Omnicom Group Inc.

Good afternoon and welcome to the Omnicom third quarter 2022 earnings release conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. To participate, please press 1 then 0. If you need assistance during the call, please press star then 0. As a reminder, this conference call is being recorded. At this time, I'd like to introduce you to your host for today's conference, Senior Vice President of Investor Relations, Gregory Lumber. Please go ahead.

Good afternoon. Thank you for joining our third quarter 2022 earnings call. With me today are John Wren, Chairman and Chief Executive Officer, and Phil Angelostro, Executive Vice President and Chief Financial Officer. On our website, omnicomgroup.com, we've posted a press release along with a presentation covering the information we'll review today, as well as a webcast of this call. An archived version will be available when today's call concludes. Before we start, I would like to remind everyone to read the forward-looking statements in non-GAAP financial and other information that we have included at the end of our investor presentation. Certain of the statements made today may constitute forward-looking statements, and these statements are our present expectations. Relevant factors that could cause actual results to differ materially are listed in our earnings materials and in our SEC filings, including our 2021 Form 10-K. During the course of today's call, we will also discuss certain non-GAAP measures. You can find the reconciliation of these to the nearest comparable GAAP measures in the presentation materials. We will begin the call with an overview of our business from John. Then Phil will review our financial results for the quarter. And after our prepared remarks, we'll open up the line for your questions. I'll now hand the call over to John.

Thank you, Greg. Good afternoon, everybody. And thank you for joining us today for our third quarter results. I'm pleased to report that in the third quarter, we continued the very strong performance we've had throughout 2022. We exceeded our expectations with organic growth of 7.5%, which was broad-based across our agencies, disciplines, regions, and client sectors. Year-to-date organic growth is 10.3%. Operating profit margin for the quarter was 15.9%, 10 basis points higher than our comparable margin in 2021. Earnings to share for the quarter was $1.77, up 7.3% versus 2021. The negative currency impact on EPS of the strong US dollar was approximately 5%. On a constant currency basis, EPS would have increased approximately 12.3%. Our cash flow Liquidity and balance sheet remain very strong and continue to support our primary uses of cash, dividends, acquisitions, and shared purchases. Phil will cover our financial results in more detail during his remarks. On last quarter's call, we mentioned several first-of-a-kind e-commerce collaborations with Amazon, Instacart, Kroger, and Walmart. This quarter, we expanded and enhanced our e-commerce capabilities by announcing Transact, a dedicated practice focused on connected commerce consulting and e-retail execution services. Transact will capitalize on the unique partnerships we've entered into and will focus on driving sales for clients and growing market share on e-retail platforms. Transact adds to our best-in-class e-commerce services in digital transformation and MarTech consulting, CRM and precision marketing, media, campaign activation, and creative content. We also continue to invest in our iconic agency brands. A recent example was TBWA Worldwide, which recently acquired innovation agency Dot Dot Dash. Dot.Dash builds future forward brand experiences at the intersection of culture and technology, a valuable addition for the total brand experience company like TBWA. We will continue investing to enhance our capabilities in high growth areas, including CRM and precision marketing, digital transformation, performance media, and e-commerce. Our investments in these areas to date have been very effective and are reflected in third-party validations. A few weeks ago, we were named leader in Forrester's WAVE assessment for global marketing services. We received the highest scores possible in five criteria, creative content and services, media management services, integration services, global client teams, and innovation road Our performance highlights our ability to deliver creative and strategic solutions to our clients through integrated multidisciplinary teams. One way we do this is through our global client leaders group, which has led the industry in developing innovative service solutions for our largest clients. Since 2014, our GCL group has been led by Peter Sherman, After a successful 25-year tenure at Omnicom, Peter has made the decision to become a full-time undergraduate professor teaching marketing and communications at a top-ranked university. I want to thank Peter for his countless contributions at Omnicom and wish him the best of luck. We're expanding on the foundation Peter helped build to further enhance the services we deliver to our largest clients and to pursue new business opportunities aggressively. As a first step towards that goal, we announced the appointment of Andrea Lennon to the new role of Chief Client Officer. Andrea has a strong track record in marketing transformation at Critical Mass, Omnicom's digital experience design agency, where she spent seven years working in Asia, Europe, and the United States. prior to being named president two years ago. Andrea will focus on transformative marketing solutions and capabilities that drive business results for our global enterprise clients. In partnership with the GCL team, she will accelerate solutions that draw on the group's best talent, integrating Omnicom's leading capabilities in data, creative, media communications, and technology. We will be sharing more updates on our client solutions strategy and the business team in the coming weeks. We are fortunate to be making these changes from a position of strength. We were recently recognized by the FEs with one of the industry's most prestigious honors, identifying ideas that work, the 2021 Global FE Effectiveness Index named Omnicom the most effective marketing communications company in the world. Four of our agency networks, BBDO, DDB, OMD, and TBWA, placed in the top six of the most effective agency network category. In addition, OMD was named the most effective media agency network. These notable rankings demonstrate our standout talent I want to congratulate all of our agencies and people on executing the most effective and creative work in the industry for the benefit of our clients. Overall, we're very pleased with our quarterly and year-to-date financial results, as well as our progress on our key strategic initiatives. Based on our strong performance this quarter and for the first nine months of the year, we are increasing our prior organic growth forecast from 6.5% to 7% to 8% to 8.5% for the full year 2022. We also continue to anticipate delivering the same strong operating margin of 15.4% for the full year of 2022 that we achieved in 2021. While we're confident in our forecast, we retain a healthy level of caution due to macro factors including the ongoing war in Ukraine, the continuing disruption of global supply chains, the economic risk posed by rising interest rates here in the United States, and higher inflation around the world. In light of these risks, we are actively taking actions to mitigate the potential negative effects of these macro factors on our business. I'm confident we are well equipped to handle any economic downturn, and have the leadership teams in place to minimize the impact on our top and bottom lines. I will now turn the call over to Phil for a closer look at our financial results. Phil?

