The Interpublic Group of Companies, Inc.

Good morning and welcome to the Interpublic Group first quarter 2020 conference call. All parties are in a listen-only mode until the question and answer portion. At that time, if you would like to ask a question, you may press star 1. This conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Mr. Jerry Lushney, Senior Vice President of Investor Relations. Sir, you may go ahead.

Thank you. Good morning. Thank you all for joining us this morning. We hope you are well. This morning we are joined by Michael Roth and Ellen Johnson. Keeping with social distancing, we are each in different locations, so we would ask you to please bear with us should there be any minor delays. As usual, we have posted our earnings release and our slide presentation on our website, interpublic.com. We will begin our call with prepared remarks to be followed by a Q&A and plan to conclude before market open at 9.30 a.m. Eastern. During this call, we will refer to forward-looking statements about our company. These are subject to the uncertainties in the cautionary statement that is included in our earnings release and the slide presentation, and further detailed in our 10Q and other filings with the SEC. These forward-looking statements may be affected by risks related to the spread and impact of the COVID-19 pandemic. 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.

Michael Roth Thank you, Jerry, and thank you all for joining us this morning. Above all, we hope that you your families, and those you hold dear are safe and well. Our thoughts are with all of those who have been affected by this pandemic, with frontline health workers and others who provide essential services, and with our colleagues around the world. These are stressful times for society as a whole, for the global economy, and of course for business, which means the appropriate focus on this call is on updating you on where we stand in dealing with and adjusting to the new realities that are being driven by this health crisis. Our top priority has been and continues to be the safety, health, and well-being of our employees, clients, and other key partners. Over 95% of our people globally are working from home, where they are safest against risk to their health. That has been the case for a bit over a month now. Our associates have made an extraordinary transition in their professional as well as personal lives. We're fortunate to have a workforce that is comfortable leveraging technology, collaborating virtually, and being part of a highly supportive set of networks, both within our company and with client organizations as well. This means Interpublic continues to actively serve our clients across our agencies and disciplines and around the world. We continue to help them navigate a range of far-reaching changes and complex challenges that require the highest order of insight into human behavior and motivation, expertise when it comes to innovation in product and service delivery, as well as creativity and commitment. Anecdotally, it bears mention that many of our senior teams are reporting that the intensity of what we are living through is leading to very deep engagement with clients, which could in time lead to even stronger and more productive relationships. Another recurring theme in our conversation with clients is that they understand the value of our services and the importance of our work for their long-term competitiveness and growth. I've said this before, but it deserves repeating. We have amazing and talented people, and it's been inspiring to see the way they've rallied around one another and around our clients. Many of our agencies in markets such as the UK, Australia, and markets across Asia and Latin America have also been actively involved in helping their governments inform local populations about the public health crisis. We've done great work that is helping to change behavior and which we hope will contribute to altering the trajectory of the pandemic. Since the initial COVID-19 outbreak, the senior-most IPG corporate team have been in close and consistent contact with our medical advisors, getting their guidance on key public health and policy issues so as to ensure that we are taking the appropriate protective actions for the health and safety of our employees. We've also been able to lean on our pre-established business continuity planning and crisis preparedness to share information and communicate decisions across the company in a timely and effective manner, relying heavily on our risk, HR, IT, and legal teams. This has been given the fast-changing nature of the health situation. It goes without saying that the speed at which this all has developed means that the most significant business challenge has been the very high level of uncertainty. There is not much in the way of historical precedent to draw on for our company, our industry, and for the macroeconomic conditions that our clients must navigate. Across all business sectors, senior leaders understand that events have moved exceptionally quickly and will remain subject to major decisions driven largely by public health policy. Going forward, the actions of governments and regulators around the world will continue to be definitive in terms of their impact on the health crisis and the global economy. In this environment, visibility into marketing and media spend is, to say the least, challenging. Given the uncertain duration and extent of macroeconomic pressure and pace of eventual recovery, Questions about forecasting and targeting are difficult to answer and quantify. Certainly, we expect a very difficult second quarter, after which we should have a better line of sight into the full year. As always, as we move ahead, we remain committed to the high level of transparency that you've come to expect from this management team. We remain convinced that Interpublic's prospects for the future are sound, both in our ability to navigate the crisis and to take the actions that will allow us to emerge from it even stronger. First, as