidst significant change in our industry and the environment in which we operate. All of our people can take pride in these accomplishments. Their talent and the great work they do everyday on behalf of our clients is what drives such terrific results in the marketplace and for our shareholders.

We thank them for their ongoing hard work and dedication. It’s equally important to note that, along with strong performance, we have continued our investments in outstanding talent across our agencies and in the tools and capabilities that keep us on the leading edge of our dynamic industry.

This is especially true in key areas like creative, digital, data and analytics. On this note, our acquisition of Acxiom was the signature investment in our space during 2018, and we think for years to come.

On the strength of these results and our future prospects, we are pleased to announce this morning our Board’s decision to raise IPG’s quarterly dividend by 12% to $0.235 per share. This marks our seventh consecutive year of dividend increases, over which time our quarterly dividend per share has nearly quadrupled.

As we turn to our outlook for 2019, we do so with the foundation of agencies competing successfully in our commercial marketplace over many years, and converting revenue growth to operating profit at leading rates.

We are focused on deleveraging our balance sheet following the Acxiom transaction and returning capital to shareholders, all of which furthers our commitment to driving shareholder value. The worldwide tone of business among our clients remains solid through year-end, as is apparent in our results.

While there is shared concern around macro issues, which include the aging economic expansion, political turmoil, international trade and interest rates, the backdrop appears sound as we entered the New Year.

With that, our opportunity for solid growth in 2019 is promising, even as we are comparing against industry-leading growth rates and revenue headwind due to certain account losses that we saw at the end of last year. These are not the norm for us.

We will have largely cycled through their impact by this time next year, and we are well-positioned to bring our world-class offerings to compete for meaningful new business opportunities that are coming up over the course of this year. For 2019, we’re targeting competitive organic growth of 2% to 3%.

The growth of Acxiom again is not included in our organic calculation until the fourth quarter.

Turning to expenses and EBITDA margin for 2019, we anticipate that we will take cost actions in Q1 for headcount reduction and to exit real estate, mainly due to the account losses in 2018 and to implement certain other additional headcount actions to further right-size our cost structure.

The largest accounts driving these actions are the Army and FCA Media North America. These cost actions will result in a charge to Q1 earnings, which has yet to be finalized, so we currently anticipate that it will be in a range of $30 million to $40 million.

We expect to continue to add to our longstanding record of margin expansion in the upcoming year. We’re targeting adjusted EBITDA margin expansion of 40 to 50 basis points over the results we are reporting today, excluding the cost actions we expect to take in Q1, which would bring us to 13.9% to 14%.

As always, as the year unfolds, we will regularly review our perspective on the year during our quarterly calls. In summary, we believe that the drivers of shareholder value creation and the quality of our people, revenue growth, margin expansion and share dividends will continue to work well at Interpublic, as we enter a New Year.

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

Frank?.

Germany, France, Spain and Italy. Full-year organic growth was 5.3%. In Asia Pac, net organic growth was 6.6% in Q4, paced notably by strong growth in Japan, India and China. Organic growth in the region was 3.9% for the full-year. LatAm grew 17.4% organically in Q4.

We continue to see strong performance throughout the region, with double digit increases in Colombia, Argentina, Chile, Mexico and Brazil. We were led by Mediabrands, McCann, Huge, FCB and R/GA. Organic growth for the full-year was 11.7%.

In our other markets group, organic growth was 8% in the quarter, with strong increase in Canada and the Middle East. Full-year organic growth was 3.4%. Moving on to Slide 6 on operating expenses, which remained well controlled in the fourth quarter.

Compared to our net revenue growth of 13.3%, Q4 net operating expenses increased 12.2% as adjusted for Acxiom transaction expenses and the amortization of acquired intangibles. For the full-year, operating expenses similarly adjusted grew 6.7%, supporting net revenue growth of 7.5%.

Our ratio of total salaries and related expenses to revenue for the full-year was 66%, compared with 66.8% a year ago. Underneath that, we continue to drive efficiencies on our investment in base payroll, benefits and tax, which is our largest cost category where leverage improved 120 basis points for the year.

And our expense for performance-based incentive compensation and salaries increased to 3.7% of revenue for the year. That was driven by performance against our operating targets for revenue and margin growth.

