Good morning and welcome to the Interpublic Group Fourth Quarter and Full Year 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..

Thank you. 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 Ellen Johnson. We will begin with prepared remarks to be followed by Q&A.

We plan to conclude before market open at 9:30 AM 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 other filings with the SEC.We will also refer to certain non-GAAP measures.

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

Thank you, Jerry and thank you for joining us this morning as we review our results for the fourth quarter and 2019. I’m pleased to be joined this morning by our CFO, Ellen Johnson. I’ll start our call by covering the highlights of our performance, as well as our outlook for the New Year.

Ellen will then provide additional details and I’ll conclude with an update on our agencies to be followed by our Q&A.We’re pleased to report strong performance for both the quarter and full year.

At the top of our financial highlights, net revenue organic growth was 2.9% in the fourth quarter, which builds on the challenging 7.1% count in the fourth quarter of 2018.

That brings organic growth for the full year to 3.3% which exceeds the high end of our targeted range for year and again, places us at the forefront of our industry.Regionally, fourth quarter US organic growth was 2.1%, which is on top of the 6.3%, US organic growth in the fourth quarter of the prior year.

It’s also worth noting that our growth in the US this quarter includes that is in spite of the headwinds we have described in prior calls, which dragged on US growth by 4.3% in the quarter.International organic growth was 4.1%, which on top of 8% growth a year ago, also represents continued strong performance.

We grew our net organically across the UK, Continental Europe, LatAm, Canada, the Middle East with Asia-Pac, the sole exception. Globally, we saw a solid Q4 increases at both our IAN and CMG segments, which reflects very broad participation across agencies and disciplines.Our growth was led by media, data services and tech.

We also saw contributions from our creatively led global integrated networks. Among our marketing service specialists, fourth quarter growth was based by sports and entertainment marketing and experiential marketing. Our top performing client sectors were tech and telecom, healthcare, retail, financial services and food and beverage.

For the year, it’s worth noting that every client sector grew other than auto, where we are contending with our headwinds.Turning to our operating income and EBITA, fourth quarter operating income was $491 million. EBITA was $513 million of in Q4, compared with adjusted EBITA of $504 million a year ago. EBTIA margin was 21.1%.

For the full year, adjusted EBITA was $1.2 billion, an increase of a 11.3%. Our adjusted EBITA margin was 14%, an increase of 50 basis points from the year ago, attaining the high end of our target range for the year.Full year diluted reported earnings per share was $1.68 and was $1.93 as adjusted which his comparable to $1.86 per share a year ago.

Our results for the year further demonstrate the strength of our client-centric, integrated offerings and the quality of our people, our combination that has produced leading organic growth and margin improvement over a period of many years.We’re proud of our consistent level of achievements amidst significant change in our industry, and the dynamic environment in which we are all operating.

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 a leading-edge of our industry.This is especially true in key areas like digital, data services and analytics, strategy and creative.

On the strength of these results and confidence in our future prospects, we’re pleased to announce this morning our Board’s decision to raise the IPG’s quarter dividend by 9% to $0.255 per share. This marks our eighth consecutive year of dividend increases.

However, which time our quarterly dividend per share is more than quadrupled.As we turn to our outlook for 2020, we do so with the foundation of highly competitive agencies, collaborating effectively in our open architecture framework and converting revenue growth to operating profits at margin accretive rates.

Further, we’re extremely well resourced with data science capabilities that are fundamental to a future of high order offerings.From a capital allocation standpoint, we continue to be focused on organic investment in our business, to maintain growth leadership on deleveraging our balance sheet following the Acxiom transactions and as demonstrated in our action this morning, on returning capital to shareholders.

All of these priorities further our commitment to driving shareholder value.As it’s apparent in our results, the worldwide tone of business among our clients were made solid through yearend.

While there are macro issues that required continued attention, including the sustainability of economic expansion, the state of international trade and global political developments, the backdrop nonetheless appears down as we enter the New Year.In addition, like all global companies, we are concerned about the coronavirus outbreak and we want to convey our deepest support and commitments to the people of China.

Naturally, we are focused on the wellbeing and safety of our own people, as we have 2,500 employees in Greater China and thousands more partners, clients and suppliers. Most of our people in China are working from home, and are subject to travel restrictions.We have technology in place that makes it easier for our people to work remotely.

We are closely monitoring the situation and we’ll take every necessary precaution to safeguard our people. Nonetheless, we continue to see opportunities for solid growth in 2020.

Even as we are comparing once again, against industry-leading growth rates and we’ll continue to contend with revenue headwinds in the first half of the year.For 2020, we are targeting organic growth of 3%, we outcycled through large headwinds by midyear.

And we’re well positioned with world-class offerings, a distinctive go-to-market strategy and a unique high value added resources.Turning to EBITA margin for 2020, we also expect to continue to hedge to our longstanding record of margin expansion in the upcoming years.

We’re targeting EBITA margin expansions of 20 basis points over our 2019 adjusted EBITA margin, which would bring us to 14.2% in 2020.

