The Interpublic Group of Companies, Inc.

Good morning and welcome to the Interpublic Group third 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 one. 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, interpublic.com. We will begin with prepared remarks to be followed by Q&A. We plan to conclude before market open at 9.30 Eastern Time. During this call, we will refer to forward-looking statements about our company. These are subject to the uncertainties and the cautionary statement that are 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. As usual this morning, I'll begin with a high-level view of the quarter, after which Ellen will provide additional details. I'll conclude with updates on our agencies to be followed by Q&A. Before getting to the business of the call, however, it seems not only appropriate but necessary to speak to our collective shock and grief in response to the terrorist attacks perpetrated in Israel and their aftermath. Thankfully, our colleagues in Israel are safely accounted for, but many are being called into service. We're also clearly in the midst of a humanitarian crisis in the region. So our thoughts go out to all innocent lives that have been impacted by violence and those who remain in harm's way. Given the scale of our operations in Israel, we'll also spend a bit more time later in the call discussing the implications on IPG's business. Turning to 3Q performance, starting at the top with revenue, results did not measure up to expectations. The organic change of our revenue before billable expenses with a decrease of 40 basis points. For the first nine months of the year, our organic decrease is therefore 80 basis points from a year ago, inconsistent with a trailing three-year growth of 15.7 percent. The same factors we've discussed as having impacted the first half of the year continue to weigh on the third quarter. These are, in order of magnitude, the decrease in client activity in the tech and telecom client sector, which has been evident across our industry this year, and the underperformance of our digital specialist agencies. Decreases in both of these areas were at about the same scale as we identified in the second quarter, and together they weighed on our third quarter growth by approximately 3.2 percent. As we've spoken to in recent quarters, major marketers in the technology sector are consumers of our core services. And as a sector, their budgets this year have seen significant cost cutting in line with the broader austerity efforts at those companies. While it's challenging to call the timing of the upturn in their marketing spend, we do believe that the current pressure on this sector will abate since these market leaders will need to return to growth mode. Another key factor negatively impacting our results is the broad concern about marketers related to macroeconomic conditions. which we've identified in our previous calls this year. Economic concerns have translated into what is now an unmistakably more cautious tone in the business. We saw those headwinds take several forms, including pauses in certain planned activities, fewer and generally smaller project opportunities, and a slower than anticipated pace in conversion and onboarding of new business. Notwithstanding these challenges, it's worth noting that we did see progressively better performance from month to month during the third quarter with growth in September. We also saw aggregate growth among our top 20 clients in the quarter. We continue to anticipate that the new business that we've won across the first part of this year will be more visible in our results going forward. And as was announced yesterday, we were pleased to see General Mills tap UM as their global media agency of record. UM will handle all strategy, planning, buying, analytics, performance, and commerce efforts across 36 markets for this important client. It's also worth highlighting that in the quarter, we continue to see growth in areas of the business that have been key drivers of success for us over a number of years, namely our media offerings, which performed very strongly, and the healthcare sector. In addition, we had solid growth in sports and entertainment marketing public relations, and our experiential offerings. Six of our eight client sectors grew during the quarter, as has been the case in the nine months year to date. We were led in the quarter by the strong growth of auto and transportation, followed by our other sector of diversified industrials and public sector clients, the financial services and healthcare sectors. Healthcare grew in the quarter, though not at the more robust levels we'd expected. Food and beverage and consumer goods sectors also increased in Q3. We had a slight decrease in the retail sector. The tech and telecom sector decreased in the high teens, the percentage basis. And this is not only due to the larger trend in the sector, but also the significant client loss in McCann. Regionally, we saw organic growth in the quarter across the UK, Europe, Latin America, and our other markets group. the U.S. and Asia-Pacific region decreased. Lower revenue in the U.S. was predominantly due to the sector and agency-specific challenges we've called out. As we look at the balance of the year, the geopolitical situation in the Middle East does add a degree of uncertainty to our business. Our operations in Israel include the full range of creative marketing services and media offerings, and they represent approximately 1% of total IPG global revenue. As you'd expect, economic activity in the country is at a standstill, which has already begun to have an impact during what is seasonally the business's largest quarter. The developing geopolitical crisis is, of course, foremost a human concern, and our top priority is to do what we can to support our colleagues in the region. But in the context of this call, we did feel it was necessary to point out it will also have some business implications. Turning to segment performance, media, data, and engagement solutions grew organically by 50 basis points in the quarter. We continue to see very strong growth in our media offerings, but that was again largely offset by challenge results in our digital specialty agencies. Our segment of integrated advertising and creativity-led solutions decreased 4.1% organically as the tech and telecom client sector and a more cautious spending climate weighed on our more traditional consumer advertising agencies. SCV's strong performance in the quarter was a notable exception, powered by its strategy of incorporating data-informed, audience-led thinking into its core creative offering. Our segment of specialized communications and experiential solutions grew by 6.5% organically. The quarter was highlighted by increases in sports and entertainment, experiential, and public relations. Turning to an overview of expenses and margin, operating discipline continued to be a strength and was fully in evidence during the quarter. Third quarter adjusted EBITDA margin with 17.2 percent, up from 15.5 percent a year ago. Across the group, we're effectively managing our flexible operating model which you can see in our expenses for temporary labor, performance-based incentive compensation, and SG&A. Total headcount decreased by 1.5 percent from a year ago. Occupancy expense decreased as well as we continue to benefit from actions taken on our real estate portfolio and other variable expenses such as travel or sources operating leverage. Our diluted earnings per share in the quarter was 63 cents as reported and was 70 cents as adjusted for intangibles, amortization, and other items. During the quarter, we repurchased 2.6 million shares, returning $91 million to shareholders. That brings our share repurchases for the nine months to 6.1 million shares, using $219 million. The strength and strategic relevance of our offerings is evident in our new business wins year to date and our long-term record of organic growth. That said, we had anticipated that the puts and takes in Q3 would have netted to better revenue performance than reflected in our results today. And I'll do more to unpack that for you in my closing remarks. Turning to our outlook for the remainder of this year, given the trends we've called out for you since the beginning of the year, the fact that macro conditions have become more challenging as well as the incremental impact of geopolitical uncertainty, we believe organic revenue performance for the fourth quarter will come in at approximately 1% growth. Nonetheless, we remain committed to our margin goal for the year of 16.7%. Our current level of performance is not up to the standards we've set over many years. We'll therefore be looking to close this year as strongly as possible and specific to identified areas of underperformance, also assess structural internal solutions to improve our growth profile. At this point, I hand the call over to Ellen for a more detailed review of our results.