At year-end, total headcount was approximately 54,000, an increase of 3,800 from a year ago, with more than half of the increase due to the addition of Acxiom. As you would expect, headcount increased in growth areas of our portfolio, including media, digital services and our healthcare specialists.

Our office and other direct expenses was 16.9% of full-year net revenue, compared with 17% a year ago. We leveraged our expenses for occupancy during the year by 30 basis points. That was partially offset by increased investments in data and other general expenses.

Our SG&A expense increased as reported $267 million for the full-year, which includes $35 million of Acxiom deal expenses in the second-half of the year. As adjusted for transaction costs, our SG&A expense was $132 million in 2018, compared with $119 million in 2017.

The increase includes higher incentive compensation expense and increase investment in shared services and systems. A little further down this page, our expense for depreciation in 2018 was $165 million, which is up from $136 million for the year before.

The increase is primarily due to the increased investment in data and software, an additional $10 million of Q4 depreciation on Acxiom book – Acxiom’s books. Acquired intangibles amortization for the year was $38 million, compared with $21 million in 2017, with the difference being $17 million in Q4 related to the Acxiom acquisition.

Turning to Slide 7. We present detailed adjustments to our reported fourth quarter results in order to give you better transparency and a picture of a comparable performance. This begins with our reported results and steps through to adjusted EBITDA and our adjusted diluted EPS.

Beginning with our operating expenses, in SG&A, Acxiom transaction costs were $23 million in the quarter. Our D&A expense includes $22 million for the amortization of acquired intangibles. Below operating expense, we lost in the quarter $12 million in other expense related to disposition of few small non-strategic businesses.

In our tax provision, we recorded a net benefit in the quarter from a number of discrete tax items totaling $24 million, which we have backed out here. At the foot of this slide, we show the after-tax impact per diluted share of these adjustments.

The total was $0.05 per diluted share, which is the difference between $0.84 reported and $0.89 as adjusted. Slide 8 depicts similar adjustment for the full-year again for continuity and comparability. Acxiom transaction costs were $35 million in operating expense and $14 million below operating income. Our amortization expense was $38 million.

At right, adjusted EBITDA was $1.08 billion. Business dispositions over the course of the year resulted in a book loss of $62 million. The impact of discrete tax items was a benefit of $24 million. The result is adjusted full year diluted EPS of $1.86.

Note that our adjusted effective rate for the full-year was 24.5%, which is below the 27% to 28% we had targeted. It reflects the 2018 benefit of certain tax planning strategies. For 2019, our forecast for our normalized effective tax rate is 26% to 28%. On Slide 9, we turn to cash flow for the full-year.

Cash from operations in 2018 was $565 million, compared to $882 million a year ago. The comparison includes $431 million used in working capital in 2018. It’s not unusual for working capital be volatile from year-to-year due to variations of timing of collections and payments in our media business, which can be large.

Investing activities used $2.5 billion a year, which, of course, is mainly our acquisition of Acxiom. CapEx was $177 million. Our financing activities included debt proceeds of $2.5 billion raised to purchase Acxiom for $2.3 billion gross. We paid stock dividends of $322 million and share repurchases in the first-half of the year were $177 million.

Our net decrease in cash was $121 million. Slide 10 is the current portion of our balance sheet. We ended the year with $673 million of cash and equivalents. Slide 11 depicts the maturities of our outstanding debt. Total debt at year-end was $3.7 billion, which is a reduction of $100 million from the pro forma schedule at the end of the third quarter.

In summary, on Slide 12, we’re pleased with our performance in the quarter and the year. Our teams executed very well achieving strong revenue growth, while maintaining expense discipline.

Our balance sheet continues to be a strong and meaningful source of value creation as evident in the actions announced by our Board today, and we are on our front foot strategically. That leaves us well-positioned entering 2019. With that, I’ll turn it back over to Michael..

Thank you, Frank. Well, we’re certainly pleased with the quarter and the year with respect to both growth and profitability.

Our sector-leading performance with growth well ahead of our core competitors during the year, along with significant margin expansion, demonstrates the continued competitiveness of our offerings, the effectiveness of our long-term strategy and the strength of our culture.

We work to create a company that is positioned to address four fundamental changes in our industry.