As always, as the year unfolds, we will regularly review our perspective on the year during our quarter calls.In summary, we believe that the drivers of shareholder value creation are the quality of our people and resources, revenue growth, margin expansion and share dividends, they all will continue to work well in Interpublic as we enter a New Year.At this stage, I’ll turn things over to Ellen, for additional detail on our performance and then I’ll return with an update and highlights of our businesses.

Ellen?.

Thank you, Michael and good morning. As a reminder, my remarks reflect the slide presentation that accompanies our website [technical difficulty]. On Slide 2, you’ll see a summary of our results. Fourth quarter organic growth was 2.9%, on top of strong growth the year ago.

US organic growth was 2.1% and international organic growth was 4.1%.For the full year, our organic was 3.3%. Q4 EBITA was $513 million and EBITA margin on net revenue was 21.1%. For the full year, our adjusted EBITA margin was 1.2 billion and adjusted EBITA margin expanded 50 basis points to 14%.

For the quarter, our adjusted diluted earnings per share was $0.88. Full year adjusted diluted EPS was $1.93.Over the course of 2019, we’d retired debt in the amount of $400 million. Gross leverage at yearend was 2.3 times, 2019 and adjusted EBITA as defined in our credit agreement.

As Michael mentioned, we announced this morning that our Board has once again raised our common share dividend. They’ve approved a 9% increase to $0.255 per share quarterly.Turning to Slide 3, you’ll see our P&L for the quarter. I’ll cover revenue and the operating expenses in detail in the slides that follow up. Turning to revenue on Slide 4.

Fourth quarter net revenue was $2.43 billion compared to Q4 2018, the impact of the change in exchange rate was negative 1%. And the impact of net debt position was a negative 1.1%.

The resulting in organic revenue increase was 2.9%.Net revenue growth for the full year was 7.4%, consisting of 3.3% organic growth and a positive 5.8% from net acquisitions while currency was a negative 1.7%. Net acquisitions for the year were cheaply Acxiom’s revenue over the first nine months, less the impact of certain small non-strategic agency.

Acxiom growth was included in our organic change, beginning with the fourth quarter.As you can see, on the bottom half of the slide, Q4 organic growth for integrated agency network segment was 2.9%.

growth in IAN was led by a range of our offerings, including IPG Mediabrands and Kinesso, Acxiom, McCann Worldgroup, FCB, notably FCB Health, MullenLowe and Huge.At our CMG segments, organic growth was 3.3% in the quarter, driven by strong performance at our Octagon sports and entertainment marketing group and by Jack Morton in experiential.

Full year organic growth was 3.5% at IAN, and 2.3% at CMG.Moving on to Slide 5, revenue by regions. In the US, organic growth was 2.1% in the quarter, which includes a revenue headwind of 430 basis points that we’ve called out previously.

Our domestic growth was led by a range of offerings, notably media, technology and other services, healthcare and both FCB and McCann and our creatively led services at MullenLowe and Carmichael Lynch.For the full year, US organic growth was 1.9% that’s on top of 5.1% a year ago and includes the impact of headwinds of 3.3%.

And again, the headwinds will be get diminished in Q2 and are essentially cycled at midyear.Looking at our international markets, we had another strong quarter from the UK, with 4% organic growth, you’ll recall that’s on top of 9.6% in Q4 2018. We continue to see contributions to growth across the number of our offerings in agencies.

Notably, IPG Mediabrands, Jack Morton and Huge.For the full year, UK organic growth was 3.7%, a solid increase against 9.7% growth in 2018. In Continental Europe, organic growth was 6.2%, this was highlighted by increases in most of our largest national markets, namely Spain, Germany and France.

Q4 cast an outstanding year of 7.3% organic growth on the continents. In Asia-Pac, our primary concern as Michael mentioned earlier, is the safety and wellbeing of our colleagues, as well as all those affected by the coronavirus.Looking at our results in the regions. Our organic revenue decrease was 3%.

Consistent with recent quarters, we continue to see mixed performance in our largest regional markets. Revenue in China and Australia decreased, well India was flat in the quarter and Japan increased. Our organic change in the region was negative 30 basis points for the full year.LatAm was 17.1% organically in Q4 which was on top of 17.4% a year ago.

We continue to see growth across the regions were led by our offerings in Brazil and Mexico, powered by both new client wins and growth with existing clients. Full year organic growth was 21.8%. In our other markets group, organic revenue growth was 4.7% in the quarter, led by increases in the Middle East and Canada.

Full year organic growth was 4.6%.Slide 6, if you look at the expense drivers of our margin expansion in the quarter and the year. I will focus my remarks on a full year. Our ratio of total salaries and related expense to net revenue ratio for the full year was 64.6%, which is an improvement of 140 basis points.

Underneath that, we improved in all major expense categories. These payroll, benefits and tax, performance based incentive, compensation, temporary labor and severances.At yearend, our companywide headcount was approximately 54,300, which is an increase of less than 1% from a year ago.

