Good morning and welcome to the Interpublic Group Second Quarter 2019 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 A.M.

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-Q and our 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 performance 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 this quarter and first six months of 2019.

As usual I'll start out by covering the highlights of our performance, Frank will then provide additional details, and I'll conclude with an update on our agencies to be followed by our Q&A.Pleased to report another quarter of solid financial performance. Organic growth of net revenue was 3.0% in the quarter.

That's on top of 5.6% a year ago and brings organic growth over the first six months of this year to 4.6%.Regionally, organic growth in our international markets continue to be strong at 6.5% in the quarter, driven by our performance across LatAm, Continental, Europe, and the U.K. In the U.S., organic growth was 0.6% against 4.6% growth last year.

This result reflects growth in the quarter across many of our U.S. agencies and disciplines bode by headwinds from the account activity toward the end of last year which we have talked about on previous calls.These losses year-over-year resulted in a U.S. headwind of 3.8% in the quarter.

The growth we saw despite the headwinds and industry-leading comps from last year along with our win rate this year demonstrates that our business remains solid.In our Integrated Agency Networks or IAN segment, global organic growth was 3.2% in the second quarter led by Mediabrands and FCB Health along with contributions from McCann Worldgroup, R/GA, MullenLowe, and Huge.Our CMG segment grew 1.9% organically paced by another advance in public relations with notably strong performance by Weber Shandwick and by Octagon and FutureBrand.Among client sectors globally, we saw strong growth across healthcare, financial services, industrials, consumer goods, tech and telecom, and retail.

The total growth of our net revenue was 9.1% in the second quarter and was 11% in the first half. That includes organic growth, acquisitions and dispositions, as well as the impact of year-over-year currency changes.

Within that we continue to be pleased with the growth of Acxiom which remains on track with our expectations and continues to be accretive to growth and margins.Turning to EBITA and the operating income. Second quarter EBITA was $285.5 million, an increase of 12.2% from last year's second quarter. Operating income was $264.2 million.

EBITA margin as a percent of net revenue in the quarter increased 30 basis points to 13.4% from last year's EBITA margin. For the first six months our adjusted EBITA margin increased 140 basis points from a year ago.Second quarter diluted earnings per share was $0.43 and was $0.46 as adjusted which compares to $0.44 a year ago.

Looking at the quarter and the first half, our performance means that the year is off to a solid start. Our client-centric integrated offerings continue to drive highly competitive global growth and the quality of our talent continues to strengthen our offerings.

This is further reflected in very high levels of recognition accorded our people and our agencies once again this year in industry awards such as the Cannes Festival of Creativity and in other key industry rankings.Turning to our outlook, you'll recall that we came into the year with financial targets of 2% to 3% organic growth and 40 to 50 basis points of margin expansion.

At mid-year, we're confident that our performance to-date and the current tone of business have us on track to deliver at the high end of that range and that is inclusive of headwinds.In addition, we continue to be comfortable with our target for EBITA margin expansion of 40 to 50 basis points over last year's 13.5%.

As always, we'll update our outlook as the year progresses.At this point, it's my pleasure to turn things over to Frank for additional detail on our performance and I'll return with an update and highlights of our businesses.

Frank?.

Thank you, Michael and good morning. As a reminder, I will be referring to the slide presentation that accompanies our webcast. On Slide 2, you'll see a summary of our results. Second quarter net revenue growth was 9.1%. Organic growth was 3% with the U.S. being 0.6% international at 6.5%.

Q2 EBITA of $285 million, which compares with $254.4 million a year ago, an increase of 12.2%.For the quarter, adjusted diluted earnings per share was $0.46. The adjustments exclude the amortization of acquired intangibles and exclude non-operating losses due to disposition of certain small non-strategic agencies.

We also adjust for the benefit of certain tax settlements in the quarter.Turning to Slide 3, you'll see our P&L for the quarter. I'll cover revenue and operating expenses in detail in the slides that follow. Here it's worth noting a small restructuring charge, $2.1 million to fine-tune the expense of the actions we took in the first quarter.

Below operating income, our net interest expense continues to be higher year-over-year due to the financing we added in late September last year due to Acxiom.Turning to Q2 and first half net revenue on Slide 4, net revenue in the quarter was $2.13 billion.

Compared to Q2 2018, the impact of the change in exchange rates was a negative 2.4% with the U.S. dollar stronger against every functional international currency. Net acquisitions and divestitures added 8.5%, which includes the impact of Acxiom, as well as smaller acquisitions less our dispositions.

The resulting organic revenue increase was 3%.At the bottom of the slide, we break our operating segments. As you can see, our IAN segment grew 3.2% organically.