First, a need to adapt to rapidly changing consumer media habits; second, the potential for disintermediation, as clients work directly with digital platforms; third, the in-housing of certain marketing practices; and finally, the threat though still in the early stages of new entrants into our competitive space.

Today’s results point to our ability to adapt to rapid change. Long-term, we believe that our many strengths, including the differentiated strategic decision to acquire Acxiom, will allow us to successfully address and capitalize on the elements that underlie each of those four headline challenges.

We remain optimistic about our ability to thrive in this environment. I’ll speak to the Acxiom capability shortly, and we will be sharing a lot more about unlocking the potential on future calls with you. Turning now to the highlights of our annual performance, which was led by Mediabrands, which once again posted outstanding results globally.

Growth was especially notable at our digital offering, Cadreon and Reprise, further demonstrating the key role these high-value offerings play in our media engagements.

UM closed the year with a major global new business win, following Quicken loans and Henkel early in the year, all of which will help balance out the account losses I mentioned earlier. The agency also promoted a long-term leader into the U.S. CE role, and UM was named one of Ad Age list of Best Places to Work in 2019.

Initiative continued to be a great turnaround story for IPG. The agency had a headline win in the Q – in Q4 with KPMG and won a special notable win at the start of this year with UPS, along with the marketing agency who together were tapped for integrated media and creative duties.

Media brands itself was also named a Best Employers For Diversity by Forbes. FCB closed the year very strong in terms of its financial results and added to the business with a number of wins in LatAm, Europe and the U.S. FCB Health drove significant growth for the network and launched Solve(d), a data-backed practice at the end of the third quarter.

In the U.S., FCB New York received news assignments from GSK in Q4. McCann made news with several global leadership appointments, notably at MRM//McCann, which promoted a long-term female executive from within to the post of global CEO. MRM//McCann was named the industry’s B2B Agency of the Year by Ad Age.

In addition, McCann saw a number of additional new business wins, following the Opel/Vauxhall win in Europe at the end of the third quarter. McCann also delivered two of the best received ads at the Super Bowl.

The agency’s efforts for its Microsoft and Verizon clients scored number one and two in the digital social conversation about TV commercials run during the game, according to metrics from Advertising Age. McCann’s ad from Microsoft also topped the list of most effective ad shown during the game according to a consumer survey fielded by Unruly.

At the end of the fourth quarter, MullenLowe announced an exciting agency record win for the Sennheiser global consumer business. MullenLowe also saw a particularly strong performance from the network’s media arm, Mediahub throughout the fourth quarter, picking up new business from Bloomin’ Brands and Dropbox.

In LatAm, MullenLowe was named Network of the Year at the region’s most important creative awards festival. Among our marketing service agencies in CMG, we saw an acceleration of top line growth at Golin, Weber Shandwick and Octagon.

Weber Shandwick continued to prove a leader in its face and launched a new global management consultancy practice specializing in transformation called United Mines. The PR firm closed the year by winning the prolonged record business and being named the Best Place to Work in 2019 by Ad Age.

Our specialist agencies continue to elevate and expand their offerings, experiential agency, Jack Morton, launched a global innovation practice Genuine X and appointed a number of new creative leads.

Octagon had a standout performance for the year, both in terms of growth and profitability and was named the Best Agency in Talent Representation at the Sports Business Awards.

At R/GA, we passed the mantle of leadership from industry icon and founder, Bob Greenberg, who remains in the role of Chairman to longtime agency leader, Sean Lyons, who is now global CEO. The agency also made a number of key appointments in the quarter, including senior talent in its creative department, ushering in a new generation of leadership.

Brooklyn headquartered Huge continued to bolster agency talent and capabilities and they saw a standout performance for the year as a result of major new projects in the U.S. and Asia. Our U.S. independents round out our portfolio.

These agencies deliver a range of integrated services to their clients and also augment the rest of the IPG offering in a collaborative open architecture solutions.

Martin Agency picked up major new business with Buffalo Wild Wings and UPS, which is returning clients as part of the Open Architecture collaboration with Initiative, as we previously mentioned.

The agency continues to deliver iconic creative work, notably this quarter was Geico’s Greatest Hits, featuring the agency’s longtime client’s best ads dating back to 1997. We’re very proud of the Martin Agency’s performance in 2018 under its first-ever female CEO.

