The Interpublic Group of Companies, Inc.

Good morning and welcome to the Interpublic Group second quarter 2023 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 begin.

Good morning. Thank you for joining us. This morning, we are joined by our CEO, Philippe Krakowski, and by Alan Johnson, our CFO. We have posted our earnings release and our slide presentation on our website, intrapublic.com. We will begin our call with prepared remarks to be followed by Q&A. We plan to conclude before market open at 9.30 Eastern. During this call, we will refer to forward-looking statements about our company. These are subject to the uncertainties and the cautionary statement that is included in our earnings release and the slide presentation. These are 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 Philippe Krakowski.

Philippe Krakowski Thank you, Jerry. Good morning. As usual, I'll begin our call with a high-level view of the quarter. Ellen will then provide additional details, and I'll conclude with updates on our agencies to be followed by Q&A. Starting at the top with revenue, the organic change of our revenue before billable expenses was a decrease of 1.7 percent against last year's second quarter organic growth of 7.9 percent. For the first six months of the year, our organic decrease was 90 basis points. During the second quarter, we saw the same puts and takes on revenue that we've identified and discussed with you since the beginning of the year. Those factors continue to weigh significantly on our performance in the second quarter. Concurrently, we continue to grow in areas of the business that have been key drivers of success for us over a number of years, namely our media offerings and the healthcare sector. We saw solid growth as well in disciplines such as public relations and our experiential offerings. Consistent with the items we've called out previously, During the quarter, we continued to see reduced spend from clients in the tech and telecom sector as it moves through a challenging period that has included significant cost cutting. Those reductions significantly impacted on our ability to grow in the second quarter and for the first half. Our digital specialist agencies also continued to underperform in the quarter. As we've discussed previously, the transformation of those offerings continues to move forward and we've seen some good wins there recently. Restoring those brands to consistent growth is proving slower than anticipated, however, due largely to continued challenges in the tech sector, as well as modestly heightened macro uncertainty. Taken together, the second quarter impact on our growth due to the second telecom sector and our digital specialists was approximately 3.5 percent. Along with the strength of our media offerings in the healthcare sector, It's worth highlighting that six of our eight client sectors grew during the quarter and in the six months here to date. We also continue to win some of the largest new account opportunities in market so far this year. Our very strong new business momentum encompasses a diverse set of client industries, including pharma, financial services, autos, and food and beverage. These wins span the full range of marketing disciplines, especially in media, as well as global integrated solutions that bring together creative, public relations, experiential, and data. As such, they underscore the role that we play as a critical partner to the world's most sophisticated and demanding marketers. To cite an important example, we're proud to have recently significantly expanded our relationship with Pfizer, having been named their lead global creative public relations and medical affairs partner. Most of the new revenue from our wins has yet to ramp, given that the transition periods between announcement and onboarding are the norm in our industry. As these wins come on stream in greater magnitude in the second half of the year, we expect their impact to be evident in our results. Looking at client sectors in the second quarter, we were led by strong growth in automotive and financial services, followed by growth in food and beverage, healthcare, consumer goods, and our other sector of diversified industrials and public sector clients. Our retail sector decreased modestly against very strong multiyear comparable performance. And as discussed, second telecom was a significant outlier. Regionally, the U.S. decreased 2.5 organically in the quarter predominantly due to the sector and agency specific challenges that we've called out. Our international markets decreased slightly by 10 basis points organically with mixed performance by region. In terms of our segments, our media data and engagement segment solutions segment decreased 1.5% organically in the quarter where we saw good growth at the media offerings offset by challenged performance in the digital agencies. Our segment of integrated advertising and creativity-led solutions decreased 3.8% organically. This is a place where tech and telecom in a somewhat more cautious spending climate is weighing on several of our more traditional consumer advertising agencies, and that's impacting segment performance. Within the specialized communications and experiential solutions segment, we grew 3.7% organically. on top of 11.1% growth a year ago. The quarter was highlighted by increases in both our public relations and experiential disciplines. Turning to expenses and margin in the quarter, our operating discipline continues to be a strength as our management teams demonstrate that we have the talent and tools as well as the flexible business model to deliver favorable margin results. second quarter adjusted EBITDA margin was 14.2 percent, which is ahead of our pre-pandemic second quarter 2019 margin. As expected, our Q2 margin was lower than a year ago when additions to headcount had lagged a robust pace of multiyear growth. We are effectively managing our flexible operating model, which is clear in our expense for temporary labor, performance-based incentive compensation, and SG&A. each was notably lower than a year ago. Total headcount decreased by 1.2 percent over the course of the first half of the year. Expense for severance was elevated in the quarter, as we continue to both address areas of the business where performance is lagging, as well as further accelerate business transformation and integrate delivery of services in our very strong media offering. We'll see the benefit to margin of those actions going forward. occupancy expense decreased from a year ago as we continue to benefit from actions taken on our real estate portfolio. Diluted earnings per share in the quarter was 68 cents as reported and 74 cents as adjusted for intangible amortization and other items. We want to make sure to call out that our EPS both as reported and adjusted includes the benefits of 17 cents per share related to the resolution of routine federal income tax audits previous years. During the quarter, we repurchased 1.3 million shares, returning $50 million to shareholders. That activity brings our repurchases for the six months to 3.5 million shares, using $128 million. Turning to our outlook for the full year, and having just completed our usual midyear update with our operators, we're positioned to resume solid organic revenue growth in the range of three and a half to four percent over the course of the year's second half. As we move ahead, we expect that the benefit of net new business will be increasingly meaningful and that underlying growth from several of our larger businesses will also strengthen. Nonetheless, given our first six months, which in Q2 reflect what we believe is modestly heightened macro uncertainty, we are revisiting our full-year organic growth expectations, the 1 to 2 percent. At the same time, with strong operating discipline, we remain committed to our margin target for the year of 16.7 percent, which represents an increase relative to our 2022 full-year margin. The strategic relevance of our offerings is evident in new business performance year to date. which, as I've mentioned, has been exceptional. And while we're disappointed in Q2 organic revenue performance, we'll continue addressing certain areas of the business with urgency during the back half of the year. We'll also continue to invest in the multiple growth drivers in the portfolio. Now I'm going to hand things over to Ellen for a more detailed review of results.