Shub Mukherjee - Vice President-Investor Relations John D. Wren - President, Chief Executive Officer & Director Philip J. Angelastro - Chief Financial Officer & Executive Vice President.

Peter C. Stabler - Wells Fargo Securities LLC David Karnovsky - JPMorgan Securities LLC Julien Roch - Barclays Capital Securities Ltd. Craig Anthony Huber - Huber Research Partners LLC Tim Nollen - Macquarie Capital (USA), Inc. Peter Daniel Salmon - BMO Capital Markets (United States).

Good morning, ladies and gentlemen, and welcome to the Omnicom Fourth Quarter 2015 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will follow at that time. As a reminder, this conference call is being recorded.

At this time, I'd like to introduce you to your host for today's call, Vice President of Investor Relations, Shub Mukherjee. Please go ahead..

Good morning. Thank you for taking the time to listen to our fourth quarter 2015 earnings call. On the call with me today is John Wren, President and Chief Executive Officer, and Phil Angelastro, Chief Financial Officer. We hope everyone has had a chance to review our earnings release.

We've posted on our website at www.omnicomgroup.com this morning's press release along with the presentation which covers the information that we will review. This call is also being simulcast and will be archived on our website.

Before we start, I've been asked to remind everyone to read the forward-looking statements and other information that we have included at the end of our investor presentation.

And to point out that certain of the statements made today may constitute forward-looking statements and that these statements are our present expectations, and that actual events or results may differ materially.

I would also like to remind you that during the course of the call, we will discuss some non-GAAP measures in talking about Omnicom's performance. You can find a reconciliation of those measures to the nearest comparable GAAP measures in the presentation materials.

We're going to begin this morning's call with an overview of our business from John Wren. Then Phil Angelastro will review our financial results. And then we will open up the line for your questions..

Thank you, Shub. Good morning. I'm pleased to speak to you about our fourth quarter and the full year 2015 business results. As you will hear this morning, it was an excellent quarter for Omnicom. We recruited some of the best talent in our industry, continued to win significant new business, and made a couple of important agency acquisitions.

It was a terrific way to end the year. Our financial performance was also solid. We posted organic revenue growth of 4.8% in the fourth quarter resulting in 5.3% growth for the full year. We also achieved our margin and net income targets for the quarter and the full year despite significant strengthening of the U.S.

dollar and its impact on revenue and EBIT. FX reduced our revenue in the fourth quarter by $236 million or 5.6%. For the year, currency impacts reduced our revenue by just over $1 billion. As we enter 2016, FX will continue to be a headwind on our revenue and earnings, but hopefully at a less significant rate.

Phil will provide more details about the impact of FX later in the call. Turning now to organic growth by region, North America increased by 4.7%, reflecting very strong performances in our brand advertising and media businesses. This was offset by a public relations and specialty disciplines, both of which had difficult comps versus prior year.

In the fourth quarter of 2014, PR was up 9.9% and specialty was up 8.9%. The UK. was up 4.9% in the quarter and ended the year up 7.1%. Overall, growth in our Euro region was 3.5%.

In the Euro Markets, Germany was in the mid-single digits, and Spain and Italy also outperformed, while France and the Netherlands continued to weigh on the performance in the region. Outside the Euro countries, Russia, Sweden, and Turkey had above average results. Moving to Asia Pacific, organic growth was 8.6%.

We had solid growth across almost every market and double-digit growth in Australia, China, Indonesia, Korea, Thailand and Vietnam. Latin America was slightly positive for the quarter as strong performances in Mexico offset weaknesses in Brazil. Looking at our bottom line, EPS for the quarter was $1.35, up 3.8% versus the prior year.

For the year, EPS was up 4% to $4.41. Excluding the impact of currency, earnings per share would have been 8% higher for both the quarter and the year. For 2015, we generated over $1.6 billion free cash, an increase of 2% year-over-year and returned almost $1.2 billion to the shareholders through dividends and share repurchases.

Finally, our balance sheet and liquidity remained very strong. Overall, I'm very pleased with our performance for the quarter and the full year. Looking forward, the consistency and diversity of our operations and results combined with our very strong liquidity and balance sheet will allow us to capitalize on opportunities when they arise.

Turning now to some of the events of last year. As widely reported, 2015 had a significant number of media reviews. As I mentioned on previous calls, we were very selective in accepting only a handful of invitations to pursue new media business and declined a few others in order to stay focused on our existing clients.

And as I'm sure you have seen, we ended the year winning most of Procter & Gamble's North America media planning and buying business which was perhaps the most expensive and certainly the most closely watched review of 2015.

This win is a reflection of the talented people and the capabilities we have within Omnicom's Media Group and Annalect, our open-source data and analytics platform. You've heard me talk about the investments we've made in this area and they're paying off for our clients and our business.