Deutsch promoted creative talent and saw wins with Vigo, the all in one insulin delivery device and a global stock of marketing project with Budweiser. Just last week, Deutsch was named global creative agency of record for Reebok.

South Carolina-based EP+Co, which is one of IPG’s agencies to watch, continues a successful run of client growth, which has led the agency to significantly expand its leadership team.

Open architecture solutions that integrate the best of our talent across the organization by means of customized client teams continue to be an area of focus and success for us in 2018. In contrast to some of our peers, IPG’s long established hybrid approach is to invest in and protect agency brands, while promoting collaboration.

This puts our company in a strong position that appeals to talent and clients with respect to career development, as well as speed of service for clients. In the fourth quarter, Acxiom results are consolidated with IPG for the first time.

And we’re pleased to say that actual performance met both the revenue and profit targets we had set for the agency in the quarter. As we’ve noted on prior investor calls, this acquisition was about growing a great business at Acxiom and about revenue synergies, and we expect to see those synergies begin to come to life over the course of 2019.

To date, Acxiom provides the data foundation for many of the world’s largest and most sophisticated marketers. They removed the pain points of organizing and cleansing data, which in turn positions these large marketers to leverage their data. This gives Acxiom broad reach into large enterprises, including about half of Fortune 100 companies.

These are deeply embedded service relationships, with long average life spans and very strong renewal rates.

All of us operate in an increasingly data-centric ecosystem, which means that most of media and marketing will be centered around precision marketing, especially the ability to manage first-party data to create deeper, direct consumer relationships, where we can connect with individual consumers at scale.

Marketing needs to be done at the right place, right time with the right consumer, but that’s easier said than done. Data capabilities unpack an understanding of the entire customer journey. That’s a core principle in our era of fragmented media.

Strategically, the acquisition puts us ahead several years to a fulfillment of our strategy in data and analytics. Together with our company’s best-in-class offerings across media, creative, digital and marketing service, we have positioned with a strong competitive advantage in our market.

As we continue to fully integrate Acxiom, we’re able to make our clients’ data work harder for them and can deliver a more efficient marketing.

We’re beginning to see this play out in pitches now, where sophisticated clients initially in the media space are asking us to pressure test our ability to link their first-party data with an external data stack to deliver better business outcomes. Turning back to our overall results.

It’s clear that despite a challenging revenue environment, we posted growth that was well 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 are proud of. Our capital return programs continued to be significant drivers of value. In 2018, we returned capital to our shareholders through dividends and share repurchases. The latter were appropriately suspended on a temporary basis due to the Acxiom acquisition.

During the year, however, we returned approximately $322 million in the form of dividends and an additional $117 million via share repurchases. We intend to return to share repurchases as we make progress on reducing our debt levels.

Given the leverage required to complete the Acxiom acquisition, we are pleased that the rating agencies acknowledge the strength of our financials and the strategic value of the deal by reaffirming their ratings for us. Our public debt issuance to finance the acquisition was a success across the Board.

While the Acxiom financing was a landmark capital markets transaction for IPG. It bears noting that we continue to invest in our most innovative capabilities, as well as additional targeted M&A outside of Acxiom, ensuring that our offerings stay relevant and differentiated in a highly dynamic media and marketing environment.

Our Board’s decision today to once again meaningfully increase the dividend shows a continued commitment to return value to shareholders, as well as confidence in our future prospects. Looking forward against the backdrop of global uncertainty, the tone of the business is good and we have some new visits opportunities coming up.

The breadth and strength of our portfolio, however, positions us well to participate in nearly all sizable pitches and there is further organic growth to be had by broadening the scope of our relationships with our existing clients.

In light of these factors, we believe that we should continue to see competitive organic revenue performance in 2019, which is why we’re targeting 2% to 3% organic growth for this year.

Given the headwinds we are facing due to a couple of sizable client losses in late 2018, as well as the fact we are comping against industry-leading growth rates, the fact that we’re able to target competitive organic growth performance speaks to the strength of our underlying offerings.