Our office and other direct expense was 18.1% for the full year and net revenue compared was 16.9% a year ago. The increase is mainly due to the consolidation of Acxiom for the full year which has a relatively more investments in data and technology.SG&A expense decreased to 1.1% from 2019 or a 2.1% as reported in 2018.

Excluding Acxiom deal expenses from 2018, the SG&A ratio was 1.7%.

The change mainly reflects a greater expense allocation to our agencies in 2019 to that including the Acxiom for the full year and lower expense for performance-based incentives and compensation in SG&A.Our depreciation – our expense for depreciation was 2.2% of net revenue in 2019, that’s an increase of 20 basis points.

The amortization of acquired intangibles was 1% in 2019, compared to 0.5% in 2018.

For both depreciation and amortization, increases due to the consolidation of Acxiom for the full year in 2019, compared to only the fourth quarter in 2018.Turning to Slide 7, we present detail on adjustments for reported fourth quarter results in order to give you better transparency and a picture of comparable performances.

This begins on the left-hand side with our reported results and steps through our operating income to EBITA and our adjusted diluted EPS.Our amortization expense for acquired intangibles was $21.4 million, resulting in EBITA of $512.7 million.

On our operating expense, we had a loss in the quarter of $24 million in other expense, related to the disposition of a few small non-strategic businesses.In our tax provision, we recorded a net benefit in the quarter from valuation allowance reversal settling $25.3 million which we have backed out here.

While an adjusting item, the allowance reversal reflects fundamentally improved operating performance in the related markets. At the part of this slide you can see the after tax impacts for diluted share based adjustments.

The total was $0.04 per share the difference between $0.84 reported diluted EPS and $0.88 as adjusted.Slide 8 depicts similar adjustments to the full year. Again, for continuity and comparability this also brings in the impact of the restructuring charge from Q1.

Our amortization expense was $86 million and Q1 2019 restructuring charges were $32 million. Business dispositions over the course of the year resulted in a [$1] [ph] loss of $46 million.The impact of discrete items from tax was a benefit of $39 million. The results as adjusted full year diluted EPS was $1.93.

Note at our adjusted effective tax rate for the full year was 25.8% which is at the low end of our targeted 26% to 28% range. In 2020, our direct forecast for our normalized effective tax rate is unchanged at 26% to 28%.On Slide 9, we turn to cash flow for the full year. Cash from operations was $1.5 billion compared with $555 million a year ago.

The comparison which was $443 generated from working capital, compared with $431 million used in working capital in 2018. As we have pointed out on previous calls, working capital can be volatile from year-to-year.Due to the variation in timing of collections and payments evened by only a few days.

The timing percentage of both for late 2018 resulted in a benefit to us in 2019. Investing activities was $152 million in a year, reflecting our CapEx of a $199 million.

2018 includes the Acxiom acquisition.Our financing activities used $843 million, which was mainly $403 million for the repayment of long-term debt and $363 million for our common stock dividend. In 2018, proceeds from long-term debt issuance related to the Acxiom acquisitions.

Our net increase in cash was $519 million.Slide 10 is the current portion of our balance sheet. We ended the year with $1.2 billion in cash and equivalents. Our $500 million, 3.5% senior notes mature in October this year and is reflected under current liability.Slide 11 depicts the maturity schedules of our outstanding debt.

Total debt at yearend was $3.3 billion, which is a reduction of approximately $400 million from a year ago and $500 million since the Acxiom financing in October 2018.In summary on Slide 12, we are pleased with our performance in the quarter and the year.

Our teams executed very well, achieving strong revenue growth in spite of significant headwinds, while maintaining expense discipline. Our balance sheet continues to be strong and a meaningful source of value creation. As evidenced main actions announced by our Board today.

That leaves us well positioned entering 2020.With that, I’ll turn it back to Michael..

Thank you, Ellen. Well we were pleased to have achieved strong results for 2019, highlighted by organic revenue growth that once again, leads the sector. In each of the past five years, our growth rate has topped the industry average. This continued outperformance speaks to our talent, offerings and a differentiated holding company model.

For some time, we’ve seen our key role as supporting and nurturing strong agency brands, so that they can continue to produce great advertising for our clients.Simultaneously, we have never lost sight of the evolving landscape and a disruption taking place in marketing, media and communications.

To address these challenges, we’ve invested in key areas that create an IPG disposition for the future.These have included embedded digital expertise across the portfolio, leading edge media and data capabilities and open architecture solutions, all of which have helped us fill our future facing company.

Today, IPG is in a preeminent position to help brands reach consumers in a highly efficient and relevant way.Our company can unite data with creativity, to deliver advertising that is valued by consumers and valuable for brand. We can help business leaders find tomorrow’s growth through the combination of technology, craft and collaboration.

And we have created a modern holding company with a culture of integrity and transparency, where IPG sets the standard regarding conscience and respect for privacy, accountability and brand safety.As we have noted on prior calls, understanding data and its power is absolutely essential and it’s been the priority for us over many years, well before we acquired Acxiom.