Underneath that result was growth in media led by IPG Mediabrands and our global creatively led integrated offerings at FCB, McCann Worldgroup and MullenLowe and our digital specialist agencies R/GA and Huge.Total growth at IAN was 10.8%, which reflects acquisitions including Acxiom dispositions and a drag from currency changes.

At our CMG segment, organic growth was 1.9% in the quarter driven by another quarter of strong growth from Weber Shandwick along with Octagon in sports and entertainment marketing and FutureBrand. The impact of revenue headwinds from accounts lost in Q4 2018 was felt in both segments.Moving on to slide 5, revenue by region. In the U.S.

second quarter organic growth of net revenue was 0.6%. We continue to see solid growth from our global integrated offerings. From a regional standpoint, this was also where we have begun to see the impact of the revenue headwinds from accounts lost last year, namely FCA Media, Army and VW Creative. It's worth noting that total U.S.

growth was 14.2%, due to the impact of acquisitions and dispositions, which include Acxiom.In our international markets, we had another strong quarter with organic growth of 6.5%. In the U.K., organic growth was 4.7%, a very solid increase on top of double-digit growth in Q2 2018.

We had terrific contributions from both our IAN and CMG segments, highlighted by Mediabrands, McCann, and Weber Shandwick.In Continental Europe, organic growth was also strong at 9.2%, on top of 11.7% in Q2 2018. This was highlighted by very strong growth in some of our largest national markets, namely Germany, Italy and Spain.

In Asia Pac, net organic revenue decreased 0.3% in Q2. Among our largest markets, we had strong growth in India and Japan, but that was offset by soft results in China and Australia.Lat Am grew 25.1% organically in Q2. We had strong organic growth across the region led by Brazil, Mexico, Argentina and Colombia.

Organic growth in the region was 24.5% in the first half of the year. In our Other Markets group, organic growth was 4.8% led by very strong growth in Canada.Moving on to slide 6 and operating expenses, which were again well controlled in the quarter.

Compared to net revenue growth of 9.1%, our net operating expenses increased only 8.7% as adjusted for the amortization of acquired intangibles. Our ratio of total salaries and related expense to revenue was 65%, an improvement of 140 basis points.

The improvement reflects disciplined organic growth of expenses and the benefit from the consolidation of Acxiom.Underneath that, the ratio of base payroll and benefits to net revenue decreased to 54.9% in the quarter an improvement of 90 basis points.

We also saw solid operating leverage on temporary labor and our expense for severance in the quarter, while the expense of performance-based employee incentive compensation as a percentage of net revenue was flat with the year ago at 3.2%.At quarter end, total headcount was approximately 54,200, an increase of 7.1% from a year ago, with most of the increase due to the addition of Acxiom.

Our office and other direct expenses was 18.2% of second quarter net revenue compared with 17.1%, a year ago. Within office and other direct, we levered our expenses for occupancy by 10 basis points from a year ago.

That was more than offset by the expense profile of Acxiom, which is accretive to our margins overall, while consolidating relatively more investment in data and technology.Our SG&A expense was 80 points – 80 basis points of Q2 net revenue, which reflects lower professional fees and general expenses at corporate.

Our expense for depreciation increased due to the consolidation of Acxiom this year as was the case with our amortization expense, which was $21.3 million in the quarter.

We also had a restructuring charge of $2.1 million in the quarter, which represents a small expense adjustment to the actions taken in this year's first quarter.On slide 7, we present detail in adjustments to report our results in the quarter in order to provide better transparency and a picture of comparable performance.

This begins in the left-hand side with our reported results and steps through to EBITA, and our adjusted diluted EPS. Our amortization expense for acquired intangibles was $21.3 million resulting in EBITA of $285.5 million.

Below operating expense, we had a loss in the quarter of $6.1 million in other expense related to disposition of a few small non-strategic businesses.

Our reported results also include a benefit of $13.9 million from the settlement of certain tax positions in the quarter, which we adjust for as well.At the foot of the slide, you can see the after-tax impact per diluted share of each of these adjustments and that's at $0.03 per share, a difference between reported EPS of $0.43 and adjusted of $0.46.On slide 8, we show similar adjustments to the first six months, which bridge to the adjusted earnings of $0.57 per diluted share.On slide 9, we turn to cash flow in the second quarter.

Cash from operations was $293 million compared with $172 million a year ago. Within that, working capital generated $53 million compared to the use of $63 million in Q2 2018. Investing activities used $47 million for CapEx in the quarter.

Our financial activities used $278 million, including $100 million towards the repayment of our term note, and $91 million for our common stock dividend. Our net decrease in cash for the quarter was $16 million.Slide 10 is the current portion of our balance sheet.

