The Interpublic Group of Companies, Inc.

Good morning and welcome to the Interpublic Group fourth quarter and full year 2024 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 Ellen 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-K 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, and thank you for joining us this morning. As usual, I'll start with a high-level view of our results in the quarter and for the full year, as well as our operating outlook for the year ahead. Ellen will then add additional detail, and I'll conclude with thoughts on the compelling strategic benefits of our proposed acquisition by Omnicom. Turning to performance and beginning with revenue, our organic revenue decrease in Q4 was 1.8%, bringing us to full year organic growth of 20 basis points. Our revenue change in the fourth quarter was largely due to the impact of the account activity over the previous 12-month period, which we had discussed with you on prior calls. Those headwinds intensified during the quarter which was expected but at a somewhat greater rate than we'd anticipated. As a result, the full year fell shy of our forecast. While we saw the impact of those headwinds broadly across a number of disciplines and geographic regions, that was partially offset by notably strong growth in the food and beverage sector as well as the return to solid growth in technology and telecom. As discussed on our last two calls, the underlying tone of business in the quarter did pick up from earlier in the year. It's also worth noting that we had several headline wins to close the year, including Amgen, Little Caesars, and Volvo on the media front, as well as Pizza Hut and the Kimberly Clark Creative Consolidation, which took place in mid-January. This represents solid new business momentum, but those wins are too recent to have benefited our fourth quarter and won't fully be online until a bit later in the year. Turning to operating expenses and profitability in the quarter, our adjusted EBITDA margin was 24.3%. And with that performance, we delivered against the full-year margin target of 16.6%. that we'd set at the beginning of 2024. That sustained level of profitability reflects strong operating discipline by our teams, notwithstanding a challenging year, while continuing our significant investment in talent and our technology and platform capabilities. Fourth quarter diluted earnings per share was 92 cents as reported and was $1.11 as adjusted for acquired intangibles amortization, some initial deal expenses related to our planned combination with Omnicom, and the non-operating impact of non-strategic businesses sold or held for sale. Full year diluted earnings per share was $1.83 as reported and $2.77 as adjusted. That compares to $2.99 in 2023. As a reminder, our EPS in full year 23 included the benefit of a 17 cent per share related to the resolution of routine federal income tax audits of previous years. Over the course of the year, total capital returned to shareholders between dividends and share repurchased was $727 million. We suspended repurchases in the fourth quarter due to the tendency of the merger and given regulatory limitations, we expect to be back in the market after our shareholder meeting. It's also worth noting that while historically we've raised our dividend per share at this time of year, as we work towards the acquisition by Omnicom, both parties contractually agreed to no increases through the pre-merger period. As you heard last week in John's remarks, the expectation is that the free cash flow of the combined companies will be very substantial. And as such, he expects to increase Omnicom's historical capital allocation for dividends and share repurchases while also being able to invest meaningfully into the combined business to further enhance its strength in key areas such as technology and talent. As we look ahead to 2025, of course, one very significant focus is our commitment to bringing the merger to full effectiveness. A number of our competitors are clearly concerned enough about the combination that they've spent a lot of airtime talking about our being distracted. But our frontline talent is fully focused on clients, which is obviously as it should be, and we have a small and clearly defined group here at corporate that will be working on the day-to-day activities required for a successful integration. In the meantime, IPG will of course continue to operate independently. So it's appropriate that we continue to share our standalone outlook with you as part of these calls. Entering the new year, we've seen that clients remain focused on the need to drive growth. And that means investing in the ongoing evolution of their businesses. especially around solutions at the intersection of media, creativity, technology, and data. Yet global macroeconomic and geopolitical uncertainty, which we had seen abate in the latter part of 2024, remains. And that is showing up in a somewhat more cautious and deliberative approach to budgeting on clients in certain industry sectors. During this year, we'll also continue to navigate the weight of trailing wins and losses on our top line. As we've discussed previously, we are on the wrong side of the outcome in defending a number of very significant media accounts. It's worth reminding everyone that the decisive factor on those largest decisions was principal media, and specifically the commercial terms enabled by principal media at scale. In one other important account shift in the healthcare vertical where our capabilities have led the market for many years, a competitor was able to leverage its much greater size to win a significant portion of a large creative account that we'd been awarded not long prior. Looking at just the three largest of those decisions, together they will weigh on our growth for this year by four and a half to five percentage points. Factoring in that headwind and with an offset of otherwise sound underlying performance, we are therefore targeting an organic decrease for 2025 of 1 to 2 percent. We estimate that quarterly revenue phasing will be significantly more challenged in the first half of the year with a net impact of wins and losses easing in the year's second half. It's important to highlight that our proposed combination with Omnicom will position us with greatly strengthened solutions for more competitive and better client outcomes. Turning to our outlook on expenses and margin for the year, as most of you know, we've consistently challenged ourselves with respect to our opportunities to evolve the architecture of our company, both for client service as well as operating efficiency. You've heard me speak before are the structural changes that we need to make to improve our growth profile, namely investing in higher growth capabilities, increasing the integration of our offerings, and constantly simplifying what it means to work with us. This also applies to our ways of working and our organizational structure. With an eye on the rapid evolution of our industry and its impact on our business, over the course of the back half of last year, we undertook a wide-ranging strategic analysis that included multiple avenues to rethinking our operating structure. This strategic review has been focused on maximizing opportunities as an independent IPG, but these efforts will also clearly benefit us when it comes to the combination of our company into Omnicom. Our outlook for 2025 therefore includes a programming of restructuring over the course of the year designed to transform our business, enhance our offerings and drive significant structural expense savings. This is a blueprint for accelerating change that includes speeding our progress on strategic centralization of many corporate functions, greater offshoring and nearshoring in both corporate services and certain areas of client service delivery. with the latter centers of excellence focused on platform benefits in key areas such as production and analytics. We will also continue to improve efficiency of the operational structure at a number of our agencies, as well as further improve real estate efficiencies. Specifically, we expect that our program will generate in-year savings of approximately $250 million in 2025. The associated charge should be of an equivalent amount with a significant portion being non-cash. We will recognize most of those expenses in the first and second quarters and we'll call those out for you in our P&L. And we plan to provide additional details on this plan with our first quarter report in April. To be clear though, we believe these actions have very limited overlap with a $750 million of cost synergies anticipated as part of our proposed combination with Omnicom. As you heard in some detail from John last week, those savings are enabled largely by the combination of our two companies and the areas of focus he called out are not those that I just identified. Additionally, as John mentioned on his call, the $750 million of synergies excludes revenue synergies, synergies from automation, and incremental onshoring and offshoring. The restructuring is required given the opportunities for greater efficiency within our company and will allow it to become a part of the new Omnicom in the strongest possible position. In terms of 2025, with these strategic actions on costs along with our usual strong operating discipline, We're targeting adjusted EBITDA margin of 16.6% under our expected organic revenue decrease of 1 to 2%. As we look ahead, we remain confident in the many fundamental areas of strength within our company and the enormous potential of our plan combination with Omnicom. I'll come back with thoughts on the acquisition, but at this point, I'd like to turn things over to Ellen for a more in-depth view of our results.