Today’s IPG has the ability to help companies optimize the value of their own first-party data and the service of enhancing the customer experience and in helping our clients reach their business goals.Thanks for our long-term strategy, there are many more used cases with which we are increasingly involved ranging from power and ecommerce to the execution of omnichannel and media.

Sometimes the job is to help a company determine if the data they hold has been sourced in a way that meets the most rigorous, ethical and regular – regulatory standards.

Other times the challenge is to put first, second and third party data to work to drive new insights and innovation.To further enhance our media and data services and tech offerings, last quarter we launched Kinesso, a marketing technology company that leverages our data science skills to provide services that help marketers make media activations faster and more effective.

Kinesso was currently working in close partnership with Mediabrands, where there was the most adjacency and therefore, the great opportunity. Acxiom and Kinesso capabilities are being brought to bear on all our major clients and new business opportunities.We have coupled these strategic moves with strong financial management.

Consistent with recent years, during 2019, we demonstrated our ability to remain disciplined on cost and to deliver against our stated financial goals.

Our record is sustained long-term margin improvement is something we are very proud of.Our Board’s decision today to increase the dividend shows the continued commitment to return value to shareholders as well as confidence in our future prospects.

In addition, in the future, as we return our debt levels to more historical ratios, we will return to including share buybacks in our capital allocation programs.To provide a progress report on the key developments within our portfolio, let’s now turn to the performance of the agency level during the quarter.

At our integrated agency network, Mediabrands closed the year with a very strong performance. UM retains the relationship with GoPro and added Armor All, recently acquired by existing client Energizer.And it has just named UM, a best place to work in 2020. Initiative also posted a very good quarter and end of the year.

The agency saw a notable win with [indiscernible]. At CES, IPG Media Lab was again on the convention floor, identifying the most exciting and relevant innovations in products and providing guided experiences for our clients.FCB also grew in the quarter, driven by strong performance from its health operations.

FCB Health was named Global Healthcare Network of the Year for the third consecutive year and Area 23 named our Global Agency of the Year and Regional Agency of the Year at the 2019 New York Festivals Global Awards.McCann Worldgroup saw growth globally, as well as an important industry accolades, notably Global Agency of the Year awarded by Adweek and Network of the Year at the Epica Awards.

In addition, McCann’s work for Microsoft, featuring the first female and openly NFL Coach in Superbowl history, has been wildly herald it as one of the best of the broadcast topping the major rankings.MullenLowe Group closed the year with a number of new business wins, including being named the Global Agency Partner for Bayer in the US TaxAct and they gave us budget group of both headed to MullenLowe’s roster.

Collaborating with the group’s integrated media arm, MediaHub MullenLowe won media and created duties for Hawaiian Airlines media hub also added interest.After a year with IPG, Acxiom continues to expand its role to the clients in our agencies.

Today, our data and tech solutions have a seat at the table, and now adding value with both existing and new clients. As mentioned early in the fourth quarter, IPG launched Kinesso, a marketing intelligence engine powered by Acxiom.

Kinesso furthers IPG’s vision as brands’ trusted partner in data science by bringing together top data and technology talent with addressable media experts.Turning to CMG for the first time – for the fourth time in six years, Holmes Report and Weber Shandwick Global Agency of the Year, Weber Shandwick and its consultancy United Minds launched a new suite of expanded offerings to help companies access cultural risk within their organizations.

Golin had a trio business wins in the quarter including Lego, Twitter and Meso robotics. The agency also restructured leadership naming a new CEO from the [indiscernible].Octagon also had a solid quarter, announcing new business wins at several sporting conferences.

The agency is coming off a successful Superbowl where it represented three players in the game, many corporate clients and managed multiple activations in the Miami.All in at the agency level, IPG continues to have many of the industry’s most vibrant brands.

Last month, IPG Agencies and People swept the inaugural campaign US Agency of the Year Awards, taking home more on as in all other holding companies combined.

These awards which are unique and that they are judged by clients recognized leadership, creative excellence and business performance.We’ve also focused on creating a holding company model that is not just differentiated by our offerings but by our culture and our commitment to diversity and inclusion as well.

2019 IPG joined the Business Roundtable and redefining the purpose of a corporation. Setting a new standard at how a company should operate. As we continue to generate long-term value for stakeholders, through innovation, transparency and corporate responsibility.

In addition, our focus on ESG continues to be a part of our business priority.According to the management top 250 ranking, IPG ranked as one of the best managed companies of 2019 and was the only company from the advertising industry included in the lists.

Developed by the Drucker Institute and the Wall Street Journal, the ranking makes a corporate effectiveness through customer satisfaction, employee engagement, innovation, social responsibility and financial strength.

Additionally, IPG was named the top company to work for by LinkedIn and was the highest ranked company in the advertising sector on the list, which compile the most 50 most-sought after companies where people want to work and develop their careers.Our differentiated culture and strategy are our key reasons to our long-term performance have been strong.