We now have data and analytic experts or marketing scientists as we call them, embedded in many of our account teams. Clients increasingly recognize this alignment leads to better data informed strategies that are more effective in today's fluid and personalized marketing environment.

Overall we're very pleased with our results on these media reviews for the year as we came out a net winner. An independent third-party, (7:01), recently reported that we ranked ahead of our main holding company competitors and that includes us passing on some of the pictures I mentioned earlier. Since year-end Sony concluded its global review.

OMD adding substantially to its music business and entertainment business while trading off some gaming businesses, principally out of the UK. Looking ahead, there are also a few mid-sized opportunities and risks that are more typical of a normal review year. Whether the pace of 2015 continues into 2016, it's too early to say.

But we will not be surprised if the patterns continue. At the same time, our Media Group is in a process of developing a third global brand in addition to our successful OMD and PHD brands. You can expect our Media Group to announce the official launch of this third media brand in the next few weeks.

In the year ahead, they will be establishing network offices in key markets around the world leveraging other in-country media assets. This'll give us additional capacity to manage more client relationships as well as leverage the investments we've made in media capabilities across our businesses.

Turning to the topic of talent, we announced last quarter that Wendy Clark would become CEO of DDB North America. Wendy is highly respected in the marketing world and joins DDB from Coca-Cola where she was the president for sparkling brands and strategic marketing. We're excited to have her part of the DDB and Omnicom team.

We also had a number of other important recruits in the quarter from leading marketers. These senior talent additions are a testament to Omnicom's ability to attract top people from iconic brands. I mentioned at the beginning of the call that we had made two important acquisitions in the fourth quarter, one in Latin America and one in the UK.

In November, DDB Worldwide announced the acquisition of Grupo ABC, the largest independent advertising and marketing communications group in Brazil. Grupo ABC has 2,000 people in 30 locations with best-in-class advertising brands as well as offerings in public relations, CRM, digital, promotion and events.

Their blue-chip client roster includes names like Procter & Gamble, J&J, and Anheuser-Busch InBev. We have known the co-founders of Grupo ABC since we invested in DDB's operation in Brazil in 1997. So I'm especially pleased to officially welcome them back to the Omnicom family.

Importantly, ABC has outstanding creative talent that will strengthen our capabilities, not only in Brazil, but also around the world. And despite its current economic challenges, we're fully committed to the Brazilian market as one of the largest for our services.

The ABC acquisition closed at the end of January, and Omnicom's 2016 results will include 11 months of their operations. In December, BBDO Worldwide acquired a majority stake in Wednesday Agency Group.

With over 100 people in London and New York, Wednesday is a leading creative agency focused on fashion and luxury lifestyle bands, a specialized niche in our business. The firm is known for its creative excellence and passion which makes it a great fit for BBDO.

Grupo ABC and Wednesday are perfect examples of agencies founded by leading industry talent with strong creative cultures that also strengthen our geographic and service capability. Another barometer that we use to measure our success in cultivating the best talent is the performance of our work for clients in award shows.

Once again, our agencies and networks continue their tradition of being the most creatively awarded companies in the world. Let me mention just a few just to highlight them. Omnicom swept Campaign Magazine's prestigious 2015 Agency of the Year awards.

BBDO was awarded Agency Network of the Year; PHD, Media Network of the Year; and adam&eveDDB picked up Agency of the Year. BBDO topped The Gunn Report for the tenth year in a row.

At the campaign Asia-Pacific Agency of the Year awards, TBWA and DDB won Creative Agencies of the Year in Japan, Malaysia, New Zealand, Southeast Asia, Philippines and Indonesia. There were many others throughout our disciplines and I want to congratulate all of our people in agencies for their outstanding work.

Operationally, we continue to drive greater efficiencies throughout our business in 2015. We are constantly challenging our people to find ways to manage their costs agency-by-agency.

And on a regional and global basis, we're leveraging our scale in areas such as information technology, real estate, back office services and purchasing to deliver further cost improvements.

We believe that these and other initiatives will allow Omnicom to deliver a 30 basis point margin improvement for the full year 2016 or 13.7% EBITA versus 13.4% for this past year.

Before I hand the call over to Phil, I want to touch on the importance of innovation and collaboration in our business as we continue moving forward towards more interconnected activities. In January, I attended the Consumer Electronics Show in Las Vegas.

I'm always amazed at the pace of technological change, from virtual-reality which has now reached the tipping point, to the Internet-of-Things which is resulting in automation and interconnection of homes, cars, personal devices.

Many of these innovations were still in the concept stage just a few years ago and are examples of technologies that will create new opportunities for marketers.

For Omnicom and our agencies, it is critical to continue and hire and develop talent and build capabilities to keep pace with these changes, as well as to align our businesses and people in a manner that allows us to best service our clients. Partnerships will also help drive our success.