We ended the quarter with $614 million of cash and equivalents.Slide 11 depicts the maturity of our outstanding debt with total debt at quarter end of $3.8 billion and diversified term maturities going forward.In summary on slide 12, first half growth and margin expansion have us well positioned at mid-year to deliver on our financial targets.

Our teams continue to execute very well. Our balance sheet continues to be a strong and meaningful source of value creation all of which has us well positioned.With that, I'll turn it back over to Michael..

Thank you, Frank. Our results reflect a strong quarter. Organic revenue growth despite the headwinds faced in the U.S. is an encouraging sign that our clients remain in an investment mode, when it comes to their engagements with us.

Our performance is also a reflection of the strength of our offerings, our people, and the differentiated strategy.Specific to the U.S., we're well positioned to both resume market share gains and leverage a growing economy in our largest market. We are net new business positive year-to-date both internationally and in the U.S.

As such, we've been able to offset significant domestic headwinds. And once we cycle through those losses, we expect to see a return to solid U.S. growth rates.Our continued strength is due to a strategic position that differentiates IPG. First, our open architecture model is the most client-centric approach in the market.

It integrates marketing channels across creative, media, public relations and data management in a model that continues to resonate with clients.Open architecture is a solution that consultants cannot deliver, and one our peer set has been trying to emulate.

We're seeing it in work with major clients in health care and financial services and other sectors. In addition, we include environmental, social and governance issues as value creators.

That means we consistently take public positions on important social issues.We feel doing so was in line with our values of transparency, ethics, inclusion and community involvement. It makes us a company people can believe in, with values that are backed by actions.

Doing so, makes us the company clients want to do business with and people want to work for.Our hallmarks include having embedded integrated digital capabilities as foundational to our operations, a step we took many years ago, having strong agency brands joined by a collaborative culture and seeing transparency as a core value.

Thanks to this differentiated go-to-market strategy IPG received a host of recognition and accolades related to our effectiveness, our creativity and our powerful agency brands during the quarter.For the third year in a row, IPG was named the Most Creatively Effective Holding Company at the North American Effie Awards.

This award recognized all forms of marketing that contribute to a brand's success and IPG had 15 agencies among the top winners across all marketing disciplines. At the Cannes Festival of Creativity, we had a particularly impressive performance.IPG agencies took home 11 of the festival's highest honor the Grand Prix.

This is more than all other global holding companies and consultants combined. Grand Prix won by our agencies were in categories, including brand experience, industry craft, health and wellness, creative data, innovation, mobile and others.

These Grand Prixs were won by a variety of our agencies across many clients, again, showcasing the breadth and strength of our agency brands.In addition, our agencies won more Gold Lions, the festival's next highest honor than any other holding company.

Notably in terms of awards per dollar of revenue, IPG topped the rankings among holding companies at the festival. While there, we hosted our Ninth Annual Women's Breakfast.

Partnering with the United Nations, we attracted a standing-room-only crowd and featured top marketers from Adobe, Levi Strauss, Mars, Microsoft and Unilever to examine advertising's influence and impact on societal inequalities.As we've noted on these calls, the future of our industry rests on the ability to combine transformative data capabilities with creativity.

IPG's performance throughout the year coupled with adding Acxiom to our existing tools and expertise enables us to provide clients with the industry's most forward-looking and creative marketing solutions.

Clients continue to believe in the power of the idea and look to us as their most valued partner to use creativity to drive business results.We've been able to perform at this level, thanks to our investment in vibrant and differentiated agency brands.

In our Integrated Agency Network or IAN reporting segment, which now includes Acxiom as well as our other global networks.

Mediabrands, again, led growth in the quarter, posting a very strong performance.UM was awarded its first-ever Grand Prix for 5B, a documentary created specifically for Johnson & Johnson that chronicles the work done by nurses during the 1980s in one of the country's first HIV hospital wards.

This marked the first time that a media agency won the Grand Prix in the entertainment category.In addition, UM kicked off the third quarter by winning the Mattel business across Europe, the Middle East and Africa and Asia Pac.

Initiative picked up a number of new business wins including high-growth TikTok in the U.S.; and in APAC Carnival and Groupon's APAC and EMEA media account. The agency also took home a number of top honors at Cannes, including sharing the Grand Prix with FCB in Canada.FCB posted very strong performance, especially in its health care operations.

Area 23 part of FCB Health, won a Grand Prix this year for a highly innovative connected wellness device. The New York office won three Grand Prixs as well. Recently the network named a new CEO of Canada and New York as well as a new President in New York.McCann Worldgroup saw continued growth in the quarter driven by increases with existing clients.

On the new business front, they added ADT among others. In addition, McCann continues to see very high levels of industry recognition. Following their Effie Index recognition as the Most Creatively Effective Network in the World for the second year in a row, the network continued its momentum by being named Network of the Year at Cannes.

McCann Health was also named Healthcare Network of the Year and McCann Health China named Healthcare Agency of the Year.MullenLowe Group had a strong quarter on several fronts.

The network had a number of new business wins including Mediahub adding Fox Sports and Fox Entertainment at the end of the first quarter, and more recently the home automation company ecobee.The media arm also promoted a leading digital innovator to U.S. President and added a number of senior leaders all as a result of new business growth.

You'll note, our three global creative networks McCann, FCB and MullenLowe continue to perform well, which demonstrates the value of our strategy to invest in our brands and the embedded digital services that are a hallmark of our offerings.As noted, Acxiom is also doing very well.

All of the strategic reasons to bring Acxiom into our company have only accelerated since the acquisition, giving us an unrivaled industry position in data management capability.

This allows us to help marketers get the best out of all their data assets, driving better and more efficient one-to-one connections with consumers at scale.We are pleased with how integration is progressing. Performance is in line with our expectations and results continue to be accretive to IPG.

We see opportunity to bring new innovative products and services to market, as well as the upside of continuing to grow their existing data management business.This quarter Acxiom continued expanding its global data offerings, most recently in Japan, Australia, Spain and Canada.

The company also expanded its relationship with a major auto distributor in the U.S., with respect to managing its customer data and entered a new multi-year engagement with a financial technology and marketing client, looking to expand audience measurement and reporting capabilities. We continue to be impressed with the team and business.

Acxiom has a rich and promising pipeline of opportunities.Brooklyn based Huge partnered with Amazon during the quarter to create the Earth Challenge 2020 initiative.

Together with the Earth Day Network, they designed tech solutions to help citizens solve key environmental challenges facing humanity in the 21st century.Also in the quarter, Pantone selected the agency to handle global earned-first campaigns and the Toronto office won the Sinai Health business.

Highlights at R/GA in the quarter included growth with their existing clients, plus the partnership between the agency Venture Studio with Kinship, the newly launched innovation arm of Mars Petcare.Together they created the Innovation Exchange the start-up of academy and mentored eight purpose-led female-founded companies from Pakistan, Kenya, Brazil, Uganda and the U.S.

On the new business front, R/GA was recently selected by GameStop to redesign their cultural gaming experience.Our U.S. integrated independent agencies continue to round out our portfolio.

They deliver the full suite of marketing services to their clients and can also combine with the best of the IPG offering on our collaborative open architecture solutions.Highlights with this group -- within this group come from the marketing agency, which continues to expand its culture department and recently welcomed it's first-ever talent engagement and inclusion specialist and onboarded new clients CarMax and Buffalo Wild Wings.At CMG, we're also seeing positive developments.

As you saw last week, IPG announced new leadership at CMG and Weber Shandwick, promoting from within our ranks. This leadership team has worked together to keep Weber Shandwick at the forefront of contemporary brand-building during a transformative era of marketing and communications.

We're pleased to have them move into these new roles.As we previously called out, Weber Shandwick and Golin are among the most highly awarded PR agencies in the business. Weber Shandwick received a number of accolades this quarter.

The agency was the most awarded at the 2019 North American SABRE Awards and the agency's recently named CEO received Global Professional of the Year at the PR Week Global Awards shortly after she was named Agency Professional of the Year at the PRWeek U.S. Awards last quarter.

With her added CEO title, IPG has one of the highest-ranking women leaders in the PR space, a point we take particular pride in.Golin had an exciting quarter. PRWeek recently named the agency Global Agency of the Year.

On the new business front, Golin had a number of wins including Porsche in Asia-Pac, AIA in Hong Kong and IT service management company Verra Mobility.

In total, we are happy that through the first half of the year, we continued to perform at the top end of the industry.It shows that our investment in people and in a modern data-fueled offering is succeeding and that our focus on the client-centric open architecture model is the right formula.

We are pleased with our results and we continue to feel confident in our long-term plans and prospects. As always, we remain committed to strong financials and significant reduction in debt over the next few years, as well as continuing to grow our dividend.

We also expect to return to share repurchases after a period of time.Turning to our outlook, we're confident that our performance to-date has us on track to deliver growth at the high end of our 2% to 3% organic growth range.