Thanks, John. As you just heard from John, our third quarter results were solid, reflecting growth across all our disciplines. While the rate of growth as expected is below our first half results, we feel very good about the competitive position of our company. leading us to raise our guidance for full year 2022 organic growth, and we have a positive outlook for 2023 and beyond. Further down the income statement, our cost management has resulted in strong operating performance and operating profit margins, and our disciplined approach to capital allocation and investment has led to both improved service offerings and increased shareholder returns through dividends and buybacks. all while maintaining an excellent credit and liquidity position. Let's go into the financial details of the quarter, beginning on slide three. Reported total revenue in the third quarter was flat year over year at $3.4 billion. Organic growth was 7.5% for the quarter. However, as I'm sure you're aware, the U.S. dollar has strengthened significantly, and almost half of our revenue is outside the U.S., In dollar terms for the third quarter, this drove the largest negative quarterly impact from foreign currency translation so far this year, a $216.6 million, or 6.3% reduction of revenue. With most of our expenses incurred in the local markets where our revenue is earned, foreign currency translation impacted our profits as well. Reported operating profit for the third quarter increased around 1%. while on a constant currency basis, it increased 6%. Below the line, higher interest income helped lower our net interest expense, and we've benefited a bit from the translation impact of our Euro and British Pound denominated debt. Overall, our net income rose 2.5% on a reported basis. Combined with a 4% reduction in shares year over year, diluted EPS rose 7.3%, after a negative 5% headwind from foreign currency translation. On a year-to-date basis, it's helpful to turn to slide four, where we show adjustments to make the current and prior year-to-date periods more comfortable. None of these adjustments are new this quarter. They were discussed earlier this year and last year. The year-to-date 2022 period, operating expenses and income taxes were impacted by charges in the first quarter arising from the effects of the war in Ukraine. For the year-to-date 2021 period, operating expenses benefited from a gain on sale of a subsidiary, and both interest expense and income tax expense reflect the impact from the early extinguishment of debt. Similar to the quarterly results we just discussed, the strength in the dollar this year also impacted our year-to-date results. Foreign currency translation reduced revenues by 4.5%. Operating profit on a non-gap adjusted basis was up 1.9% and on a constant currency basis was up 6.1%. For a more detailed look at our results, let's now turn to slide five and begin with an analysis of the changes in our revenue. As discussed, the quarterly impact from foreign currency translation was negative 6.3%. The impact of acquisition and disposition revenue was negative 1%, primarily reflecting the disposition of our businesses in Russia during the first quarter. Our organic growth was 7.5% for the quarter and 10.3% year-to-date. Looking forward, if FX rates stay where they were as of October 12th, we estimate that the impact of foreign exchange rates will reduce our revenue by approximately 6.5% in the fourth quarter. Based on deals completed to date, we expect the impact from net acquisitions and dispositions will result in a reduction of our revenue of approximately 1.4% in the fourth quarter, primarily resulting from the disposition of our businesses in Russia. Turning to slide six, for the quarter, we once again showed growth across all of our disciplines with double-digit growth in three of them. Advertising and media, our largest category, posted 6% organic growth in the quarter, led by strong media results. Precision marketing continued its strong performance with 16% organic growth as clients turned to us for digital transformation, digital customer experience, and data and analytics services. Commerce and brand consulting was again up 11% organically on the strength of our branding and design agencies. Experiential organic growth slowed to 2%, as we continue to experience declines in China. As expected, growth in this discipline will remain choppy. Execution and support, which we also expected would grow slower