We are also focused on our client-centric model to assure retention of our important client base as we move forward. Along with this level of growth, we’re targeting adjusted EBITDA margin expansion of 40 to 50 basis points over the results we’re reporting today, excluding the cost actions we expect to take in Q1.

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

Combined with the transformative opportunities of our enhanced ability to connect marketing with data and our commitment to capital return, that means there remain significant potential for value creation and enhance shareholder value. As always, we thank our clients and our people who are the foundation of our success.

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

Thank you. [Operator Instructions] And our first question will come from Alexia Quadrani of JPMorgan. Your line is open..

Hi, thank you very much, and congratulations guys on such an impressive quarter here. The revenue growth really is unbelievable. My question really is on the – just the organic revenue growth that we saw in the fourth quarter.

Do you have a sense maybe to talk broadly about how much may have – it may have benefited from some project business or sort of a budget flush towards year-end? And how much was kind of the underlying growth of the business, the strength of the business that you’ve sort of been seeing all year? And then I have a follow-up..

Yes. As you know, our fourth quarter is typically when we see an increase in projects and, in fact, we saw that. That was evidenced then by the strong fourth quarter result. For example, at Weber Shandwick and Golin, as well as Octagon. So, I don’t consider necessarily a flush of spending.

I think it’s pretty difficult to have these projects operate in the fourth quarter. But what it does signal is the tone and the fact that our clients continue to value our marketing services in terms of their ability to do events and project to reach their consumers..

And then on the, I guess, two other quick questions. One, the growth in the UK continues to be so strong.

Are you sensing there’s some good market share gains there from competitors? Can it continue through Brexit? And then maybe just a follow-up for Frank as well on incentive comp in temp labor that trends up in the quarter, I’m assuming reflective of the very strong revenue growth? Is that likes to continue in Q1?.

All of that. First of all, the strength in UK, yes, as we – as you summarized in the fourth quarter, we have 9.6% and for 12 months, we’re up 9.7%. So those are pretty good results. A lot of it – and what’s impressive about that is, it’s across the Board. It’s media, it’s PR, it’s advertising.

So a lot of that has to do with new client wins and the competitive positioning of us in the UK. We have yet to see any big pullbacks from Brexit, and I know that question comes up all the time. I mean, eventually, depending on what that outcome is, it may be impact, but right now, we’re just not seeing that. So we’re very pleased with the results.

And just for a comparison, I believe the UK represents about 8% or 9% of our business and we’re pleased with these results. The incentive comp follows our performance, so frank why don’t you comment on it..

And lastly, the model is working. We did a very good job of managing our base benefits and tax, both in the quarter and the year, which led us to generate 80 basis point leverage of the entire SRS line, and we’re able to overcome the increase in incentives and temporarily labor, which are more variable.

incentive, as Michael pointed out, is based on performance. temporary labor was around growth. As it relates to 2019, the actions that we’re taking as relates to the the account losses are what you would have expected, we’re gradually trying to manage our base benefit in tax.

And unfortunately, when you have account losses like that, there’s going to be actions around people. We’re still servicing those clients as we work through the transition.

But we wanted to make sure, we let the investment community know that we recognize there will be some pressure on our SRS lines with that revenue decline and we’ve got actions underway more to come when we release our first quarter on that specifics..

We always say it’s a variable costs model and that’s what you do when you have – when you lose a client and unfortunately, we did. The adjustment to that is unfortunately in terms of layoffs and right-sizing the business.

And the other side of that is, as we bring new business on, we’re going to see an increase sometimes in temporary labor until we get the full-time employees embedded in the organization. So it goes both ways. When we win a client, it takes a while for the revenue and we have the expenses.

On the other side, we have to take express actions when we lose and – but the business continues to run off..

Thank you very much..

Thank you..

You’re welcome..

Thank you. Our next question comes from Dan Salmon of BMO Capital Markets. Your line is open..

Good morning, everyone..

Good morning, Dan..

Michael, one, maybe high-level one for you and then just a follow-on for either you or Frank. But just obviously Acxiom addresses your interest and desire to sort of grow your capabilities for data management more broadly.

Getting beyond that theme of data when you look at your priorities for either tuck-in M&A for transitioning the folks you have working at your agencies, what are the sort of next two or three priorities on your list right now as you just sort of move beyond the acquisition of Acxiom to integrating it? And then secondly, I know you’ve been reticent in the past to give targets for revenue synergies and fair enough on that.

But maybe either you or Frank could give us a little bit of color on how you’re thinking about revenue synergies within that 2% to 3% outlook number for organic growth for the year? Thanks..

Yes. Well, on the revenue synergies, we said that the Acxiom transaction will be accretive. In fact, in the fourth quarter, when we added Acxiom, it was, in fact, accretive and we expect it to continue to be accretive for the full-year 2019. So we’re very pleased with how that’s going in.

The synergies won’t really be taking effect probably towards the latter part of the year. Right now, we’re busy integrating the businesses. And the integration of the businesses is – frankly, has given rise to additional revenue synergies versus what our base case was.

But it will take sometime to implement some of the things that have to be done to make sure that the integration is correct and then whatever products we bring to market are being brought at the right time with the right people in place. But the good news is that we’re seeing greater potential revenue on synergy than we anticipated.

In the meantime, the base business of Acxiom continues to be solid. Remember, the key aspect of Acxiom was data management, and 65% to 70% of their business is data management and they continue to do an outstanding job there. In terms of our priorities, the – our markets are changing. So, therefore, it’s important for us to invest in talent.

I mean, clearly, it goes without saying digital capabilities, which incidentally we embedded in all of our agencies long-time ago. So every one of our agencies, whether they’d be creative, media, experiential, PR, all have very strong digital capabilities.

And then, of course, we have the Huge, R/GA, Profero, MRM, which are our unique digital capabilities within themselves. But we continue to have to invest in the talent. The other is business transformation.

We’re finding that, that given our relationship with our clients and the work that we’re doing, we are seeing opportunities for business transformation. So we have been bringing onboard consultants, experts and business transformation, particularly in our digital agencies like R/GA, Huge, MRM and Profero.

These business transformation projects are very well received. They’re dealing with C-suite executives. And, of course, our goal is not only to win the project part of that, but to expand our relationship as a result of that. So one of the emphasis will be to continue to expand our expertise in business transformation.

As well as in terms of data, data covers a lot of ground. I do believe we’re going to see an increase in privacy issues across the country. Acxiom has expertise certainly with GDPR. We have expertise that we’ve already brought to the market. In the United States, we see it in California. We’re going to see it expanding all of the United States.

We hope that we’ll see a federal answer to the question of data privacy in the U.S. and that’ll give us a great opportunity to leverage the expertise of Acxiom as being the leading provider of these services that have an element of trust, confidentiality and capabilities that are necessary in that environment..

And maybe just one quick follow-up.

Fair to say that review activity is lower right now than it was a year ago at this time?.

Yes, I think that’s fair to say, but I do believe it’ll start to pick up. I don’t think it’s going to stand still. But a good part of our revenue is coming from our existing clients. And our expertise in terms of working those clients bringing in the additional resources under our open architecture model is the opportunity that we have.

I mean, that’s the bread-and-butter of our business. And you win – hopefully, you win more than you lose in new reviews and hopefully, there are the other competitors’ clients that are in review. Unfortunately, we had some bad result in December, but we don’t have anything under review now. I don’t want to jinx it.

And we’re opportunistic and we’re feeling good about our ability to compete as they come up in 2019..

Great. Thanks, Michael..

Thank you, Dan..

Thank you. The next question comes from Ben Swinburne of Morgan Stanley. You may go ahead..

Thank you. Good morning, guys. Michael, just staying on AMS, [I don’t know if you don’t] [ph] want to give it to us. I think you sort of talked to it before, but – and I don’t trust my own historical AMS numbers, because I know they’ve been adjusted a lot since it was owned by LiveRamp.

It looked like the business was up north of 8% in the fourth quarter. I don’t know if you guys could talk to how the business has performed since you’ve bought it on a top line basis. I know it’s accretive to adjusted EPS? And then as you look at the margin guidance for 2019, I would have guessed AMS would be a nice driver of margin expansion.

I’m just wondering if you unpack the guidance, is there any kind of core underlying margin expansion that you’re expecting this year, given all the comments you made about tough comps and the account churning in the business, if you could help us there, that would be great? Thank you..

I wish I can help you all the way that you asked, of course, but [Multiple Speakers].

I’ll take what I can get..

Okay. Well, look, when we originally did the forecasting of Acxiom, we used a 5% growth number that was out there..

Yes..

Suffice it to say, what I said, we delivered at least a 5% growth as expected in the fourth quarter. And given all the opportunities and what we believe the market is looking for from Acxiom, obviously, there’s a growth participation in our growth through 2019.

We also commented that the Acxiom business was on the higher side of margins, and we expect that to continue throughout the year and no, we’re not going to break out the margins for Acxiom, as you asked. But we do – we – as I said, we do believe it will be accretive to us for the full year..

Yes. If I could just ask one follow-up kind of coming off of Omnicom’s call yesterday, I thought John made an interesting comment about competing with weak competitors versus wounded. Some of the account losses you’ve had, there’s been some press around pretty aggressive, I don’t know about irrational, but at least aggressive pricing.

I guess, if you could just comment on whether you think there’s some – that the market is more competitive than it’s been, and part has to do with some of the struggles from some of your competitors impacting where accounts are going or if it’s just -- this is sort of what we’ve been dealing with for years?.

Well, I always look to John as being the wise man in our industry, and I thought we’ll always take his guidance. The fact is, yes, I think, what happens is any company that’s – that has some issues, the best way to show the strength of their business is to win business. And needless to say, this business is a very competitive business right now.

Actually, it always. Ever since I’ve been in this business, it’s been competitive, and pricing is an important aspect of it.

But let’s not forget, you don’t get the pricing unless you have the capabilities to get there, okay? So when it comes down to pricing, I don’t – there are circumstances, where for strategic reasons, some of the competitors may view this as an opportunity to gain market share or put a win on the Board.

And sure, to the extent that some of our competitors are lacking revenue as reflected in their results, that’s the way of doing it. I think we’ll see on their future performance in terms of how their growth goes and how their margin expansion flows through. And I think you’ll be able to tell which of the businesses are doing it and which aren’t.

I mean, on a long-term basis, the rub is going to hit the road. You can win a quick business by buying it, but it’s [Audio Interruption] in the margins. So the fact that we’re forecasting an expansion of margin for 2019 and organic revenue and we believe in the product that we serve and how we deal with our clients.

And in the end, you get what you pay for, and that’s how we view our competitiveness in the marketplace..

Makes sense. Thank you..

Thank you. The next question comes from David Joyce of Evercore. Your line is open..

Thank you. I was hoping just for some more clarification, help understand the wins and – client wins and losses and the cadence of your – of the revenues. With the big American Express win, did that contribute in the fourth quarter? Should we expect the U.S.

Army to be winding down by the end of this first quarter? And whether your 2% to 3% growth guidance really be supported more in the first part of the year, given these puts and takes?.

Well, look, the way -- it’s still unclear how these businesses in terms of losses are going to roll out. First of all, the losses didn’t affect 2018, it’s principally a 2019 event in terms of the impact, and it’ll cycle through probably the second quarter and thereafter, if you want to do your modeling on it.

And as far as our wins, the losses came in, in December of 2018. That’s why it takes a while for it affect our results in 2019. On the other side of it, we had business wins in 2018 that start to impact a little bit in the fourth quarter, but the bulk of the wins will impact starting in the first quarter of 2019..

And in terms of having so much strength in – across your disciplines and across your regions, are there particular clients who were spending globally that help that, or are there particular verticals?.

Yes. I think it’s pretty clear that healthcare was a major vertical for us, we’ve been saying it all year. And for the full-year, it continued to be our largest growth and healthcare is 25% of our business. So that’s a strength and we see that continuing into 2019. We did have a pickup in consumer goods. And I was surprised.

Everybody would talk about consumer goods. I was expecting the first question to be how come you guys are up on a global basis of consumer goods. Consumer goods is 8% of our business and we had some client wins. So we’re fortunate in our clients in the consumer goods space, which frankly accounted for a good growth for us on a year-to-year basis.

Financial services continue to be solid for us. We saw our auto and transportation growth in that area. Earlier in the year, it was not quite as growing, and we saw an improvement in auto and transportation. Tech and telecom, we had some strain in the first part of the year. We saw some recovery in the second-half of the year.

And frankly, food and beverage is probably our weakest sector. But overall, we’re very pleased with the fact that our business is disbursed versus sectors, and we’re performing well in most of them..

All right. Thank you very much..

My pleasure..

Thank you. The next question comes from Jason Bazinet of Citi. Your line is open..

I appreciate you’re reminding us about the suspension of the buyback. And I guess, I apologize in advance if I’ve missed this.

But have you ever given a leverage number when you would resume the buyback, or it’s – we’re just going to sort of see it turn on at some point in the future?.

Yes. No, we don’t. And there’s so much that goes into our rating, the tone of the business, the integration of Acxiom and obviously, our cash flow. So what I said in my remarks is how we have to look at it. And that is, as we perform, as we take, we don’t have share buyback. So we hopefully delever in terms of paying down debt.

And when we reach the right levels, we’ll know it when we see it and we’ll implement buying back shares. We think it’s important that there’d be a balance between returning of capital to our shareholders in the form of dividends and buybacks.

I’m very pleased with the support the Board has with us with respect to the increase of the dividend, showing that their confidence in the business in the future and how important it is to return capital to our shareholders. So we chose the dividend vehicle this time. And as we delever, we’ll see us getting back into buyback business..

I appreciate it. Thank you..

Sure..

Thank you. The next question comes from Michael Nathanson of MoffettNathanson. Your line is open..

Thank you. I have three quick ones. Michael, you talked a lot about the losses in America and what do we do to organic growth. But when you look at the international business, it’s really amazing how fast you’re growing at some markets where there’s just no economic strengths.

So I wonder, when you look at 2019 internationally, what are you expecting for growth? And anything about just how you’ve achieved such growth levels in markets like LatAm, which is really struggling, or Western Europe as you talked on? And what do you think about 2019 off of the 2018 run rate?.

Well, again, if you look at the size of our businesses, I think LatAm is a great example of the effect that we have in terms of business wins and losses. We went for a period in time, where LatAm, the business – we were negative because of losses. Fortunately, whether it be McCann or Mediabrands and FCB and MullenLowe, we picked up new business.

So we saw a strength in Brazil, which is great to see as a result of some of the new business. Argentina, Mexico are very strong for us. So it’s across the Board in Latin America, but the good news is Brazil and that’s principally driven by new business wins, or actually a new business win or client come back, which is great.

With respect to the other markets, the same is true in Continental Europe. The fact that we’re stronger in Continental Europe. We were up 4.1% in the fourth quarter and 5.3% for the year. That too was very much a new client business-related. And again, it’s 8% of our business. So a client win here or there gives rise to a nice increase.

So I think the answer to your question is, we want to win business in those markets and we’ll see the growth coming from that..

Okay, thanks. And then two quick ones for Frank. Frank, I don’t know if we quantified the benefits of cost actions over the year.

So how much do you expect to save after you make those actions in the first quarter?.

Michael, we don’t have that information today. We’ll disclose more on the first quarter call. We’re still looking at the specifics, which are both people and real estate. So we’ll get more granularity on the first quarter call. We just want to rage out for new folks the general size of the charge we’re looking to take..

Okay. And the last one, going back to Ben’s question just on margins at Acxiom.

With your first quarter under management at Acxiom, is there any material change the way you manage the business on a margin side, or should we look at historical margins there as kind of a good guide for what happened on the first quarter under your management?.

I think that we’re very supportive of the AMS management team and their margins are very strong. And we’re looking for opportunities to drive incremental margin, but we haven’t changed anything materially how they run their business..

Yes. I mean, that’s the key part of the integration and we didn’t want to break it. We do it well. We bought them because of their strength. So we have teams. We have great oversight in terms of how we work together. And I got to tell you the relationship between them and IPG is fantastic.

And not only we’re looking at revenue synergies from IPG clients using Acxiom, we’re seeing a lot of action coming from Acxiom, bringing in IPG businesses. So we’re really excited about that opportunity..

Okay. Thank you, both. Thanks, guys..

Thanks, Michael..

Well, I’m getting the high sign here. So I thank you all for your participation. I know we’ve got to do it again, but we’re quite proud of the results for 2018, and we look forward to great results for 2019. Thank you very much..

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