Partnerships between our clients and agencies, across our different types of agencies and partnerships with companies that complement our capabilities. From shopper marketing to PR, to media, to advertising, to CRM, our agencies are increasingly working together seamlessly on behalf of our clients.

They're also collaborating with tech companies, entertainment companies, fashion and design firms to create the innovative award winning work that they're known for. We believe we are the best-in-class in doing this, and our 2015 performance demonstrated it.

Omnicom continued to be an industry leader, strengthening our talent, embracing new technologies and collaborating to deliver outstanding creative work for our clients and their brands.

I want to recognize and thank the 74,000 people at our agencies for their world-class integrated campaigns, outstanding new business wins, and all the great work that enabled us to deliver these results. I will now turn the call over to Phil for a closer look at the fourth quarter and the full year results.

Phil?.

Thank you, John, and good morning. During 2015, our businesses continued to focus on meeting the needs of their clients and winning new business, as well as enhancing efficiencies within their organizations to improve their operational profitability.

For the fourth quarter, our organic revenue growth of $200 million or 4.8% once again exceeded our expectations, and capped the year where organic growth was 5.3%. The U.S.

continued its strong performance to close out the year with Q4 organic growth of almost 4%, coming off a particularly difficult comp versus last year's Q4 where organic growth was 9%. Internationally, we again experienced solid growth in all of our regions with strong country performance in the UK.

and Canada and across most of our major Asia Pacific markets. Continental Europe was positive, driven by Germany and Spain, while revenues in the Netherlands and France declined.

While we continue to have solid organic revenue growth overall, in the fourth quarter, exchange rates continued to create a considerable headwind on our international revenue as almost all foreign currencies again weakened versus the dollar in Q4.

The negative FX impact of 5.6% in Q4 was somewhat lower as a percentage than the previous three quarters of 2015, as the decline in currencies began in the fourth quarter of 2014.

Revenue for the quarter after considering a small reduction in revenue from the impact of our dispositions, net of acquisitions, was $4.15 billion, down 1% versus Q4 last year. We will go over our revenue growth in detail in a few minutes. Now we'll move to EBITA and operating income.

EBITA for the fourth quarter of 2015 decreased $5.4 million to $604 million versus $609 million in Q4 of last year. As we've discussed previously, the vast majority of our expenses are denominated in the same local currency as their revenue, which operationally serves as a natural hedge.

However, in several of our higher-margin markets, including Australia, Canada and Brazil, FX had a relatively larger negative impact this quarter than in previous quarters this year. However, through our ongoing initiatives, to increase efficiencies throughout the organization, we've enhanced the flexibility in our cost structure.

These efforts have allowed us to offset the FX headwind on EBITA. As a result, the EBITA margin for the fourth quarter of 2015 was 14.5% which was unchanged versus Q4 of last year. Operating income decreased by $3.9 million to $575.5 million for the quarter, which was also negatively impacted by FX.

Operating margin of 13.9% was up slightly compared to 13.8% in Q4 of 2014. Turning now to page two of the presentation. Net interest expense for the quarter was $36.8 million, up $6.8 million versus the fourth quarter of 2014, and up $900,000 from the third quarter of this year.

Versus Q4 of last year, the increase in net interest expense related to an increase in rates on our floating rate debt and the termination in Q4 of the floating interest rate swaps on our 2020 senior notes and a portion of the swaps on our 2022 senior notes.

This brought our ratio of fixed rate to floating rate debt from 50%-50% to 60% fixed, and 40% floating at year end. The gain that we realized on the termination of the swaps will be amortized over the life of the debt. The amortization of that gain in Q4 of 2015 was lower than the benefit recorded from the swaps in Q4 of 2014.

Additionally, interest income on our cash balances held internationally decreased year-over-year by approximately $1.1 million due to negative FX. On a constant currency basis interest income was up slightly year-over-year.

And versus Q3 of 2015, the increase in net interest expense was the result of a decrease in the interest benefit from terminating our floating interest rate swaps in Q4, partially offset by an increase in interest income from our international treasury centers resulting from our higher than average cash balances in the fourth quarter as compared to the third quarter.

Our quarterly tax rate of 32.8% was in line with the full year tax rate of 2015 and consistent with our projections for the year. Earnings from our affiliates of $2.2 million is down versus last year, which was related to a reduction in the contribution of certain international affiliates, primarily as a result of the negative impact of FX.

On a constant dollar basis, our earnings from affiliates was flat.

The allocation of earnings to the minority shareholders in our less than fully owned subsidiaries decreased nearly $11 million to $32.6 million, while negative FX was the primary reason for the decrease since a large number of our less than fully owned subsidiaries are located outside the U.S.