we navigate the near term, it's noteworthy that our team has demonstrated over a period of many years that we have the financial and management talent, tools, and business model to successfully manage through difficult times. Steps being taken across our agencies and corporate group include deferred merit increases, freezes on hiring and temporary labor, major cuts in nonessential spending, furloughs in markets where that option is available, and salary reductions where possible or appropriate. We are also taking advantage of any government programs that are available around the world. Given the breadth and complexity of our portfolio, both in terms of the types of offerings, client mix and geographic presence, the impact of the crisis will be quite different across many of our companies. As such, there is no one-size-fits-all approach to the appropriate combination of cost actions. At a number of our agencies, salary reductions have been applied. ranging up to 25% of base compensation. A few involve the entire employee population. While at others, they are focused on senior leadership. The management team at IPG immediately announced voluntary compensation cuts for the balance of 2020. These previously announced cuts have been increased and are deeper than any else we have seen in the industry. since the direct reductions for our named executive officers will flow through to total compensation as well. We have also identified very significant corporate center cost savings which are already being actioned. We are, of course, doing what we can to minimize the impact on our people to the greatest degree possible. But as you already have seen at some of our agencies, we will regrettably see it again in order to align costs with new revenue reality. Staff reductions will be unavoidable in the face of the pressures most every business is facing. Cost containment alone will not be enough to keep pace in a world where certain client sectors look likely to be at a standstill for the foreseeable future, and large gatherings for cultural, sporting, or business events may still be a ways in the offing. We remain committed to providing a high level of support to our people, which is in keeping with our culture and with the knowledge that talent is our key asset. This will ensure a strong foundation to resume our trajectory of industry-leading growth coupled with margin expansion in the macroeconomic recovery to follow. A second vital area of focus during an economic downturn is liquidity and financial flexibility. We have a strong balance sheet. We began the year with $1.2 billion of cash and concluded the first quarter with $1.55 billion. Our committed term credit facility is $1.5 billion, supported by a group of leading banks and committed for several years into the future. Further, in late March, we arranged an additional $500 million, 364-day committed credit facility with a consortium of banks. In addition, we issued $650 million of four and three-quarter percent 10-year senior notes. With the strong market reception, our offering was upsized from $500 million. This effectively pre-funds the $500 million maturity coming due in October of this year. These are proactive and prudent measures to further enhance our financial resources. Of course, our cash flow disciplines are active and have been intensified as appropriate. In addition to the extensive corporate course actions I already mentioned, we've identified significant capex that can be deferred for a time without detrimental effect. Working capital management has also been a priority for us. Along with that, collections and the historically high quality of our receivables also receive additional attention. especially in the most challenged economic sectors. In this environment, the sustainability of a dividend at its current level is a reasonable question. Given the level of visibility we have today, the actions we have taken to date, and the potential for economic recovery later this year and into 2021, we do not think that action on the dividend is required at this point in time. Of course, we will continue to assess this decision, given the current lack of visibility into upcoming quarters. A third key area continues to be our focus on our clients and offerings. During the past five years, we've established very solid momentum relative to our peers in terms of our strategic differentiation, go-to-market offerings, revenue growth, and account wins, as well as industry recognition. We are confident that our client-centric culture, open architecture model, and industry-leading data management capabilities will continue to develop and will help to see us through this challenging period. Every economic downturn is somewhat different, and this one is, of course, unique. For IPG, the severe financial crisis and recession in late 2008 and 2009 was followed by our strong return to growth and margin expansion in 2010. That chapter can be instructive as to how our model can work over the coming months, with rigorous expense management and a flexible cost base that provides us with a buffer against some of the top-line headwinds. The bottom line is that during the last crisis, we managed expenses appropriately to our revenue reality. and also had two notably strong years of cash flow from working capital during the downturn. Exiting 2010, our balance sheet was stronger and our commercial offerings had moved dramatically ahead. It's unfortunate that our solid results in the first quarter cannot be indicative of the environment for the remainder of the year. It is, however, an indication of the competitiveness and the strength of our offerings and our people. With that said, in the first quarter we posted net organic growth of 0.3% and 4.9% EBITDA margin against both headwinds, mainly in the U.S., and strong organic growth of 6.4% a year ago. I will now turn this over to Ellen to take us through the results in greater detail. We also continue to have business highlights to acknowledge, which I will come back to in my closing remarks, followed by a Q&A. Ellen?