in the second half, had organic growth of 4%. Public relations grew a strong 13% organically, reflecting client demand across many industries and geographies. And lastly, health care delivered solid organic growth of 5%. Turning to slide 7 for organic growth rates by region, it's clear that growth was solid overall, but varied widely by region and, as expected, each region grew a bit less than they did in the second quarter. Both in the U.S. and internationally, in Q3, organic growth was primarily driven by revenue growth in advertising and media, precision marketing, commerce and consulting, and public relations. Organic growth in the U.S. was strong at 7.6%, and outside the U.S., the organic increase in revenue was led by the U.K. at 11.5% and Europe at 6%. Looking at revenue by industry sector on slide eight, relative to the third quarter of 2022, the broad distribution of our clients remained very stable. Let's now turn to slide nine, and look at our operating expenses for the quarter. For your reference, a slide in the appendix also presents this on a constant currency basis. Our total expenses, exclusive of depreciation and amortization, were flat at $2.8 billion, down 10 basis points as a percentage of revenue. Salary-related service costs were fairly constant at 50.8% of revenue compared to 50.4% last year, The slight increase was due primarily to the increase in organic revenue, an increase in headcount, and a return to more normal business conditions. Third-party service costs were flat at 21% of revenue. Occupancy and other costs were also flat at 8.2% of revenue. They decreased due to lower rent and other occupancy costs, partially offset by an increase in office expense, and other costs resulting from the return of our workforce to the office. SG&A expenses were down year over year as a percentage of revenue, due primarily to decreases in professional fees and third-party marketing costs. Turning to slide 10, our third quarter operating profit was $546 million, a 1% increase from last year, net of a reduction of 5.2% due to the impact of foreign currency translations. Our operating profit margin of 15.9% on total revenue was 10 basis points above last year's result. Please turn now to slide 11 for our cash flow performance. We define free cash flow as net cash provided by operating activities excluding changes in working capital, which are generally positive for us on an annual basis. Free cash flow for the first nine months of 2022 was $1.23 billion. compared to $1.25 billion for the first nine months of last year, a small reduction year over year. However, as a reminder, we note that $48 million of the charges we recorded in the first quarter of 2022 for the effects of the war in Ukraine were cash-related. Regarding our uses of cash, we used $438 million of cash to pay dividends to common shareholders. and another 63 million for dividends to non-controlling interest shareholders. Our capital expenditures of 66 million were at normal levels. Acquisition spend, net of dispositions and other items, was 330 million. And lastly, our net stock repurchases during the third quarter were 486 million. We continue to expect total repurchases for the year at our historical annual range of around $500 to $600 million. Slide 12 is an overview of our credit, liquidity, and debt maturities. During the quarter, the impact of foreign exchange rates on our Euro and sterling denominated debt caused the book value of our outstanding debt to decrease to $5.5 billion from $5.7 billion as of December 31, 2021. There were no changes in outstanding balances during the quarter, and our $2.5 billion revolving credit facility, which backstops our $2 billion U.S. commercial paper program, remains undrawn. Our cash and equivalents were $3.3 billion, flat with our balance at June 30, 2022, reflecting an increase in net free cash flow during the quarter. which was offset by the negative impact of foreign currency translation. Turning to slide 13, our operating capital discipline consistently drives above-average returns on both invested capital and equity. When the 12 months ended September 30, 2022, we generated a solid return on invested capital of 25% and a strong return on equity of 43%. We're confident that the outlook for our business growth and our prudent process for capital allocation will lead to increasing returns as they have historically. Operator, please open the lines up for questions and answers. Thank you.