Notably in our organic growth performance as this metric shows the foundational strength and competitiveness of our operations. It goes without saying that we remain focused on evolving the IPG offerings.

But our results demonstrate how well positioned we are for the future, with the company that remains highly relevant to marketers in an increasingly crowded and complex media environment.Looking forward, the tone of the business remain sound, new business activity is solid, the greatest strength of our portfolio positions us well to grow with our existing clients as well as participate in the Fitch opportunity as we see today.

And our hard work to create a modern highly collaborative company ensures that we have positioned to profit from opportunities that may come from outside of traditional arena going forward.In light of these factors, we believe that we should continue to see organic revenue growth and we are therefore targeting growth of 3% for 2020.

Along with this level of growth, we expect a further improved EBITA margin by an additional\ 20 basis points which would bring us to 14.2% in 2020.On top of our recent success, we feel that it remains significant potential for value creation and enhanced shareholder value over the long-term for our company.

As always, we thank our clients, our people who have been the foundation of our long-term success. And we look forward to updating on our progress, at our first quarter call.With that, I’ll open it up to questions. Thank you..

Thank you. We’ll now begin our question-and-answer session. [Operator Instructions] And our first question comes from Alexia Quadrani from J.P. Morgan. Your line is now open..

Hi, thank you. Thank you very much. A couple of questions.

First to get down like business was so strong across the Board in the quarter and I’m wondering if there was one particular area that really outperformed that surprised you guys in the upside? And then secondly, do you see the sort of momentum or maybe the healthy ad spend environment in general sort of continue into 2020 when you speak with your clients as a sense of optimism? And then I’ll add a one more follow-up? Thank you..

Thank you, Alexia. Well the fourth quarter obviously came in strong and frankly, it was across the Board, our integrated network came in strong as I mentioned Jack Morton and Octagon came in strong and obviously Mediabrands, Dater, Acxiom pretty much FCB Health and all our units performed well in the fourth quarter.

So that gave rise to our strong growth in the fourth quarter and notwithstanding the headwinds that we came in.I mean it sets the tone for 2020.

When we set a target of 3% for 2020, it still – we continue to have very difficult comps year-on-year, which is a good thing as we continue to set the pace for the industry, we still are setting goals on top of that.

And was Ellen indicated, we still have headwinds in the first half of 2020 so when we set a goal of 3% for the full year of 2020, that reflects cycling through those headwinds.So we continue to feel that tone of the business continues to be solid and the compensations with our clients indicate that we are offering our value proposition to our clients that moves the needle and obviously that bodes well with respect to our open architectural approach to meeting our clients’ needs.

Now of course there are wild cards out there, the coronavirus, you know, I know the question is how is that going to impact us?China is roughly 2% of our total revenue, it’s important to us, because our clients are there, when total revenue which – it’s is not that significant, but what remains to be seen is, what impact this will have on our suppliers and the chain – the supply chain and what impact that would have on US companies and other global companies.

But it’s – there still some wildcards out there with respect to 2020, but the tone continues to be solid as we move into certainly the first quarter..

And just a quick follow-up on the new business you mentioned and we see that from our data there is headwind still on the first half of the year.

So do you think when you look at the back half from what’s happened there been announced sort of today, can you find that you’re going to see some actual tailwinds or to be more neutral in terms of the wins you’ve had more recently or in the last fall?.

Yeah, thank you. If we – if we’re forecasting a 3% of organic growth, we hope we have some tailwind. But we do have some recent losses that were – the project business that you know all of that had with the Bank of America should tail off in the second part of the year.

But we have new business that win coming on stream that should offset that.So when we look at a target, we look at into – we take into consideration business wins, potential business wins that we have in the pipeline and as well as losses that we’ve realized.

So all of that get factored into both the organic growth target as well as the margin expansion..

Thank you very much..

Thank you..

Thank you. And our next question comes from Ben Swinburne from Morgan Stanley. Your line is now open..

Hey, good morning everyone.

Michael could you just give us an update on the Acxiom integration, I know obviously you have the asset now for some time, but just you had talked about revenue synergies or revenue opportunities I’m just wondering if you’re starting to see those actually flow into the numbers if the 3% has any sort of Acxiom bump, for a lack of a better phrase and how that’s all tying into Kinesso which you mentioned in your prepared remarks?And then just for – maybe for Ellen, in the fourth quarter you had – your incentive comp was down I think as a percent of revenue you got some nice leverage there, base day was up offsetting that can you just remind us sort of how bonus accrual process works and where that shows up in the P&L when you guys have a year strong as you did last year? Thanks..

Yeah, look – what I’ll go – what you’re seeing is a performance-based compensation. Some business units performed well, some didn’t deliver on their targets, and remember last year we exceeded our goals much higher than this year.

So the incentive comp is working exactly as it’s supposed to be working and that is – those units that outperformed were compensated, those that didn’t reflected it. So the incentive comp number that you see also in the fourth quarter, because we do it on a full year basis, we had a catch up and reflected in our final numbers.

So, the incentive comp worked exactly as we expected it to, with respect to pay for performance.As far as Acxiom goes, you know, I’ve said in the last call, we’re very happy with, first of all, how the integration is going.

The integration is pretty much done in terms of all the necessary physical legacy accounts and all the different comp plans and all the things that integration from mechanical point of view need to be done, but more importantly, the integration of Acxiom with IPG and our offerings and the seat at the table that Acxiom has with respect to our existing clients as well as a potential new business is real, and they have a seat at the table along, you know as part of Kinesso as well, with all business pitches and with our major clients.So as we indicated, that was one of the, you know, if you look at Acxiom versus the management of first-party data, okay, so that business continue to be solid.

As we said in the third quarter, it’s performing consistent with our business case in terms of acquisition.

I think we used like a 5% growth for that business, [technical difficulty] that it continues to perform well and we’re very happy with the first-party data management and the core business of Acxiom.On top of that with the formation of Kinesso, where we have putting together the adtech, the martech in the service business and obviously Acxiom provides the data backbone, but Kinesso is the technology part of that and then we have Cadreon in there which focus on the activation.

And we’re really pleased with how well that proposition is working both with respect to new business pitches and getting the attention of our existing client base.So of course in the 3% number for 2020, we continue to bake into a solid performance for Acxiom, solid performance with Kinesso what we said last time last year that we will start introducing new products through Kinesso in terms of the value-based offering, and we do have a pickup in part of the organic growth for 2020, which reflects the synergies between the Kinesso, the Acxiom and the Mediabrands in particular, because what we said was, we were going to focus on Mediabrands, initially because that’s the logical place for them to come together.

Then eventually we’ll roll it out to our creative agencies as well.So we’re very pleased with how Acxiom is performing. I think it’s very clear to us that it was the right decision for us to acquire Acxiom, and it gives us a competitive advantage when dealing with the full integrated offering in open architecture.

I mean – the stuff that Kinesso was doing with respect to focusing on high value audiences and the value that it creates, creates an immediate impression with clients, because they frankly haven’t seen that type of offering and we’re really pleased and excited about the future of that..

Thanks, Michael..

Thank you, Ben..

And our next question comes from Dan Solomon from BMO Capital Markets. Your line is now open..

Thanks, and good morning, everyone. Michael, one for you and one for Ellen. Over the last year so – I – there’s plenty I could ask you about Acxiom or Kinesso, but I think Ben covered a lot of it there. I want to ask maybe about R/GA. It’s never easy to see an industry legend.

He’s out of an agency, but the transition with Bob Greenberg, that’s played out there over the last year, that agency has been such a huge contributor to your growth over the last decade or so, I just love to hear it update on how that’s going?And then, Ellen, the Michael’s comments, I think in the press release reiterated the intention to get back to share buyback at some point.

I know you won’t give us a timeline for that. But just maybe remind us what are the milestones with your balance sheet that you’re watching, you’re executing on your cash flow generation for the company overall? What are the things you want to check the box on before you think about that again? Thanks..

Yeah, unfortunately I’ll take that one too. That’s a topic very close to my heart. Believe me, we have Ellen and the entire – all the finance team –.

And the board –.

And the board. We addressed this issue very carefully. In my remarks, I commented that our goal you know for 2020 is to continue to pay down debt. We have a $500 million tower there that we’ve looked to reposition and pay down in one form or another.

And frankly, when you get to the levels that we were previously at, in terms of maintaining our investment grade, we see given the cash flows that sometime next year we should be reaching those levels.So I think it would be reasonable to think that all things happening the way we want them to, we could be back in the market buying shares sometime next year, obviously that requires Board approval.

We’ll talk to rating agencies, which is very important to us and we’ll take into consideration the overall market conditions.But it’s certainly we believe strongly that one of the shareholder value creation opportunities for us is to continue to return cash to our investors up until Acxiom you know, we had a good mix between buybacks and dividends, we paid debt, we distributed $4.4 billion already in terms of that type of mix, and we’re very pleased with it.

So the sooner we can get back to the mix between dividend increases, as we saw we did this year and share buybacks, the better we believe is for our shareholders and we’ll continue to focus on that opportunity.Thank you for asking about R/GA. You know, we have a new CEO, Sean Lyons.

He’s beefed up his team, he’s repositioned some of the individuals within your organization. They’re looking at the go-to-market strategy on a global basis.

As any new CEO, Sean is taking a look at the entire organization and what markets they should be in, what offerings they have, particularly in terms of the consulting side of the business is a strong opportunity for them. They’re making investments in that and they’re sowing very good traction in that area.

So we continue to be excited about R/GA.Of course, Bob Greenberg is in fact a legend. There aren’t many legend, real true legends in the business. And he continues – he will be part of R/GA frankly forever.

But I’m really excited about what Sean and his team putting together in terms of the go-to-market strategy, leveraging the expertise and the traditional, strong base under the leadership of Bob Greenberg. So R/GA will continue to be a strong contributor to the overall performance of IPG..