The decrease was also due to the purchase at the end of the third quarter of one of our larger non-controlling interests of one of our agencies in Latin America. As a result, net income for the quarter was $332 million. That's up $2.1 million or a little less than 1% versus our Q4 results last year.

Turning to slide three, the remaining net income available for common shareholders for the quarter, after allocation of $3.3 million of net income to participating securities, which for us was a dividend paying unvested restricted shares held by our employees, was $328.3 million. up slightly from last year.

And our diluted share count for the quarter was $243.8 million, that's down 2.4% versus last year which has been driven by our share buyback activity over the last 12 months. The resulting diluted EPS for the quarter was $1.35 per share. an increase of $0.05 or 3.8% versus Q4 of 2014.

On slide four through six, we provide the summary P&L, EPS and other information for fiscal 2015. The brief highlights are as follows. Our full year 2015 organic revenue growth was 5.3%, while the FX headwind decreased revenue by 6.6%.

Net of the impact of this year's acquisitions and dispositions which added $15 million, our total revenue was $15.1 billion down 1.2% versus last year. And as was the case with our Q4 results, FX negatively impacted our full year EBITA and margins.

EBITA decreased 1.1% to $2.03 billion, and FX negatively impacted our margin by about 20 basis points for the year, with almost all of the impact coming in the second half of the year. As a result of our ongoing efficiency efforts, we're able to maintain our full year EBITA margin of 13.4% consistent with last year.

Turning to taxes on page five, our effective tax rate for 2015 of 32.8% was in line with our expectations for the year. At this point, we expect our 2016 tax rate to be fairly consistent with the 2015 rate. And on page six, you can see our 2015 diluted EPS was $4.41 per share which is up $0.17 or 4% versus 2014's reported amount of $4.24 per share.

On slide seven, we turn to the discussion of our revenue performance. First, as I mentioned, we saw positive organic growth across all our regions this quarter.

Fourth quarter's growth was driven by the performance of our traditional advertising and media disciplines, all our other disciplines a mixed performance across the regions which I'll discuss later. FX continues to be a significant drag on our revenues. On a year-over-year basis, in the fourth quarter, once again the U.S.

dollar strengthened against every one of our major foreign currencies. This decreased our revenue for the quarter by $236 million or 5.6%.

While the decline in the value of the euro accounted for over one-third of the overall FX reduction, we also saw significant declines related to the Australian and Canadian dollars, the Brazilian real and the British pound as well as the Russian ruble.

As of the end of the fourth quarter, we've now seen five consecutive quarters of large negative movements in FX due to currencies weakening against the U.S. dollar.

As we enter into 2016, based on our most recent projections and assuming currencies stay where they currently are, FX could negatively impact our revenues by approximately 3% during the first quarter of 2016 and 2% for the full year 2016. Revenue from acquisitions, net of dispositions, slightly decreased revenue by $6 million.

While we've added businesses both domestically and internationally over the past year, we're continually evaluating our businesses and making strategic dispositions as deemed appropriate. And finally, organic growth was $200 million or 4.8% this quarter.

We had another quarter with solid organic growth across all of our major regions with the notable country exceptions being France and the Netherlands which struggled in 2015, and Brazil which continues to face an uncertain economic outlook. Looking at our disciplines, our traditional media and advertising businesses led the way.

The performance of the businesses in our CRM discipline was mixed, with our field marketing and events businesses having a challenging quarter.

And although our specialty and public relations disciplines were down organically for the quarter, both of them faced difficult comparatives to last year's Q4 performance when they each achieved organic growth in excess of 8%.

Overall, our below-the-line disciplines did not achieve as much of the year end client projects spend as they did in Q4 of 2014. On slides eight and nine, we present our quarterly regional mix of business.

During the quarter, split of revenue was 59% from North America, 10% from the UK., 17% for the rest of Europe, 11% for Asia Pacific, with the remainder coming from our Latin America and our Africa and Middle East regions. For the full year, the split was much the same as in the fourth quarter. In North America, both the U.S.

and Canada contributed to another solid performance, with organic revenue growth of 4.7% for the quarter and 5.4% for the full year. Internationally, our UK. agencies continued to perform well across our businesses. The rest of Europe was up 3.5% for the quarter and 3.7% for the year led by Germany and Spain as well as Italy.

France was still negative organically and Netherlands continues to lag behind our other major markets in Europe.

Asia Pacific was up 8.6% in the quarter and 7.9% for the year with the major markets again performing well, including China, South Korea, Thailand and Australia with the exception being Hong Kong which was up slightly in the quarter, but down for the year.

In Latin America, our Brazilian agencies had another negative quarter in the face of uncertain economic conditions. But we had strong performance from our agencies elsewhere in the region, in particular Mexico. This resulted in a slightly positive organic growth for the region in Q4, but the region as a whole was negative for the year.