And as a reminder, if you would like to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by pressing the 1-0 command. If you're using a speakerphone, Please pick up the handset before pressing the numbers. Our first question comes from the line of Steven Cahal with Wells Fargo. Please go ahead.

Yeah, thanks. John, maybe one for you and then one for Phil. Rather than asking for you to prognosticate on organic growth, which I know is hard, maybe to ask it a different way, how are you thinking about the cost base and being proactive in a pretty volatile revenue environment? I think when we last spoke, You mentioned that there maybe could be some real estate opportunities or some opportunities in things like hiring and incentive comp. So I'm just thinking about when you look at the environment right now, is it a time to be very proactive or based on the good growth that you put up in the third quarter, do you actually feel like things are pretty stable and that proactive cost management is more something you can think about in the future?

Thanks for the question. We're being... we are internally acting as if the markets are going to be extremely difficult. Increasing our productivity in a couple of different areas is extremely important and we're in the process of taking action and having very detailed conversations on a couple of fronts. One is correct, is real estate. We have real estate which leases expire throughout 2023 and 2024. And with a new approach towards flexible working hours, we believe we're going to be able to reduce our real estate footprint globally. That's in process. We'll see what the market does. Additional opportunities may come up where we'll be able to take advantage of Low prices in other markets where the leases maybe are a little longer. So that's number one. In terms of people and payroll, we're taking a seriously look at our processes at a very granular level through each of our subsidiaries, looking to offshore where it's appropriate. And there's a big push on automation in terms of some of the things that we can do from an automated basis that in the past we couldn't. All of these, we've recently met with all of our management teams together where we frankly discussed all these things and they're part of our weekly agendas in terms of the progress that we're making. And as we get into profit planning for next year, we'll be setting targets and expectations for each of those companies.

Great. And then, Phil, kind of a similar flavor to the same question. You know, this year growth is strong and operating margins are guided to kind of flat year on year. Does the same logic hold that if growth slows down, operating margins stay pretty consistent? Or if we do get into a tougher growth environment, do you expect there to be some downward pressure to operating margins? Thank you.

Sure. I think if the environment is challenging, it's certainly a challenge that we're going to meet face on or head on. But the flexible cost structure that we have, which includes still, as of now, some open positions, we're going to take advantage of that. I think maybe the most instructive thing you could do is take a look at our performance prior to and subsequent to prior recessions or business disruptions like COVID. And you get the sense that we've been through this before, not just people on the call, but people who are managing the company all around the world. So we've got the experience managing through these types of disruptions or uncertainties. We're going to be aggressive about it. and act accordingly to make the adjustments we need to make as quickly as we can make them to right-size businesses to the revenue outlook for that business. That being said, we don't know what 23 is going to hold at this point, but we're certainly preparing for it to be ready to manage through any disruptions that might occur.

Great.

Thank you.