Great. Thanks, Michael..

Thank you..

Thank you. And our next question comes from Tim Nollen, Macquire. Your line is now open..

Well, thanks. I actually do have another Acxiom question, if that’s okay. I just want to ask about with so much concern amongst the market these days about data privacy and Google’s changes to cookies, could you just give us a rundown of Acxiom’s work with first as well as third-party cookies.

I think there might be a misunderstanding out there about Acxiom is just a third-party data seller. I think that’s a vast – a very, you know, minority of the business.

I just wanted to – you know sort of in terms of doing your work that is very much more about the first-party data management? And then in terms of the actual sales, just if you could just give us a sense of how much is – of the importance comes from the first-party versus the third-party? Thanks..

Well that – do you want to call it sales, two-thirds, approximately two-thirds of Acxiom business is just managing first-party data, and we don’t say that light and just managing. Remember, their management of first-party data is best-in-class. Forrester gives it the five star rating. It’s well known in terms of their expertise in privacy.

They are a trusted manager of first-party data.

In fact, you know in the UK when they introduced GDPR, Acxiom played an important role, working with the regulators and executing those type of rules and regulations and inviting clients.So when we bought Acxiom, everyone misunderstood it to be, frankly the InfoBase, which is the third-party data management part of their offerings.

Everyone focused on that part of the business. But the true core business of Acxiom is first-party data. And this year, they’ve added new logos, their performance has been, as I said, very consistent with our business plan in terms of the acquisition. And that’s a core competency that frankly, you don’t see anywhere else.

And well you know we’re sort of scratching the surface in terms of having IPG access to the first-party data management clients that Acxiom has and vice versa. And we wanted to make sure that we roll this out on a very even basis without overwhelming the Acxiom people.So the core first-party data business is a gem and it’s well respected.

And frankly, now with the California privacy rules and more privacy rules throughout the United States, we see their expertise even more in demand and it just buttresses the fact that this will be a true game changer for us as we move forward.

So the first-party data is critical to the success of Acxiom.The third-party data, you know, puts together sources from all over the globe. And it distinguishes Acxiom, frankly from the competition. And one of the questions that’s come up is, you know, we don’t have to use the InfoBase.

Mediabrands has amped their own data source, which uses other third-party data. So it’s up to our clients to make sure which one is best suited for them.

But we certainly have all the tools and resources with respect to third-party data at our demand, if you will and it’s being used very effectively with Kinesso and Acxiom together in terms of the value-based proposition and they’re bringing to the client.And candidly, you know, one of the questions is, is this thing hunting? And the answer is, yes, it is.

You know, we had a number of client wins, particularly on the media side, where Kinesso working together with Mediabrands as well as Acxiom had made a difference in terms of the success of the pitch, plus the strength they have when they sit at a table with existing clients, I mean, this is the kind of stuff that clients are looking for.

And we have them sitting at the table and the role of our top to top and open architecture positioning.With respect to cookies, I know everyone’s writing about it. We’ve been worried about the cookies and the regulatory environment with respect to Google now for years, and we’re building up ways to work around it.

We’re highly confident that we’re working with Acxiom and Kinesso and all the other tools and resources that we have, that we will have a solution in place to address that issue. And we’re working closely with Google and the other providers to make sure that in fact happens.

But that was one of the purposes of us buying Acxiom as well.So I think we’re really well positioned to the changes in the environment that’s coming. And in fact, more than ever clients need the expertise that we bring to the table, which is why we’re so excited about not just Acxiom and Kinesso, but all of the offerings we have at IPG.

When you put together on a team in terms of an open architecture, the creative capability, the activation capability, the experiential, the PR, the media capabilities and the secret sauce that comes out of Kinesso in terms of value propositions, it’s a very compelling offering. And I think you see the results in our organic growth..

Yeah, that’s great. Thanks, Michael.

Can I slip in a quick follow-up, which is also on Acxiom about the cost side, just maybe give us a quick review of what cost lines it impacts? And sort of what is the cost to run and maintain and invest in Acxiom?.

Well, this one, I’ll let Ellen.

How’s that?.

Listen, Acxiom is a great business from both the top line and the bottom line that we’re very pleased at. Their business mix is a little bit – more heavy weighted and office and general than SG&A. But all that’s taken into account in the numbers you see on the forecast. But it’s a great business, both top and bottom line..

Yeah, incidentally, one of the other differences is actually Acxiom has a different incentive plan. And it’s a little different than we traditionally have in our business.

So that’s also reflected in some of the numbers in terms of whether the O&G is up, whether the incentive comp is a little different, because they do have a different incentive plans and cost profiles..

That’s great. Thanks very much..

Sure..

Thank you. And our next question comes from Michael Nathanson from MoffettNathanson. Your line is now open..

Hey, thank you. I have two, one on Acxiom and expecting one for Ellen.