In addition, we continue to be comfortable with our target for adjusted EBITA margin expansion of 40 to 50 basis points over last year's 13.5%. We view our current performance and long-term strategy as significant factors that will continue to enhance shareholder value.Now, let's open it up -- the call to your questions. Thank you..

Thank you. Alexia Quadrani, your line is open, from JPMorgan..

Thank you so much. Michael, thank you for your color on the U.S. business. I think you mentioned about a 3.8% headwind from losses..

Right..

Can you give us a sense of how that trends for the remainder of the year? Does it get worse before it gets better? Or should we assume a similar run rate in the second half? And I know you had some notable wins earlier this year.

Does that become an offset at some point?.

Yes. Thank you, Alexia. Well, as I indicated, we're net new business positive through the quarter, through the first half on both U.S. and worldwide.

Unfortunately, the headwinds get a little worse in the second half of the year and, frankly, runs a little bit into the first quarter of next year.But what's important to note here is that, despite these headwinds, when we say we are comfortable with our 2% to 3% organic growth, that's net of the headwinds. So if you -- here I go.

If it wasn't for the losses, we would continue to have extremely high organic growth. Unfortunately, we have those losses. But the fact that we're overcoming those losses with net new business wins is indicative of the strength of our offerings and frankly the economic tone that's out there..

And then, just a follow-up. You continue to outperform a lot of your peers in Europe, Continental Europe, especially. So I think Germany was an area that you highlighted being really good -- really strong half year performance.

I guess, can you give us any color, if you think that's mostly share gains? Are you seeing underlying growth in the market? And, I guess, any more color on that would be great..

Yes. Well, frankly, it's reflective of some new business wins, notably McCann and its Opel win in Germany in Continental Europe. So that's reflected.

Again, the size of our businesses in those markets are 8% to 9%, so the wins and losses have a dramatic impact on growth.We'll take it though that we were net positive and we've been net positive over the last couple of quarters.

So I think it's indicative of the competitiveness of our offerings, particularly in McCann in this case, as well as Mediabrands. And we continue to believe there's strength in those markets..

Thank you very much..

Thank you, Alexia..

Thank you. Our next question comes from Tim Nollen of Macquarie. Your line is open..

Hi. Thanks. One other geographic region I'd like to ask about is China. You're not the first to mention that China was negative in the quarter. I wonder if you could elaborate a bit on why that is.

I know it's not been the strongest area for some time, but if you could just let or give us a sense of what's going on there? And then another comparison in terms of sector, you highlighted consumer goods as being a strong sector for you amongst many other sectors pretty broad-based growth I guess.

Again, peers of yours have talked about attrition and declines in fees and in ad spending. Does this come down to the work you do? Does it come down to the client that you have? I wonder if you could help us understand why you're talking about good consumer growth and others are not? Thanks..

Yes, it's all of the above. Again, consumer goods is 8% of our business. So there again the notion of we had good client wins in consumer goods with respect to the markets in those environments. We had a little bit of cutback in some of our consumer goods businesses, but it was overtaken by the growth of our new business wins.

So that accounts for the strength on consumer goods. I said this before what we're seeing is we're not raising a flag and saying all the consumer goods are back again.

I think the entire industry is going to face challenges as the consumer did -- particularly in packaged goods continue to focus on margin and cutbacks.With respect to our largest CPG clients, we believe we've seen a leveling off of that spend and our goal is to grab more brands if you will from those companies.

And if you couple that with the wins that we have in those markets that reflects the strength that we have in consumer goods. I might add that growth is good in both the U.S. and worldwide given where our new business wins fall out. I think there's no question in China that we're starting to see the impact of the economy there.

The good news for us that the losses in China are being offset by growth in India, Japan and Singapore. But we don't see a big recovery in China on the horizon. Again, it's not our largest market. We're there to service our multinationals.

We continue to invest in China in terms of our people and our brands, but I believe we don't see a big turnaround in that environment anytime soon..

Okay.

Can I ask a quick follow-up on the consumer goods response?.

Sure..

Again, thanks for the explanation there, Michael. I just wonder what is it that you're doing that might be a little different from others? You mentioned your open architecture a couple of times in your remarks. Or is it something with the data you can provide with Acxiom? Maybe it's not a consumer goods question.

Just what are you doing that's helping you do better than your peers?.

Well I said this before other than we're just better than they are. I'll take the liberty of saying that. Our open architecture is really a key. And when we -- I've attended a number of the top to tops, particularly in Europe. And I'm sitting in a room and we have FCB. We have McCann. We have Weber Shandwick. We have Acxiom.

We have RGA all sitting in the table servicing an existing client. That's a pretty powerful group to have in a room. And when I sit in that room and I look at the leadership of our clients and I say look this is the new go-to-market strategy of IPG.You're entitled to the best IPG has to offer. You see it coming to light in the room.

You probably don't even know which agencies the people who are sitting in this room are from. It's a total collaborative client-centric offering that our sole purpose is to help you move your needle and all the old silo issues that are present in our industry are our problem not yours. And it resonates with clients.

I mean -- and in fact, one of our biggest clients actually called their model open architecture, which I got a kick out of.Of course, I didn't complain to them using our terminology. But it's the wave of the future.

And you put Acxiom in that group, you have a very powerful offering in terms of giving clients in one place all that they need to focus on targeting the right consumer, with great creative, with the CRM capabilities, with the expertise in particular in this case health care which we have the best in the business in terms of those offerings.So I firmly believe -- we launched open architecture early in the stages of our new management team and it really resonates in the marketplace.

And I think that's the right way to protect your brands, because they look to our brands as those are the people that are working on their engagement, but they include IPG as a brand. And it's up to us to make sure that our -- the collaboration of all our agencies are working the way they should. And I'll tell you something else.

When it doesn't go well, I get the e-mail and says by the way we're having some problems here. Can you make sure you put the teams together and make sure they respond? And that's the way it's supposed to work and it really resonates well with our clients..

Sounds great. Thanks..

Thank you..

Thank you. Our next question comes from Ben Swinburne. Your line is open..

Thank you, good morning. Two questions, one on margins, one on Acxiom. Michael you had a very strong first half in terms of margin expansion and I'm sure you don't want to call the second half or the full year conservative.

I'm just wondering if you could talk about the margin outlook for the year, because you're certainly pacing nicely ahead of the 40 to 50. I know you've taken some restructuring activities. You've got the account headwinds.

But anything else you'd want to call out on back half margin performance realizing that particularly the fourth quarter is a wildcard?And then second, on Acxiom, there continues to be the sort of discussion in the market of sort of rent versus own on data.

And I'm just wondering if you think that by buying Acxiom, you've made a decision to own or if that's sort of mischaracterization of the strategy. And any early examples of -- you talked about it being accretive to IPG. I know financially it is.

But in terms of the strategic focus of the company and net new business, any early even anecdotal data points you'd like to throw at us about how that business is helping would be great?.

Yes. Thank you. Two great questions, Ben. Let me focus on Acxiom. I think it's a mischaracterization of why we bought Acxiom, okay? We continue to say and if you listen to my prepared remarks, Acxiom its core competency is data management, first-party data management. And that's not a question of buying or renting.

That's a strong core business that Acxiom has. And you see the new business wins at Acxiom relate to the first-party data management. So that's where we're seeing the growth.We haven't yet introduced the new products that we talked about in terms of the synergy opportunities on revenue using Mediabrands coupled with the Acxiom capability.

So I think when people talk about us buying Acxiom and whether there's conflicts or rent or buy, they're totally misunderstanding the core competency of Acxiom.When you think of privacy when you think of first-party data management as they're cleansing and organizing data to reach the right consumer that's what Acxiom does.

They have one-third of their business is using 22,000 sources so maybe two billon individuals in third-party data management.But our clients don't have to use that. They have choices in terms of who they work with, with respect to that. It just so happens a number of them use that. But that's one-third of the business.

The core competency of Acxiom is being able to target and cleanse and really work with the data that clients have within their own company and the opportunities there are significant.And what's great about those companies are the long-standing relationship we have with those clients. I mean we're part of their business.

So the retention on those businesses, the ability to grow with our clients it really is the key to this. And they are recognized. They're the top-rated from Forrester in terms of the quality and transparency and safety of their offerings. I mean that's a compelling story. So it's not that we bought data and that we're selling data.

The core competencies are much bigger than that and that's where we see the opportunities.In terms of margin, when you have those kinds of headwinds, a number of those clients carry some good margins in with it. So at this point, I'm not going to comment on any upside on the margins. Our goal is the 40 to 50 basis points.

We believe we can achieve that and that's what -- and then frankly if you -- if we achieve that or when we achieve that, I think it's another example of how we continue to focus both on top line and cost containment and that's what our goals are.And if you look at the history of our performance over the last 20 quarters I think you've seen a pretty impressive organic growth and margin expansion, which is what we say we're going to accomplish..

Make sense. Thank you..

Thank you, Ben..

Thank you. Dan Salmon of BMO. Your line is open..

Hey, good morning everyone. Michael, can I just return back to the guidance? As you noted before, we don't want to get too bogged down in the losses, which were well known before this.

