The Interpublic Group of Companies, Inc.

Good morning and welcome to the Interpublic Group second 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 any time. I would now like to introduce Mr. Jerry Leshne, Senior Vice President of Investor Relations. Sir, you may begin.

Good morning. We hope you are all well. Thank you for joining us. This morning, we are joined by Michael Roth, our Chairman and CEO, by Ellen Johnson, our Chief Financial Officer, and by Philippe Krakowski, our Chief Operating Officer. 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 Q&A and plan to conclude before market opens at 9.30 Eastern. During this call, we will refer to forward-looking statements about our company. These are subject to the uncertainties in the cautionary statement that is included in our earnings release and our 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 Ross.

Michael Ross Thank you, Jerry, and thank you for joining us this morning. I would like to start by saying that I hope that you and your families have been safe and healthy during this pandemic, which has had such a severe impact on the entire global community. A main topic of our call, of course, is how the crisis has impacted our people, our clients, and our business, and crucially, our focused and disciplined response to the profound challenges we are all facing. I would like to first recognize and thank our people at IPG and our agencies around the world for their outstanding and highly effective work in spite of the countless changes, concerns, and pressures brought by COVID into everyday life. These were unforeseeable just a few short months ago. Our people have continued in their dedication to one another, to clients, and to their communities while making necessary changes and successfully adapting our business model. As we navigate the pandemic at IPG, the safety, health, and well-being of our employees, clients, and other key partners continues to be at the forefront of everything we do. In recent months, we have also felt with renewed urgency the pain of racial discrimination here in the United States and around the world. Society is facing the long-term effects of racial injustice, which demands long-overdue action. At IPG, we know that we can make more of a difference. We have recommitted to listening, to learning, and most importantly, to action in support of social and economic justice for black Americans and for all people of color. We are a company that lives in the culture and has a voice in the culture. We understand that we have a responsibility and that the journey of rising to that obligation makes us a better company in every way. We're taking actions within IPG and in the advertising and marketing messages that we create in order to further the cause of racial equity. Turning to the results we reported this morning, our second quarter, as expected, bears the imprint of the pandemic and its economic impact and the most challenged global operating environment in memory. But during this period, that was anything but typical our company marked a number of significant achievements in maintaining distinctive quality of our services and creating even deeper client relationships while effectively managing expenses, making structural changes, and continuing to invest in our future. These accomplishments underscore the strength and resiliency of our offerings, the flexibility of our business model, and again, the exceptional quality of our talent. You'll recall that in April, we had shared that 95% of our people around the world were working from home. Today, that is more varied, reflecting conditions that have changed in some markets more than others. Around 50% of our people in Asia are back in the office at least some of the time. 30 to 40% in Europe, around only 10% in the US and UK, and less than that in LATAM. We had also shared in April that the revenue environment was uncertain and that the economic impact of the pandemic on our industry would clearly be significant in the quarter as marketers navigated the sharp and sudden global macro contraction. As you've seen this morning, our second quarter net revenue decreased 12.8% as reported with an organic decrease of 9.9%. With that, there was meaningful variation by client and by sector. and the decrease overall was perhaps not as severe as we might have anticipated or to the extent seen elsewhere in our industry. All in, spending by our largest clients held up relatively well. It was again clear that the investments we have made to differentiate our company, notably in the way we are structured and go to market with open architecture, with top industry talent, and with the most contemporary offerings, led by data capabilities at scale, continue to distinguish our performance in our industry. Top performing client sectors in the quarter were healthcare, retail, food and beverage, tech and telecom. On the other hand, sectors hit hardest by the recession were auto and transportation, financial services, and industrials. By region, the US was 66% of our revenue mix in the quarter. decreased 8 percent organically. Our international markets decreased 13.1 percent organically in a range of approximately negative 10 to negative 15 percent by region. While some margin contraction was to be expected, our cost disciplines remained effective. We managed our operating expenses to the reality of the rapidly developing recession in order to protect profitability to the degree possible. and further to position ourselves for strong recovery when revenue growth returns. This is the commitment we made to you earlier this year and will of course continue. In a people business, this has a necessity involved very difficult decisions that includes salary reductions, furloughs, and most regrettably layoffs. We reduce staff across most of our agencies during the quarter. This also means that our expense for severance was elevated in the quarter. Our net operating expenses decreased by approximately 9% from a year ago, before a charge for restructuring. Each of our principal cost categories decreased, including expenses for base payroll, temporary labor, performance-based employee incentives, and our office and other expenses. With the actions we've taken in the quarter, operating expenses are positioned to decrease further in the year's second half. As you've seen in our results this morning, we also took actions in the quarter to lower operating expenses structurally and permanently relative to revenue and to further accelerate the transformation of our business. These actions are based on our recent experience and learnings in the pandemic and a strategic review of our operating expenses, which is ongoing. They address our real estate and personnel expenses and notably accommodate a greater role for work from home in a hybrid office-home model in a post-COVID world. Our actions resulted in a restructuring charge of $112.6 million in the quarter, and we expect a significant financial return in the ongoing reduction of our occupancy and payroll expense. Of the total charge, $68 million is non-cash. These actions are planned to result in total annualized savings of approximately $80 to $90 million, which have been approximately 100 basis points of fiscal year 2019 net revenue. We will begin to see these savings in this year's third quarter. With our review continuing, we anticipate that we will take additional strategic actions in the second half of the year geared towards further structural cost reductions, These additional actions are expected to result in a second half restructuring expense in the range of $90 to $110 million. In the second quarter, our adjusted EBITDA margin was 3.4% and was 9.4% before the restructuring charge. Our diluted earnings per share was a loss of 12 cents as reported and was 23 cents as adjusted for the restructuring and other items. I would underscore that in a quarter that was clearly very challenging, we continued our investment in talent, tools, and differentiated capabilities that have made us the growth leader in our industry over a period of many years. In the current environment, that means, first, investing in health and welfare resources and programs with the objective of keeping our employees safe and healthy in every respect. It also means that as we begin to formulate our return-to-office procedures around the world. We do so with safety as our primary and predominant objective. On the product side, we launched Maticine in early May, which is an offering of our Kinesio technology unit and is the next evolution in media and addressable marketing. Earlier this month, we launched Axiom's Connections, suite of digital transformation solutions. I'll return to key agency developments in my closing remarks, and I'll ask Philippe to share an update on developments in media, data, and technology. As we look to the balance of the year, we're confident in the strength of our model and the competitiveness of our offerings, even as marketers continue to face a range of material unknowns related to the pandemic. These uncertainties include the spread of the virus, its impact on the sentiment and behavior of consumers, on income levels, business supply chains, and the actions of government authorities, including economic stimulus and social support. The environment remains unclear for as long as COVID is a threat to everyday life. As a result, visibility to revenue remains challenging and client decision-making difficult to forecast. Even the usual points of reference in marketing and media, such as back to school, the global sports calendar, media inventory, and the holiday season have not come into focus. On a positive note, we remain new business positive year to date and trailing 12 months. And our pipeline of business opportunities is quite solid, which is indicative of pent-up demand. But given the prevailing uncertainty, it is difficult to gauge the pace of client decisions and the related conversion to revenue. As always, we will manage the business appropriately and look to align expenses closely to changes in revenue and will keep you apprised as the year progresses. Our return to positive growth is obviously tied to macroeconomic timing. Marketers understand that this can be a decisive time for brands. There will be enduring changes as consumers accelerate their use of e-commerce and amid profound social change, hold brands accountable for authenticity and purpose. We are resourced with best of breed talent and tools to help rethink and reimagine the brands that are the lifeblood of companies. Further, with technology playing an ever-increasing part of day-to-day life, we're seeing heightened demand for data management and marketing technology expertise at the level of the enterprise with Axiom and Kineso now integrated with our service offerings. We're confident that our offerings are meeting this moment. With the return of supportive macroeconomic environment, we're well positioned to resume our growth as the nexus of consumer relevance and performance accountability for brands, and as an engine of value creation for all our stakeholders. I'll have additional closing thoughts before our Q&A along with Philippe, but at the end of this point, I turn it over to Ellen for additional color on our results.