And finally our Africa-Middle East region, although relatively small, was up 5% in the quarter driven by a strong performance in South Africa, and the region was up 6.8% for the year. Slide 10 shows our mix of business. For the quarter, they split 53% advertising services and 47% marketing services with the full year split being similar.

As for their performance, our advertising discipline was up 12.6% in the quarter, 9.3% for the year, driven by the outstanding performance of our media businesses across geographies. CRM was down 1.5% in Q4 and for the year had positive growth of 1.9%. Our field marketing and events businesses had a challenging quarter.

Most businesses in the category were up on a full year basis versus 2014 with the exceptions being field marketing and sales promotion which were down for the year. PR was down 6.9% in the quarter and was our only discipline that was down a bit for the full-year, was down by 1.4%.

Fourth quarter decrease was due to difficult comp compared to Q4 of 2014 when the PR discipline posted growth of 8.5%. Specialty communications was down 5.9% in Q4, but up 2.2% for the year.

Fourth quarter decrease was due to a difficult comp compared to Q4 of 2014 when the specialty discipline driven by our full service healthcare businesses posted growth of 9.4%. Overall, as I said previously, our below-the-line disciplines did not capture as much year-end client spend as they did in Q4 of 2014.

On slide 11, we present our mix of business by industry sector. In comparing the full year revenue for 2015 to 2014, there was minimal change in the mix of our client revenue by industry. Turning to our cash flow performance on slide 12, in 2015, we generated over $1.6 billion of free cash flow excluding changes in working capital.

As for our primary uses of cash on slide 13, dividends paid to our common shareholders were $497 million, up when compared to last year. Dividends paid to our non-controlling interest shareholders totaled $129 million. Capital expenditures for the year were $203 million.

Acquisitions including earn-out payments, net of the proceeds received from the sale of investments, totaled $150 million. And stock repurchases net of the proceeds received from stock issuances under our employee share plans totaled $680 million. As a result, we outspent our free cash flow by just under $44 million for the year.

Turning to slide 14, focusing first on our capital structure, our total debt of about $4.6 billion is up about $20 million from this time last year. The increase is primarily due to the change in the fair value of our debt carrying value related to the in-the-money amount of our interest rate swaps at year end 2015.

Our net debt position at the end of the quarter improved to $1.95 billion compared to $2.16 billion at year end 2014.

The decrease in our net debt of $209 million over the past 12 months using period end spot rates was driven primarily by positive contribution from operating capital of about $550 million, partially offset by the negative impact of FX translation on our cash balances over the last 12 months, or approximately $265 million, and the use of cash in excess of our free cash flow of $44 million as well as some other smaller items.

As a result, our ratios were strong. Our total debt to EBITDA ratio was 2.1 times. Our net debt to EBITDA ratio was 0.9 times, and our interest coverage ratio was 12.2 times. Turning to slide 15, we continue to successfully manage and build the company through a combination of strategic acquisition and well-focused internal development initiatives.

For the last 12 months, our return on invested capital increased to 21.5%, and our return on equity increased to 41.3%. And finally on slide 16, we track our cumulative return of cash to shareholders since 2004. The line on the top of the chart shows our cumulative net income from 2004 through year-end which totaled $11.1 billion.

The bar show the cumulative return of cash to shareholders, including both dividends and net share repurchases, the sum of which during the same period totaled $12 billion for a cumulative payout ratio of 108%. And that concludes our prepared remarks.

Please note that we've included a number of other supplemental slides in the presentation materials for your review. But at this point, we're going to ask the operator to open the call for questions. Thank you..

Thank you. Your first question comes from the line of Peter Stabler from Wells Fargo. Please go ahead..

could you let us know what Accuen's contribution in the quarter was? Thanks so much..

Thanks, Peter. Below the line, these specialty service businesses that you're referring to are the most numerous within the portfolio of Omnicom. We're constantly looking at that portfolio to find out, gee, are they growing and are they growing in a particular market at a rate that we're satisfied with. And it's a constant evaluation.

It's a constant review done by the people here at Omnicom corporate. It's also done by the people at DAS. And unlike most of the advertising and media assignments we have, they tend to be projects.

They tend to be projects with existing clients who repeat a certain amount of spending every single year, but it's not as precise and it's not as predictable.

So this year, we were particularly happy with our healthcare companies' growth that they achieved, but also the businesses that they've won, well, particularly critical in a very positive way of some of our PR operations. Some have advanced a lot further than others, and we've been spending the last several months getting everybody up to par.

There's no easy answer. It's a constant battle. But I'd say on balance today, we're pretty comfortable with the portfolio in which we're going into next year with or into this year with..

And just add to that, your second question, Peter, the contribution in terms of growth from Accuen this quarter was about $45 million..

Thanks so much..

Your next question comes from the line of Alexia Quadrani from JPMorgan. Please go ahead..