And just if we can return basically to the commentary that being more comfortable at the higher end of your organic revenue growth guidance.Maybe just -- what leads you to that sort of confidence? I know there's always a number of variables that can be in there current clients spending more net new business account record, back door has been nicely closed and we're moving along through the year and you've got more cushion on losses.

Are there may be it macro are there one or two things in there that give you that confidence to get towards the -- have that commentary there about being towards the higher end of it?And then just on Acxiom, I know that working with Mediabrands has been the immediate focus out of the box and sounds like that continues to be the focus.

But I know we're not quite to the one-year anniversary yet but any hints on where you can see those capabilities flowing to most effectively beyond Mediabrands within the holding company?.

Sure. Yeah, let me -- we don't make up the numbers. I always tell the team I don't want them to strike, so let's work from the bottom up. We just got through with most of our operating reviews and we really have our units come in and present from the bottoms-up.We see where the opportunities are.

We see where the agency of record fees are coming from, where they see their pipeline. So this number is a number that's developed based on our reviews with each of our business units. And each of the CEOs of the business units sit and talk about the tone of the business.

And frankly we go over the good, the bad, the ugly of their pipelines and their existing clients including the health of their clients.And when we look at the health of their clients, we look at how much of open architecture are they really utilizing, because the more you have an open architecture and collaborative base, the stickier their clients are right? So that's how we do a health test.

So when you put all that together, we do a forecast by agency. We do an overlay from corporate and that's where we get the number.And I know in the past and due -- by the half year we've upped our guidance considerably in the past couple of years.

Frankly I was telling -- including the team that in a way we upped our guidance by saying we're in the high end of the range because that's a real number.And as I answered one of the questions before for the rest of the year the headwinds get a little more difficult.

So in order to overcome the more difficult headwinds, we actually have additional client spend.Let's not lose sight of the fact that our existing client base is the key source of our growth, so the health of our businesses how we're using all the resources within IPG to bring to bear with respect to those clients.

So all of that goes into the mix and then we just make up a number and put it up. But that's where it comes from.On Acxiom, you're correct. I mean, we said that the first wave of integration with IPG was going to be on Mediabrands and that's what we've been focusing on.

But in our business plan, we indicated these at the latter part of this year and certainly next year, we're going to be bringing new products to bear, utilizing for example Cadreon and Acxiom and all the data capabilities that we have within Mediabrands as well as Acxiom with respect to new products.We've already started introducing Acxiom to all of our creative capabilities and all of our agencies, both with respect to their own data analytics capabilities and how they can leverage Acxiom with respect to their own capabilities and more importantly how they can introduce Acxiom to their existing clients and how Acxiom candidly can introduce IPG assets to their existing clients.

So we're in the process.But the one thing I said for this year is, we didn't want to rush out and force everything on everybody because I know a lot of comments are out there that the most difficult thing about these transactions are the ability to integrate.

And it was imperative.Our commitment to our Board was that we were going to integrate these businesses on a smooth basis without breaking an asset that we paid significant dollars for, but we very much view it as the future and transformative asset within IPG. So, we didn't want to rush into it. We're very happy with the integration.

We're not having any problems with respect to integration. And I think, frankly next year, it's going to be pretty exciting to see the stuff that's going to come out of this..

Great. That’s very helpful. Thanks Michael..

Thank you, my pleasure..

Thank you. Adrien de Saint Hilaire of Bank of America. Your line is open..

Yes, good morning everyone and thank you very much for taking the questions. I've got three of them please. So, first of all Michael, I'm under the impression that the impact of account losses are bigger than we expected and this is despite the U.S. Army being still -- still being handled by McCann.

So, can you just explain what we've missed?Secondly, back to the margin question.

Can you give us a bit more details on what would be margins in the first half excluding the first-time contribution of Acxiom? And then thirdly a bit of a bigger question, there are a number of companies, McDonald's this morning is another one where the CMO title is being eliminated or changed.

Just wondering how this is impacting your day-to-day operations and relationships with clients. Thank you very much..

Okay. Three questions. Let me take your margin question. We don't break out business units and give out margins on that. So, when we give you a number on margin 40 to 50 basis points, it's inclusive of all of our businesses and that's how we manage our businesses.

So, I know your question, but we're not -- we just don't disclose that information.You didn't miss anything on the losses. We didn't -- first of all, there was another client in there that you didn't mention. It was FCA Media which frankly was the bigger of the three.

And again, when we started the year, we started the year and we put out as a guidance 2% to 3%. That number reflect. We knew we had these losses going into the year. So, when we forecast the timing of these losses and the magnitude of those losses, it's already reflected in the 2% to 3%.