And the next question comes from the line of Jason Bazinet with Citi. Please go ahead. So I just have a quick question. If you guys deliver on your guidance this year and organic growth slows to like three or something next year, I think it would be the best three-year stacked organic growth rate that you guys have put up since 2006 or maybe 2007, a long time ago. So I guess in very simple terms, can you just help us understand what has made your business so much better? And I'll offer up a couple of hypotheticals that you can react to. One would be disposition of your slower growing businesses, Another would be inflation. Another would be sort of the privacy changes that were put in by Apple that might all provide tailwinds. But any sort of color to help us understand why your business is doing so much better than it's done in a very, very long time. Thanks.

Yeah, sure. You know, our portfolio today isn't comparable really to what our portfolio was three and a half, four years ago. that, you know, the instances you referred to, 2019, 2020 was the end of a five-year period in which we were disposing things that contributed to our profit but didn't necessarily contribute to our growth. And we were able, in good times, to find buyers who are interested in those companies and we offloaded them. Similarly, we made investments in areas where we believe that growth would be consistent in good times and in bad. You know, you can see that reflected in our precision marketing assets. You can see that in the changes that were made in our public relations category. and also the expansion of services in the health area. So as well as more traditional areas, we cleaned up low-growth geographies and or what we felt were product loans. It's a process which has served us well. It will continue to serve us well, I believe, as we face more challenging times if they come, and we're planning that more challenging times aren't. We're facing more challenging times because of inflation and some of the macro factors that are out there in the marketplace. And we're also very comfortable, I'd say, in the upgrades we've made to our management and our leadership throughout the world over the same period of time. Everybody on the team is aware of those many, many steps that we have to go through in order to be successful, you know, period.

Can I just ask one follow-up? A lot of those things that you cited were very Omnicom-specific, but we're seeing broad-based strengths. an industry overlay on top of the things that Omnicom has done. Is that wrong?

No, I don't think it's wrong. I think that the marketplace complexity has increased, which makes not only Omnicom, but our competitors important. I think the great resignation, which had an impact on some of our businesses, we were able to manage through, also had an impact on how our clients face that complexity. And I don't have the evidence to back this up, but I believe it to be true, is in the last two recessions, it's been pretty evident that companies that continue to market through those recessions prospered and came out of them more quickly than ones that just focused on cutting costs and you know indiscriminately so it's a combination of factors and technology is different you know there's a revolution going on we're moving to electric cars we're moving to more efficient ways of doing business all those things means that you want your brand known and supported by the marketplace and known as being progressive in addressing issues which are going to face businesses, recession, and in good times.

Very helpful. Thank you. And the next question comes from the line of David Karnofsky with JP Morgan. Please go ahead.

Hi, thanks for taking the question. John, just wondering if you could speak a little bit to what you're hearing from clients right now in terms of how you're kind of balancing perceived or real macro risks against, you know, kind of the need to invest in brands and performance. And then with regards to year-end project work, you know, any early view into how this potentially looks? And Phil, I'm wondering if you could say kind of what you've assumed within your guidance out of that sort of 200 to 250 million you've historically flagged.

Sure. I mean, I think every intelligent company is seeing that globally these macro factors are a mixture for further confusion in a complex environment at one level. At another level, there's new areas that are coming on stream that didn't exist before. If you look at media, you look at all the the providers that are out there that have decided to go to add an advertising model to the products that they're offering. You see our automotive manufacturers promoting their progress that they're making with the car of the future being a communication device driven by electric power as opposed to gasoline power. So there's many difficult things that are out there. There's enough fundamental changes that are going on in the marketplace that have kept marketers keen and very interested in making certain, once again, that their brands are recognized and differentiated so that when consumers make choices that their brands are seriously considered.

On the year-end project front, I'd say we're in a similar situation that we've been in every October for quite some time. We don't have a lot of visibility yet into how much year-end project work our agencies are going to capture. Typically, they're after a number which is in the neighborhood of $200 to $250 million of potential project spend. You know, some years we get it all. Some years, you know, very rarely I would say we don't get much, if any of it. You know, I would say we don't expect to get it all this year, but, you know, as we've gone through the process of looking at the fourth quarter with our companies, agency by agency bottoms up, There's a number of companies that have an expectation based on their past history of what they could capture. They've made an estimate, probably a conservative estimate. And as we look out into the fourth quarter, we've kind of considered that in our guidance. So we do expect they'll be successful. We don't expect we'll get it all this year. but we're pretty optimistic or the one thing we know is that, you know, people are going to be out there working on getting it because their incentives are aligned with ours and, you know, it'll drive incremental profit and incremental bonus for them as well.

Maybe if I could just squeeze in one more. John, PR has continued to perform really strongly. I think it's like six quarters at this point, and it didn't really drop even that much during the pandemic. Just wondering if you could kind of speak to some of the factors that have just kind of driven the strength in that business.

There's no alchemy. We did change leadership. In recent conversation with some of my other management, I'm extremely proud of the leadership that we have of that group. It's craft driven and craft led now. And I know that in the past when it was run or managed by people who didn't have such a deep understanding of the craft, the performance was different. The gentleman and team that leads it now is very proactive, very hands-on, very close to its clients and its people. And I think that's paying huge dividends. And it's hard to measure, but it's easy to see. I think the product is also much closer and much more important in the consumer journey and probably more relevant in terms of brand awareness as well as the actual completion of a sale. You know, influencers didn't exist in 2016. They exist today. PR takes a leading position in things like that. So I don't have the precise answer, but I do know that we have the right people, I think, doing the right things and adjusting our product appropriately for the current circumstances that we're operating in. Thank you.

And the next question comes from Michael Nathanson with Moffitt Nathanson. Please go ahead.

Thanks. John, a question for you and one for Phil. I think, John, there's a thesis emerging that the complexity of digital beyond Facebook and Google is really driving demand for your digital media business across everyone's business at this point. Can you talk a bit about what you've seen you want to isolate on the media buying front, planning front, just on digital and just the addition of retail media, TikTok, Apple, Amazon, Netflix to come? What do you see in terms of the growth rates rolling down to there? And then, Phil, if there's a concern with the model, it's just rising inflation for salary and services. Can you talk a bit about what you're seeing kind of on a point-to-point level on inflation and how that could be managed, wage inflation, the next 12 to 14 months?

Sure. I mean, in terms of digital, digital has taken over the majority portion of how we speak to various groups of consumers. And there's been a an ever-increasing number of providers of interesting digital sites, information, which have their own following, which are omniproduct, and some of our early concerns and involvement in how we refine and identify potential customers in a privacy-compliant manner has put us in a position where we've been very agile and been able to react to changes that happen, I was going to say market by market, but in the United States even state by state. And, you know, the retail media is a new, relatively new entry into the marketplace. During COVID, it had an explosion. And people in your business measure that the way you measure it, because I guess you do it comparably. But when you think about it, there's been a lot more platforms out there, right? You have Amazon, you have Walmart, you have Kroger, you have Target, you have missing some others, I'm sure. We've entered into... serious partnership arrangements with all these folks so as to be able to assist the consumer and consult with our clients about which platform at which moment or which product is the appropriate platform to be used. And we've been able to incorporate that into our Omni product and make it available to our practitioners who are consulting with clients on a day-to-day basis on the best way to achieve their KPIs?

On the inflation or managing inflation in the context of our business, it's a combination of things. Certainly, it's a reality of what everybody is dealing with today. ourselves and our agencies along with our clients. Frankly, as we've said before, we continue to look for efficiencies in the cost structure. It's a flexible cost structure. We've been pursuing opportunities for offshoring, outsourcing, automation, as John mentioned earlier. We've got a number of open positions and access to a flexible workforce that we could fill those positions if we need to with contractors and a flexible workforce rather than with permanent people in some cases. We're also having discussions with our clients on an ongoing basis, and those discussions continue. The results vary. Some of them result in increases in our rate cards. changes in the scope of work, incremental work, et cetera. So there's no one silver bullet to deal with inflation in our cost base, but it's a combination of things that really we need to do at the detailed agency-by-agency level. But we're certainly driving a number of initiatives to make sure that we take advantage of whatever opportunities we have to find efficiencies and new ways of working coming out of COVID is certainly helpful in that respect.

Thanks, guys.

Thank you.

And the next question comes from the line of Ben Swinburne with Morgan Stanley. Please go ahead.

Thanks. Good afternoon. Just keeping with the theme of trying to think about the strong results you need to deliver and the macro we're all worrying about. Could you talk to us a little bit, John, about the performance of the company this year thus far in the UK and the Euro markets where arguably the macro maybe is the most concerning and yet you're doing double-digit growth? Is there anything you would add to the comments you've made already on this call about what's driving that performance? And then I had a quick follow-up for Phil.

Sure. Well, you know, I just got back last week, I spent a week in Europe. I was in Germany, I was in Italy, I was in Los or a few other places. And interfacing with quite a number of our leaders. We were very fortunate. Where it shifts market by market a little bit. But you take the UK, for instance, Our healthcare businesses were outstanding this particular quarter. Our precision marketing business has been outstanding consistently throughout Europe on systems work as well as lower funnel type of work. And we are a needed consultancy and needed skill set by many of our clients for them to obtain and achieve their objectives. Plus, I'm very happy with, again, and you said referencing my prior comments, I have to go back to them, the portfolio that we have of assets throughout the world, but especially in Europe. We've taken a lot of actions over the last several years years finishing up a lot of those actions thankfully right before COVID and probably equivalent of spending every day in the gym. We've toned up the assets that we had and added a lot of people with a lot of very specific but appropriately specific skills.

Got it. Do you think there's some share gain in there too, sounds like?

Yeah, I mean, I think yes, share gain is certainly part of it. But I think these assets have allowed us to expand the budgets that we were previously, we were probably more limited in terms of the things that we could properly service our clients. I think the addition of many of these assets that we've made in the last several years, especially in precision marketing and some of the more refined nuances of healthcare, just to name two, have allowed us to enjoy or compete for budgets that prior to this, in the old pre-COVID days, weren't necessarily available to us. So our marketplace has expanded.

Right. And then, Phil, I guess technically this is two. I wanted to just, again, come back to the implied fourth quarter in your guidance that I think would be, I don't know, something like 3% or 3.5% organic. You already talked about the project work. Anything else you'd call out that would suggest that growth would step down that much from Q3 to Q4? And then anything on the buyback? The buyback was a little lower this quarter than last quarter. Is that... just, you know, sort of being a little more conservative given everything we're reading and, you know, and seeing out there or anything you want to say about capital allocation as we look forward, given the strong balance sheet and cashflow.

Well, I'll take capital allocation first. So, so as far as the buyback, I think, you know, what you've seen so far through, through the first three quarters of 22 is, is probably relatively consistent with our pre COVID approach. we tend to be in the market a little more in the first half of the year. And then the second half of the year, the third and the fourth quarter, we typically aren't in the market as much. That trend, I think, is consistent in 22. We've said we intend to buy probably between 500 and 600. We're close to the bottom of that range. We expect to... you know, still have some activity in the fourth quarter. We haven't made a decision on how much yet, but we're going to stick to that $500 to $600 for the year. And as far as capital allocation overall, I think you should expect us to continue to be consistent with our approach. We'll continue to pay an attractive dividend. We're going to seek to do M&A to the extent it meets our strategic goals and our financial requirements. most probably small tuck-in acquisitions that worked very successfully for us over the years. And then we'll use the balance of our free cash to buy shares. So you can count on seeing consistency from that perspective. And then lastly, to go back to your other question, I think the numbers, the range would lead you to somewhere between... 2% and 3.5% growth in the fourth quarter, which we're certainly comfortable with. And I think there is an expectation, given the lockdowns in China and some other general uncertainty, that our experiential business will probably take a step back in Q4. It's a choppier business. It's a great business for us. It's performing well. The people managing the business or businesses have been doing a great job. But we expect it'll take a step back in the fourth quarter. Summer execution and support businesses may do the same. But we expect good performance, good growth out of the rest of the portfolio, which has had a great year so far. And we'll finish strong in the fourth quarter as well.

Yeah. The only thing I would add, I think implicit in the numbers that you can to look at. The overall project work that we always refer to is still out there. We've spent the last several weeks going company by company looking for people who had more certainty about the projects that would be coming through and there's still some portion of that that as we continue to make inquiries and weeks go by will you know, get more and more clarity.

Thanks, guys.

Thank you.

And the next question comes from Craig Hubert with Hubert Research Partners. Please go ahead.

Great. Thank you. My first question, I mean, given these, I think, are very strong results here in the quarter and year to date, and you compare that to the macro headwinds out there that we all know about, can you just talk about maybe the tone of of the conversations you're having with maybe your major European and U.S. clients here to help account for the fact that your numbers are seemingly so much stronger than what the macro environment is shaping up as?

Well, I think at the risk of repeating myself, I think all the factors that we've talked about throughout the call are at play. There are new retail marketplaces that didn't exist in the past. We offer incredibly new services, which especially in precision marketing and those consultancy type of activities which have made budgets which prior to this were available to us, we've been able to successfully compete. and get our share of those projects. And oftentimes those projects are multi-quarter type of projects in terms of from start, which is design of them, to execution and delivery of them. And just the healthier shape of the portfolio. I think, as Phil mentioned, Some of our execution businesses, I think are ramped up and ready to respond to the demand that's out there, but there's been, you know, it's been a bit choppy, um, because of things like the China shutdowns or different interruptions, which has happened from time to time. Um, but we have several of the best assets in the marketplace. And as I look forward, I see a loosening of that. We have Olympics that are coming up. We have FIFA World Cups that are coming up. We have a lot of different activities that we prosper from. And so it's a combination. I wish it was as simple as six things I could just rattle off and satisfy your question, but I think it's a combination of all of these things that have made it, have made us more important to clients who are forced, you know, as these become new opportunities to us, it increases the complexity that a CMO or a CIO or a CEO has to go through in order to reach their customers and achieve their objectives. And we are an excellent provider of assisting them in simplifying that complexity and bringing the best-in-class services and making them available to them.

Certainly from a macro perspective as well, in terms of the first nine months of the year, the consumers continue to spend clients have continued to spend, you know, I think we're talking about what happens if and when the environment changes. Hard to gauge how much it's going to change by, but the environment certainly has been a positive in the context of the types of services that we provide.

And maybe unlike some of the other abrupt recessions which have happened in the past. This one has been a little bit slower rolling. We've all been anticipating it, especially as central banks raise interest rates and create different macro issues. And God knows what's going to happen in the war in Ukraine. And people have worked through and have been working through their supply chain issues. So we've been able to adapt as as all of that and will continue to adapt as that continues.

That's very helpful. My follow-up question, if I could, with the very high inflation rates out there, do you feel that that's helping your organic revenue growth here that you're able to pass on higher costs here in a material way much more so than in the past?

That's certainly not wholesale across the board. We have been able to get improved pricing on some clients, but it's certainly not an assumption that we make because that same inflation causes inconveniences for our clients. And at the end of the day, we're partners. So the ones that prosper, we prosper. The ones that suffer, we suffer with because we have long-term relationships with. So we're trying, wherever it's sensible, to get paid fairly for the services we provide. And our clients are very much aware of the fact that we all face similar problems. And we're doing our level best client by client to address ourselves. and adjust appropriately, whether it's scope of work, whether it's at a rate card, you know, the list goes on.

Great. Thanks a lot.

And at this time, we have no one else in the queue. We'll turn the call back over to management. Please go ahead.

Okay. Listen, I'd like to thank all of you for joining us today to discuss our very strong third quarter results. And we look forward to seeing many of you over the coming weeks and months in