Hi. Good morning, guys. David Karnovsky on for Alexia. Can you provide a bit more color on how clients are looking at spending for this year and maybe how that translates into organic growth? We've heard good growth domestically in Q4 has continued into Q1 but don't really have a lot of insight yet into full-year spending plans.

And then just how much, if at all, do you think the weak financial markets might influence those spending decisions?.

Well, Phil and I can share this. The world is, as it seems to be reported every single day, the U.S. continues to be strong and the markets that we reported growth are okay, but there are a lot of transition spots and weaker spots around the world. China is in a transition, although its business for us has been good.

Brazil, we're expecting weakness and we're expecting the weakness to continue throughout 2016, even despite the Summer Olympics. So when we take a look at organic growth based upon what we've seen, we think 2016 can be very similar to what we experienced in 2015.

And if we had to throw a number at it, we'd say it's 3% to 3.5% based upon what we know now..

Yeah. I think our expectations heading into the year are somewhat similar. We're certainly not sitting here today as very early in the year, very early in February committing to or I guess implying that the overall growth for 2015 will be the same. I think our expectations are the same sitting here in February of 3% to 3.5% organic.

I think for us, we haven't seen a correlation between the discussions our agencies have been having with their clients with respect to what our clients' goals and strategies are in 2016 and what their spending might be at correlation to what's going on in the financial markets.

I think the themes John touched on more broadly as far as the global economic situation and some pockets of uncertainty, those we expect will correlate a little more directly with what our clients ultimately decide to do. From a spending perspective, less so what's going on specifically in the financial markets over the last month or so.

And I think time will tell whether the current volatility is a forecast of something that's going to impact the economy more broadly..

Okay. Great. And then can you provide an update on capital returns? I think some investors are maybe surprised at the lack of a dividend increase this past week. Anything we should read into that? And then maybe just your updated thoughts on priority for dividend buyback in general? Thanks..

Phil, do you want to take it?.

Yeah. Sure. I think from our perspective, we don't expect any change in our capital allocation strategy. I think the dividend as we've said before is a board matter. It's certainly on the board's agenda.

I think our expectation is they'll deal with it sometime in the near future at one of the next board meetings, in that their agenda has been a little crowded with plenty of things as it always is, but we expect they'll get back to that evaluation and consideration as it relates specifically to the dividend.

As far as the rest of our strategy, I think our perspective is going into 2016 more of the same. To the extent we can find acquisitions that fit strategically, culturally and pricing makes sense, we're going to continue to look to do more acquisitions rather than less. We expect that activity will pick up.

We closed the Grupo ABC deal in the first quarter of 2016. And we've got a pipeline that we continue to pursue. To the extent deals happen, we'll have less free cash to use to buy back shares. To the extent the deals don't happen, we'll continue to deploy the cash through share buybacks as we have pretty consistently..

Okay. Great. Thanks.

Your next question comes from the line of Julien Roch from Barclays. Please go ahead..

Yes. Hi, there. Thank you for taking the questions. The first one is on the menu reviews from last year, now that we've gone through all of them.

John, maybe an assessment of the overall impact of the industry, was it led by pricing, and therefore, will it have a deflationary impact on overall industry growth in 2016? Or was it done on other consideration and have little impact? That's the first question.

The second one is again on the review but on your remark at the beginning of the call that you said that you thought that we potentially might see a similar level, which I guess the market will take negatively if we start to have massive review every year. So if you could give us some idea why you're thinking that that's going to be the case.

These are my two questions. Thank you..

Okay, Julien.

Our experience was that it's a new environment and with digital being a very much important component of what happens from a media perspective, and also the utilization of data and analytics of making decisions because of all the channels that are out there, so I'd say on balance, in the reviews we've participated in, pricing was not primary.

It was really those capabilities, and whether or not the service provider, in this case us, was the correct partner moving into this next period which is very, very – it's interesting, it's exciting, it's changing very rapidly. And if you don't have the right capabilities, it's very difficult to catch up in a short period of time.

So that's what our clients, I believe, were looking at. I also believe that there are probably some, especially on our wins who actually confirmed that separately and independently in the press. So that's a very strong feeling that I have. So I don't see pricing erosion, certainly not in 2015.

My comments in my prepared remarks were such that we have not been informed or been notified of any opportunities or risks, other than a few minor accounts that are currently in review, and we're hopeful that we see a more normal year in 2016 where there aren't as many large media accounts put up for consideration.

But at this point, preparing for that would be foolish. We're much better off being prepared to face the similar type of level. So until it's confirmed, I'd ask the market not to read too much into my comment. But we certainly stand ready..

Yeah. I think we go into 2016 trying to be prepared for what we wouldn't be surprised if more reviews occur than maybe the pace of reviews two years and prior, I don't think we're sitting here saying it's an expectation or we've got some information directly from either clients or potential targets that would lead us to conclude that it's imminent.