So, maybe some analysts may have missed that number, we didn't.So far it's exactly where we thought it was going to be. And it -- and by the way McCann is no longer doing business for the Army. So, that's why we're saying in the second half of the year that number gets a little bit harder.

But the good news is, as one of the other questions were, we hope the back door is close right now and now we just see opportunities in our pipeline.The question of the CMO, it's kind of interesting. Business is going waves in terms of centralized versus local.

That's why, if you look at our global networks, McCann, FCB, MullenLowe, the distribution, the capabilities on a global basis are very relevant to what global clients are looking for because, if they're going to be using a less centralized basis, you need local presence in the markets that they want to compete in and we have to be in a position to offer the talent to help navigate through the various local markets.

So that's what you get when you get -- you come to an IPG and that is the ability to reach all the markets when local markets are important.And so far we haven't seen any big impact yet on the changes of the structures from centralized to decentralize. But candidly, it pays -- it plays to our strength when they do that.

Of course, now you really need a third-party arbiter to help them navigate through either the media side of the business, the local customs of the business and focusing on a centralized business plan and help our clients move the needle.So, I think the changes our clients are seeing are focusing on the efficiencies that they need in their local markets.

And that's frankly what IPG can offer that many of our competitors, not the consultants and so on. They don't have that kind of capability, particularly from a creative point of view. What's creative for example in Latin America is different than what's creative in Europe.

And you have to have that kind of capability and expertise that we through our global networks offer..

Thank you, very much. If I could just sneak in one quick follow-up, the U.K. has been a very strong area for all agencies in the latest quarter and in recent years.

How sustainable is this given the macro uncertainty and the volatility in politics?.

Yes. I'd say it's a good question. We haven't yet seen a big impact and maybe because the financial services in the U.K. are not quite over-weighted for us. And so, we're seeing PR. We're seeing media. We're seeing creative capabilities continue to be strong in the U.K.

So -- but all bets are off depending on how the new leadership handles this Brexit and what impact it has. But so far, we have not seen it. And again, it's 9% of our business. So, on the good side, we're doing very well. On the hedge on the downside is its 9% of our business. So, I -- yes, it's all baked into our numbers..

Okay. Thank you, very much indeed..

My pleasure..

Thank you. David Joyce of Evercore. Your line is open..

Thank you.

From where you sit at Acxiom, how do you see targeted advertising developing from here? Are there too many disparate platforms? Or do you see the strategies and technologies perhaps aligning well enough to accelerate targeted advertising going forward? And with that view when and I guess, if you could quantify in some form would that targeted advertising drive incremental spending? And does this open opportunity work with smaller marketers? Thank you..

instead of just buying audiences, we can buy specific consumers and their likes and dislikes. And in order to be able to do that you have to have the capability and the insights and through first-party data management is how you do that.By the way, let me just comment that someone has indicated that we're selling that first-party data.

That first-party data is first-party data to our clients. What we're talking about is helping clients who have that first-party data maximize the efficiency of that data and use potential other resources to enhance those capabilities.So that's what we're doing.

And yes, I think clients are amenable to us putting forward a value proposition that shows how we can target specific individuals and particularly on the digital side of the business which is why you're seeing a continuation of digital spend to reach those consumers.So, I view that all as an opportunity for us because of the Acxiom capabilities, but also because we have the creative capabilities to create that messaging that's relevant to that consumer and putting the two together is a pretty powerful voice.So I see that as growing and I see it continuing.

And I think it also -- it adds to the value of our proposition in working with our clients. And frankly that's one of the key reasons we bought Acxiom..

And from the technology and platform perspective is it still are there too many players at this point? Is it too confusing for marketers? Or are things starting to align?.

Well, I always say confusion is good for us because if clients are confused they need someone to figure it out and that's what we do. We -- our strength is in our ability to work with different technologies, all right and cleanse it and put them all together.

I mean that's exactly what clients are looking for, the better mousetrap out there and it is confusing. And we have expertise that helps clients solve that.

So it plays right into our strength.That's why I think the notion of putting data management creativity digital PR all together in a room focusing on what clients need, I mean that's the holy grail of our business.And we built IPG based on that premise. Creativity, talent, tools all helping our clients move the needle.

And where we sit right now there isn't an offering out there that we don't have best-in-class capabilities. And frankly, I believe that's why we will continue to outperform because we put together the best talents in the business with the best tools and that's what clients are looking..

Great, thank you..

Operator?.

Yes sir?.

We've come to the bottom of the hour. That was our final question. Back to Michael for any closing thoughts..

Yes. Again we're excited about the opportunities. We had a little hiccup in terms of some of those headwinds, but we're working hard to overcome that. And I look forward to our next call. Thank you very much..

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