So Michael, one of the concerns I think we heard early on with Acxiom was we got two-thirds of business managing people’s first-party data, that the non-IPG clients would tend to leave just because they’d be concerned about being in the same, let’s say marketing vertical as a competitor, maybe you know, an IPG client.

So are you seeing any type of, you know, client pushback from the Acxiom clients that are non-IPG clients? That’s one.And then for Ellen, you talk a bit about what that working capital swing implies, the big benefit you had.

Our deal terms, you know, improving a bit, does that imply a huge media spend in the fourth quarter, so anything kind of underlying the huge improvement in working capital for the quarter?.

Let me address the – we see zero conflict. That was part of our due diligence. When we did our due diligence on Acxiom, it’s a legitimate question. But if you look at financial services for example, which is one of the significant part of the Acxiom business, we don’t see any potential conflict, where clients are worried about that.

And in fact, sometimes it adds to their expertise, right? If you have – if you pretty much own a sector, and you had in the financial service sector where Acxiom manages first-party data for probably most of the top financial service companies, that’s an expertise that is hard to come by, if they’re trusted.

And in the due diligence we tested, not only with we test existing client relationships, they were onboarding a new client. And we tested to see how the new clients’ reaction to this. So the question of conflict with the Acxiom, first-party data I mean it’s totally an opportunity for us and not a conflict.

And, you know, working capital, I’ll let Ellen..

Thank you..

This is Ellen’s first call so I’ll let Ellen answer the working capital..

So working capital is something that we manage very closely, but it’s part of those. So, if you remember back in the 2018, we had a bigger use of working capital, and then 2019, it was a benefit.

And the days that you get the collections and disbursements around yearned can vary from time to time, and cause that volatility, but nothing has really changed in the underlying either way we manage working capital or the things that we’re seeing in terms..

Okay, thanks Ellen. Thanks Michael..

You know, let me just make another point. I know all the questions are on Acxiom and it should be, because Acxiom is providing a significant advantage to us in the competitive marketplace. But we have the rest of our business, okay. And the rest of our business is doing pretty well. I mean, we have leading creative agencies in the world.

We have each of our global networks for example, have different go-to-market strategies. When we put together our open architecture, we have the luxury of picking and choosing the best people in the business that have expertise in the client sector. And we can put them together on a seamless basis in open architecture.

And if you look at McCann, you look at FCB, you look at MullenLowe and you look at our Independents, the Hill Holidays, the Martin Agency, these are world-class creatives and agencies that bring to the table, the secret sauce that puts all of this together. But and yes, Acxiom is great.

And it’s you know it’s – when you look at it as a percentage of our overall business, you know, we don’t want to lose sight of our PR business and all the other businesses that we have within our portfolio.And candidly, the strength of our results this year has been, it’s not just the Acxiom.

It’s all of our businesses that had those kind of capabilities. And when you look at our go-to-market strategy using open architecture, I mean, it’s compelling when you put them all together in a room, and the ability for us to replace one versus the other.

I mean, this is real time, if one of the agencies is not performing well, these clients in the open architecture engagements say, we’re having a problem with XYZ in this country and we have the ability to pull an expertise under the open architecture model that is best-in-class. And we see it a lot in the healthcare side of the business.

We have the expertise with – between FCB Health and McCann Health, that are world class, and they can focus on specific diseases and MedEd, and all these capabilities, and we have the luxury of being able to bring all these resources together on an open architecture basis. And that’s what’s driving our results.

So I don’t want everyone to lose sight of that part of it.

Do I have time with one more question, Jeff?.

You have the next – our final question comes from Jason Bazinet from Citi. Your line is now open..

I hate to do this? But can I just go back and ask on the working capital side? I know you guys, you know had a big inflow in the fourth quarter. But sometimes you look back on the outflows for Q1 and it can be as low as $200 million, sometimes of $800 million.

And as we all try and figure out sort of the cadence of your debt reduction and the pivot towards buybacks.

Is there any color that you can provide in terms of expectations on working capital drag for the year?.

Yeah, I think this is normal. I mean, if you look back on a year-to-year basis, last year we were negative and we were strong in the first quarter. So it’s a timing and it’s all generated from our media business in particular. When we look at our cash flows, we look out on a full year basis.

When we look to paying down debt, it’s based on our expected cash flow on a full year basis, and where we’re going to end up at year end.

And I think it’s reasonable to assume that we will continue to pay debt significant amounts so that by yearend we’ll be in a strong position to take a hard look at getting back into the buybacks side of that just and maintaining a strong investment grade rating and getting all of our ratings to where they should be in terms of solid investment grade.

So we look at on a full year basis. You know, there were anomalies on quarter-to-quarter, and a lot of it has to do with the media side of the business, which is very robust for us so that’s a positive..

All right..

That’s how we manage it..

All right. Well look forward to the buybacks when they come..

Okay. Yes, I know. Okay well thank you very much. And again, we appreciate all the support and we look forward to our first quarter call. Thank you..

Thank you. And this concludes today’s conference. You may disconnect at this time..