But certainly, we want to prepare ourselves and our businesses to be ready to compete on that basis.

And overall the more and more complexity there is in the landscape – media landscape, the more clients are looking for a provider with what we think we've now demonstrated in some of the wins that we've had, we've got the capabilities, we've got the right people, we've made the right investments.

And the more complexity, we think the better off it's ultimately going to be for our business..

Right. Just one more comment, Julien. The clients that I would categorize as blue-chip clients, we're out there looking for the right partner. There is always clients out there looking for the cheapest price, but you'll find that their business goes into reviews quite often..

Okay. Very clear. And then maybe a very quick one.

Impact of M&A in 2016 on revenue based on the current deal you have closed?.

I think probably right now, we're looking at about $100 million of net acquisition growth, or acquisition growth net of dispositions based on everything we've completed to date. We're going to continue to look to find and close more deals as I said before.

And we're always constantly reevaluating our portfolio and making sure we've got the right business mix and the right strategic assets. And if we don't, we're going to look to prune the portfolio of businesses that either aren't on strategy or are not performing to the point where we think that's appropriate to make a disposition..

Okay. Great. Very clear. Thank you very much..

Your next question comes from the line Craig Huber from Huber Research. Please go ahead..

Yes. Good morning. It's a lot of concern out there in recent quarters from investors that guys, like Google and Facebook, take much of your business, media side in particular.

Could you just comment on that? And this concern seems to come and go over the years, but what's your latest thoughts on that? Why is it not a concern I assume you'll say?.

Well, our relationships with both of those companies are very strong and they've only improved during 2015. We view them really as a partner, a neutral partner maybe, but they've assisted us in many things. They're not looking to provide many of the services that we provide our clients and we learned to work very well with them in most instances.

I think clients are looking to us to be the neutral partner in evaluating whether or not we use the media that you'd find at Google versus the approach that you'd take at Facebook, and I think that's really – it's been a question in the past as to whether they were going to be our competitors or going to be an effective media way for us to reach consumers.

And I think right today, I'd say it's settling in on them being a partner and clients increasingly depending upon us to do their planning and to do their buying off of their – whatever platforms are available..

Yeah. We certainly see our clients looking to us to help them make the evaluation across the various media options that they have. Google and Facebook are certainly huge players in the digital space, so they're part of any and every evaluation that we do on behalf of our clients.

But I don't think our clients have reached a comfort level or reach a comfort level where they're just willing to turn over a big part of their budget to Google and Facebook directly and feel comfortable that it's going to fit into their overall strategy in a consistent way..

In recent conversations I've had with one of the two, but it's true both of them, is an early tell I think is to watch their employment numbers.

How many people are Google hiring? How many people are Facebook hiring? And what type of people are they hiring? I think in earlier years, there was confusion as to whether they wanted to hire marketers or engineers.

I have a very strong impression that as they look at their businesses, they're hiring more and more engineers every day than they are marketers who could potentially compete with us in any way..

Two more quick questions, please. For the fourth quarter, what was your net new business wins? Your future (51:27) goal is usually about $1 billion there. And then also, could you speak quickly about China? Isn't it about 2% of your revenues, I believe. And you said it was up 10%-plus.

What's your outlook for growth in that market? It comes up a lot with investors. Thank you..

Well, I'll take the new business one. So the overall number was probably just shy of $2 billion, but that included a large number on the P&G front.

So I think the number from our perspective, although we don't place a great deal of weight on a billings number, a new business billings number, was probably in the neighborhood of what we would typically expect our businesses deliver on a typical quarter..

And with respect to China, the Chinese market is absolutely changing, but it's still growing at a really decent pace. And our market share in China, we have a lot of headroom.

We have a lot of opportunities to win new business, both other multinational companies doing business in China, Chinese multinational companies which are looking to develop their markets in China and they then go outside of China, and in the major markets, the more successful domestic companies.

So it's interesting conversation when we discuss what's happening with China and what's the impact of growing 7% in a year versus 5.6% a year. But we still have a lot of work and a lot of opportunity just in gaining market share in that market..

Yeah, I think overall, given what's going on comes down to your individual client base. Our clients, the majority of our clients, certainly in our agencies in China, are large multinationals who are trying to grow their business in that market.

And we think they tend to be a little bit more stable, and that's just a little bit of a difference in terms of the mix of our business versus some others. And I think overall, it's probably not the worst time to be under-indexed in the Chinese market.

Our focus has always been on the quality of the agencies that we have in that marketplace, and agencies that can meet the requirements of our clients in a satisfactory way and it hasn't necessarily been on quantity..

Great. Thank you..

Your next question comes from the line of Tim Nollen from Macquarie. Please go ahead..

Hi. Thanks. And I'm pleasantly surprised my question has lasted this long. I wanted to ask about margin expansion in 2016. Very pleased to hear, John, you were talking about 30 basis points of upside. I would assume your foreign exchange numbers of minus 2% negative impact are included in that.

I just wonder if you could put a little bit more color onto what goes into the thinking there as you've been basically flat for about four years now.

I know you've been investing in Annalect and so on and it's clearly been generating some returns for example with the P&G win, but what other color could you give on the margin expansion outlook regarding revenues, and also regarding costs? Thanks..

First of all, I think the 13.7% based upon what I know today is inclusive of the impact of foreign exchange as we know it today.

If we repeated – if we had another $1 billion impact because central banks went crazy, we've talked to you about it during the year, but based upon everything we know and everything that we've told you this morning is that those are our expectations.

The reason for it is – Phil can chime in -- the revenue growth has been solid and has continued to be solid, but we've been able to take a lot of actions in a lot of programs which take a long time to get started, but once started, we are starting to realize the benefits of the things like real estate. I don't know what else you want to add, Phil..

Yeah. Certainly, we're focused on real estate, technology, back-office administrative costs, and a few other areas. I think John's right, they do take a while to get started. But the goal for us is to make sure that the efficiencies that we implement are sustainable.

And that's what we've been pursuing for the last while here, and we're going to continue to pursue it in the future. And although we think we're pretty efficient in all of our operations overall, we know we're going to continue to try and improve in the area of efficiency and effectiveness as it relates to the cost base. And that's certainly the plan.

On the FX front, just to echo what John said, a typical year for us we would expect is plus or minus 1% or 2% in terms of FX impact. And if things continue in that zone, we're certainly comfortable with our current expectations.

If things go back beyond that to where we were this year, although it depends on where the FX negatives occur, I think we'll reevaluate it as the changes occur..

But I wouldn't have said it, Tim, if I didn't believe it..

Can I ask a follow-on which is related, and I understand what you are saying about FX obviously. You mentioned earlier in the comments, John, about you've been recruiting some of the best talent.

Just wonder, have you found it easier going or tougher going on recruiting and on wages, given some of your competitors may not be hiring as aggressively if that's true, but on the flip side I would imagine you've got intensifying competition from the Silicon Valley for talent? What can you say about recruiting and pricing?.

Well, our recruiting efforts have been very specific based upon our company needs and requirements, and we've had people on our list for a long time. And many of my network CEOs, who you don't have the occasion to speak to on a regular basis, have identified these folks have been working very, very hard.

Now there's no question that changes in the laws in terms of what people can make at the bottom end of the equation, and as you get more and more of these analytical type of people, I'd say that maybe less creative, more – highly mass oriented type of folks, you are competing with some other companies that we traditionally haven't competed with.

But so far we've been able to obtain and acquire and have joined Omnicom the people that we've looked for now..

Yeah, certainly more of an ongoing component of the business day to day as opposed to when we get a win, we then start thinking about where do we find these people or we have a need. The businesses start thinking about where do we find these people. I think it's much more embedded in the ongoing business operations..

And finally, this is an intangible but I believe it really, really counts, and I always have, culture counts. When somebody gets down to making a decision as to where they want to spend their time, the culture of the organization they're moving into is a contributor as well as pay to amazing (1:00:07) decisions people make. So, so far so good.

We're happy. We can always use more talented people. Those some extraordinary ones, you can drop me an email, but that's what we're doing..

Great. Thanks very much..

Operator, I think we have time for one more call..

Okay. That question comes from the line of Dan Salmon from BMO Capital Markets. Please go ahead..

Hi. Good morning, everyone. I'll keep it to one as I know the opening bell is ringing here.

John, as you start the third media-buying agency, how are you doing it differently than when if you might have done that say 10 years ago? I'm sure there's lots of industry slang we could use like digital native and things like that, but I'm thinking a little bit more tactically, smaller office footprint, different board chart.

But any insights you can offer on how it will be differentiated? I'd appreciate..

Sure. First, it will be different than if I was doing this in 1996. We have quite a number of hubs out there where we have a lot of talented people that that's what we're going to build around.

There are key very important markets where there'll be standalone companies under this new brand, but there will be many other markets that the service level required by the particular client is not the same. And so that becomes an important factor.

Plus, what's different today is our platforms for data and analytics are much easier to leverage over geographies than they were in the past. So that's what we'll be doing. And we'll be leveraging this next network based upon those key markets, and the various capabilities that are required to fully service clients in those markets.

So I'd say unlike in OMD you'd find more hubs, other than some of our competitors, you wouldn't have an office say in every single country because we would be able to fulfill our clients' requirements through different means..

Great. Thank you..

You're welcome.

Well, thanks everybody for....

Yeah, thanks for taking the time to join the call. We know it's a busy earnings morning..

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect..